aCCOUNTING HELP
Full Feasibility Analysis
Full Feasibility Analysis
Introduction
| A. | Name of the proposed business Hot Dog City |
| B. | Name of the founder (or founders) Naveed Arshad Michael Yashar Joseph Plonka |
| C. | One paragraph summary of the business Hot Dog City is a fast food restaurant located in the northwest corner of the central business district of downtown Chicago, Illinois. The food featured will include hot dogs, hamburgers, chicken sandwiches and fresh cut french fries. Other menu items will be available on a space basis and if it can be prepared fresh daily. This is a location with little or no same type of food competition. There are seven restaurants located within a one block radius and none are served any of the food items listed. In essence, this is the food court for a two block area filled with high rise buildings and tens of thousands of people. People will have to eat and do not always pack a lunch. By offering fast, well made comfort food at a reasonable price we hope to capture the market in this area. An emphasis will be to make anything from scratch that you can and not to rely on processed products. The hot dogs used are made fresh daily by a local meat vendor and do not contain any chemical additives and must be used with one week if not frozen. Our focus is on fast and fresh. Hamburger meat will be purchased locally and ground by our butcher, never frozen or chemicals added. |
Part 1: Product/Service Feasibility
Issues Addressed in This Part
| A. | Product/service desirability This is a desirable product that people want. Good food fast rather than just fast food. |
| B. | Product/service demand There will be a lot of demand as there is no direct competition for this particular type of food in a location that services approximately 4000 people per day. |
Assessment Tools
Concept Statement Test
Write a concept statement for your product/service idea. Show the concept statement to 5 to 10 people. Select people who will give you informed and candid feedback.
Attached a blank sheet to the concept statement, and ask the people who read the statement to (1) tell you three things they like about your product/service idea, (2) provide three suggestions for making it better, (3) tell you whether they think the product or service idea is feasible (or will be successful), and (4) share any additional comments or suggestions.
Summarize the information you obtain from the concept statement into the following three categories:
| Strengths of the product or service idea—things people who evaluated your product or service concept said they “liked” about the idea | |
| Suggestions for strengthening the idea—suggestions made by people for strengthening or improving the idea | |
| Overall feasibility of the product or service concept—report the number of people who thing the idea is feasible, the number of people who think it isn’t feasible, and any additional comments that were made | |
| Other comments and suggestions |
Buying Intentions Survey
Distribute the concept statement to 15 to 30 prospective customers (do not include any of the people who completed the concept statement test) with the following buying intentions survey attached. Ask each participant to read the concept statement and complete the buying intentions survey. Record the number of people who participated in the survey and the results of the survey here.
Along with the raw data recorded here, report the percentage of the total number of people you surveyed that said they would probably buy or definitely would buy your product or service if offered. This percentage is the most important figure in gauging potential customer interest.
One caveat is that people who say that they intend to purchase a product do not always follow through, so the numbers resulting from this activity are almost always optimistic. Still, the numbers provide you with a preliminary indication of how your most likely customers will respond to your potential product or service offering.
How likely would you be to buy the product or service described above?
__X____ Definitely would buy
______ Probably would buy
______ Might or might not buy
______ Probably would not buy
______ Definitely would not buy
Additional questions may be added to the buying intentions survey.
