Financial feasibility can be judged by the total estimated cost of the project, financing of the project in terms of its capital structure, debt equity ratio and promoter’s share of total cost, existing investment by the promoter in any other business and projected cash flow and profitability. Financial feasibility study determines how much start-up capital is needed as well as sources of capital and returns on investment. It is an analysis of the total costs of a proposed project and the potential income that the project can get. It the potential income of the proposed project can cover all the costs, then the project is financially feasible. Your financial feasibility study should analyze the start-up capital requirements, capital sources and returns for investors. Start-up capital is a cash you need to start your business and should keep it running until it is profitable. Sources of capital for your business include investors, bank business loan, large corporations and your personal money from your savings and checking account. Return on Investment also known as ROI is significant measure in investing. The return on investment is calculated by an investor to measure the performance of an investment and compare the efficiency of a number of different investments. The formula for Return on Investment (ROI) is: ROI = net profits before tax / share holders equity
In all the components of feasibility study, financial feasibility should be completed because it is use to evaluate and make sure that the project or business will live it up to its performance expectations
Business Risk and Legal Aspect
Every business faces risks that could present threats to its success. Risk is defined as the probability of an event and its consequences. Risk management is the practice of using processes, methods and tools for managing these risks. Risk focuses on identifying what could go wrong, evaluating which risks should be dealt with and implementing strategies to deal with those risks. Businesses that have identified the risks will be better prepared and have a more cost-effective way of dealing with them. Risks of doing a Feasibility Study
Premature release – this has happened to me many times. The prototype used to assess the feasibility of a solution all of a sudden becomes the demonstration of a completed product when shown to potential customers. It happened to me with one of the first web applications while I was at Bell Atlantic. Falling in love with your approach – you lose objectivity about the downside of a tool or solution because of the investment of time and energy in making it work. The whole purpose of the study is to determine the “feasibility” – not to prove it is a great solution. Extrapolating beyond the data – because a solution worked well with knowledgeable testers, you assume that naïve users will be equally successful. Alternatively, the approach works only when using an internal server, not across the cloud with limited connectivity or bandwidth.
Depending on what sort of business you’re starting you may be affected by law on: Health and safety You are responsible for the effect your business may have on the health and safety of your employees and members of the public. You may need to register with the Health & Safety Executive (HSE) or with your Local Authority. (by clicking here you can access a questionnaire which will give you an awareness of where you may need to comply with the Law). Fire precautions
You may need a fire certificate, particularly if you’re running a guest house, hotel or residential nursing home. For general advice on fire precautions, talk to your local fire service.
There are environmental regulations that may apply if your business: * uses refrigeration or air-conditioning equipment, fire equipment or solvents for cleaning * produces, imports, exports, stores, transports, treats, disposes of or recovers waste * produces, imports or exports packaging
* produces packaging waste
You must protect the legal rights of your employees. If you take over an
existing business, you must usually keep the existing terms and conditions of employment. Buildings
You must take action if:
* a new building or change of use is involved
* plant or machinery is installed within an industrial site, but outside a building * existing premises require structural alterations
‘Intellectual property’ describes things such as business names, patents and inventions. You should protect your own company name and logo, along with any inventions, product designs or copyrights. You should also respect other people’s intellectual property rights. For example, you can’t use the same name for your business as someone else doing similar work in your town. Fair trading
The Office of Fair Trading (OFT) is responsible for protecting consumers by promoting effective competition, removing trading malpractice and publishing appropriate guidance. The OFT also issues consumer credit licences.
Keeping information about people
If your business involves keeping information about people, you will have to be careful about the sort of information you keep and how it is used in relation to the Data Protection Act. You may have to register if you keep such information on computer. The Data Protection Act 1984 grew out of public concern about personal privacy in the face of rapidly developing computer technology. The act covers personal data about living, identifiable people that can be automatically processed. To keep such information on your computer legally, you may have to register. For a range of useful free information booklets or to register, contact them direct. The registration fee is £75 for three years. Providing services to disabled people
Under the Disability Discrimination Act 1995, you must do everything you can to make sure that disabled people can benefit from the services you provide. Licences A licence is required for many businesses, not just the obvious ones like casinos or public houses. For example, you need a licence to run a hotel, a guesthouse, a mobile shop or to be a hairdresser. You should always check whether your business requires a licence to trade. Insurance
It’s good practice to have insurance to cover the loss or theft of your business property, as well as other types of possible losses. It’s also compulsory to have public liability insurance, which will often come as part of your contents insurance policy.