Conclusion (expand fields and report findings, in discussion form, for each area)
| A. | Product/service desirability The desirability factor is high as there is no other food outlet in the immediate area that serves this type of food. |
| B. | Product/service demand By pricing it as one of the least expensive options within the range that people will travel to buy lunch immediate area, as well as being different from the other food choices you will have high demand. |
| C. | Product/service feasibility (circle the correct response) Not Feasible Unsure Feasible |
| D. | Suggestions for improving product/service feasibility. Use advertising to market your product and make sure the buying public is aware of its latest option. Utilize sales promotion to get customers to try your food and realize that it is good. |
Part 2: Industry/Market Feasibility
Issues Addressed in This Part
| A. | Industry attractiveness There are no direct competitors in the immediate area and there is a void in the market as the only direct competition closed due to losing their lease half a block away. |
| B. | Target market attractiveness There is a daily need for your product in the location chosen to open this business. 4000-5000 pass this intersection walking on a daily basis over a 2 to 2 ½ hour window. |
| C. | Timeliness of entry into the target market There is an immediate opportunity as there are no direct competitors and someone will come to fill the void. |
Assessment Tools
Industry Attractiveness
To the extent possible, assess the industry at the five-digit NAICS code level your potential business will be entering. Use a broader industry category (less NCICS digits) if appropriate (http://www.census.gov/epcd/www/naicstab.htm).
Assess the attractiveness of the industry the potential business plans to enter on each of the following dimensions.
Industry Attractiveness Assessment Tool
(used to assess the broad industry, rather than the specific target market, you plan to enter)
| Low Potential | Moderate Potential | High Potential | ||
| 1. | Number of competitors | Many | Few | None |
| 2. | Age of industry | Old | Middle aged | Young |
| 3. | Growth rate of industry | Little or no growth | Moderate growth | Strong growth |
| 4. | Average net income for firms in the industry | Low | Medium | High |
| 5. | Degree of industry concentration | Concentrated | Neither concentrated nor fragmented | Fragmented |
| 6. | Stage of industry life cycle | Maturity phase or decline phase | Growth phase | Emergence phase |
| 7. | Importance of industry’s products and/or services to customers | “Ambivalent” | “Would like to have” | “Must have” |
| 8. | Extent to which business and environmental trends are moving in favor of the industry | Low | Medium | High |
| 9. | Number of exciting new product and services emerging from the industry | Low | Medium | High |
| 10. | Long-term prospects | Weak | Neutral | Strong |
Target Market Attractiveness
Identify the portion or specific market within your broader industry that you plan to target.
Assess the attractiveness of the target market on each of the following dimensions.
Target Market Attractiveness Assessment Tool
(used to assess the specific target market, rather than the broader industry, you plan to enter)
| Low Potential | Moderate Potential | High Potential | ||
| 1. | Number of competitors in target market | Many | Few | None |
| 2. | Growth rate of firms in the target market | Little to no growth | Slow growth | Rapid growth |
| 3. | Average net income for firms in the target market | Low | Medium | High |
| Low Potential | Moderate Potential | High Potential | ||
| 4. | Methods for generating revenue in the industry | Unclear | Somewhat clear | Clear |
| 5. | Ability to create “barriers to entry” for potential competitors | Unable to create | May or may not be able to create | Can create |
| 6. | Degree to which customers feel satisfied by the current offerings in the target market | Satisfied | Neither satisfied or dissatisfied | Unsatisfied |
| 7. | Potential to employ low cost guerrilla and/or buzz marketing techniques to promote the firm’s product or services | Low | Moderate | High |
| 8. | Excitement surrounding new product/service offerings in the target market | Low | Medium | High |
Market Timeliness
Determine the extent to which the “window of opportunity” for the proposed business is open or closed based on the following criteria.
Determine the timeliness of entering a specific target market based on other criteria.
Market Timeliness Assessment Tool
| Low Potential | Moderate Potential | High Potential | ||
| 1. | Buying mood of customers | Customers are not in a buying mood | Customers are in a moderate buying mood | Customers are in an aggressive buying mood |
| 2. | Momentum of the market | Stable to losing momentum | Slowly gaining momentum | Rapidly gaining momentum |
| 3. | Need for a new firm in the market with your offerings or geographic location | Low | Moderate | High |
| 4. | Extent to which business and environmental trends are moving in favor of the target market | Low | Medium | High |
| 5. | Recent or planned entrance of large firms into the market | Large firms entering the market | Rumors that large firms may be entering the market | No larger firms entered the market or are rumored to be entering the market |
Conclusion (expand fields and report findings, in discussion form, for each area)
| A. | Industry attractiveness People will always need to eat and there is a void in the market place for this type of food. |
| B. | Target market attractiveness There is a lot of demand for good food fast. The margins that this industry works upon make this attractive if you can have high volume. |
| C. | Market timeliness As there is no direct competition this is a timely entry into the market at the location chosen. |
| D. | Industry/market feasibility (circle the correct response) Not Feasible Unsure Feasible |
| E. | Suggestions for improving industry/market feasibility. Get into the market as quickly as possible to keep someone else from exploiting the void in that area location. |
Part 3: Organizational Feasibility
Issues Addressed in This Part
| A. | Management prowess Current chosen management has the operational experience to execute the business plan and effectively operate the business. |
| B. | Resource sufficiency The location is within a large marketplace and has access to almost any and every type of food product or equipment necessary to implement and operate the business. |
Assessment Tools
Management Prowess
Use the following table to candidly and objectively rate the “prowess” of the founder or group of founders who will be starting the proposed venture.
Management Prowess Assessment Tool
| Low Potential | Moderate Potential | High Potential | ||
| 1. | Passion for the business idea | Low | Moderate | High |
| 2. | Relevant industry experience | None | Moderate | Extensive |
| 3. | Prior entrepreneurial experience | None | Moderate | Extensive |
| 4. | Depth of professional and social networks | Weak | Moderate | Strong |
| 5. | Creativity among management team members | Low | Moderate | High |
| 6. | Experience and expertise in cash flow management | None | Moderate | High |
| 7. | College graduate | No college education | Some college education but not currently in college | Graduated or are currently in college |
Resource Sufficiency
The focus in this section is on nonfinancial resources. Use the following table to rate your “resource sufficiency” in each category.
The list of resources is not meant to be exhaustive. A list of the 6 to 12 most critical nonfinancial resources for your proposed business is sufficient.
An explanation of the rating system used in the first portion of the table is as follows:
| Available | |
| Likely to be available: will probably be available and will be within my budget | |
| Unlikely to be available: will probably be hard to find or gain access to, and may exceed my budget | |
| Unavailable | |
| NA: not applicable for my business |
Resource Sufficiency Assessment Tool
| Ratings | Resource Sufficiency |
| 1 2 3 4 5 | Office space |
| 1 2 3 4 5 | Lab space, manufacturing space, or space to launch a service business |
| 1 2 3 4 5 | Contract manufacturers or outsource providers |
| 1 2 3 4 5 | Key management employees (now and in the future) |
| 1 2 3 4 5 | Key support personnel (now and in the future) |
| 1 2 3 4 5 | Key equipment needed to operate the business (computers, machinery, delivery vehicles) |
| 1 2 3 4 5 | Ability to obtain intellectual property protection on key aspects of the business |
| 1 2 3 4 5 | Support of local and state government if applicable for business launch |
| 1 2 3 4 5 | Ability to form favorable business partnerships |
| Ratings: Strong, Neutral, or Weak | |
| STRONG | Proximity to similar firms (for the purpose of knowledge sharing) |
| STRONG | Proximity to suppliers |
| STRONG | Proximity to customers |
| NOT APPLICABLE | Proximity to a major research university (if applicable) |
Conclusion (expand fields and report findings, in discussion form, for each area)
| A. | Management prowess We have a wealth of experience and talent to make this concept work in the chosen location. |
| B. | Resource sufficiency There are multiple options for vendors and equipment within a 10 mile radius to organize and supply the business. |
| C. | Organizational feasibility (circle the correct response) Not Feasible Unsure Feasible |
| D. | Suggestions for improving organizational feasibility Continue to price food products and drive product cost down to increase margins and profitability. |
Part 4: Financial Feasibility
Issues Addressed in This Part
| A. | Total startup cash needed $85,000 to secure lease, construction and equipment installation and initial food products. |
| B. | Financial performance of similar businesses Similar businesses that have high demand perform very well as the margins are very lucrative. |
| C. | Overall financial attractiveness of the proposed venture This is an attractive business as long as there is opportunity to have high demand for your food product. |
Assessment Tools
Total Start-Up Cash Needed
The startup costs (which include capital investments and operating expenses) should include all the costs necessary for the business to make its first sale. New firms typically need money for a host of purposes, including the hiring of personnel, office or manufacturing space, equipment, training, research and development, marketing, and the initial product rollout.
At the feasibility analysis stage, it is not necessary for the number to be exact. However, the number should be fairly accurate to give an entrepreneur an idea of the dollar amount that will be needed to launch the firm. After the approximate dollar amount is known, the entrepreneur should determine specifically where the money will come from to cover the startup costs.
The total startup cash needed can be estimate using the following table.
Total Startup Cash Needed (to Make First Sale)
| Capital Investments | Amount |
| Property | $25,000 buildout |
| Furniture and fixtures | $15,000 |
| Computer equipment | $1000 |
| Other equipment | $ 20,000 |
| Vehicles | ----- |
| Operating Expenses | Amount |
| Legal, accounting, and professional services | $1500 |
| Advertising and promotions | $500 |
| Deposits for utilities | $500 |
| Licenses and permits | $1000 |
| Prepaid insurance | $1000 |
| Lease payments | $14000 |
| Salary and wages | ---- |
| Payroll taxes | ---- |
| Travel | ---- |
| Signs | $100 |
| Tools and supplies | $500 |
| Starting inventory | $600 |
| Cash (working capital) | ---- |
| Other expense 1 | ---- |
| Other expense 2 | ---- |
| Total Startup Cash Needed = | $80,700.00 |
Comparison of the Financial Performance of Proposed Venture to Similar Firms
Use the following tables to compare the proposed new venture to similar firms in regard to annual sales (Year 1 and Year 2) and profitability (Year 1 and Year 2).
Comparison of the Financial Performance of Proposed Venture to Similar Firms Assessment Tool
Overall Financial Attractiveness of the Proposed Venture
The following factors are important in regard to the overall financial attractiveness of the proposed business.
Assess the strength of each factor in the following table.
Overall Financial Attractiveness of Proposed Venture Assessment Tool
| Low Potential | Moderate Potential | High Potential | ||
| 1. | Steady and rapid growth in sales during the first one to three years in a clearly defined target market | Unlikely | Moderately likely | Highly likely |
| 2. | High percentage of recurring income—meaning that once you win a client, the client will provide recurring sources of revenue | Low | Moderate | Strong |
| 3. | Ability to forecast income and expenses with a reasonable degree of certainty | Weak | Moderate | Strong |
| 4. | Likelihood that internally generated funds will be available within two years to finance growth | Unlikely | Moderately likely | Highly likely |
| 5. | Availability of exit opportunity for investor if applicable | Unlikely to be available | May be available | Likely to be available |
Conclusion (report finding for each area)
| A. | Total startup cash needed $85,000 |
| B. | Financial performance of similar businesses Strong performance |
| C. | Financial feasibility (circle the correct response) Not Feasible Unsure Feasible |
| D. | Suggestions for improving financial feasibility Enter market as quickly as possible to fill void, |
Overall Feasibility: Summary and Conclusion
| Overall Feasibility of the Business Idea Based on Each Part | Suggestions for Improving the Feasibility | |||||||
| Product/Market Feasibility |
| Focus on sustainable non processed food products to help increase social conscious demand. | ||||||
| Industry/Market Feasibility |
| There is a strong demand so get into the market place as quickly as possible. | ||||||
| Organizational Feasibility |
| Work to develop staff to support operations of business and train them prior to operation. | ||||||
| Financial Feasibility |
| Angel investor to make sure enough funds are available to implement as quickly as possible | ||||||
| Overall Assessment |
| Need to generate customer demand as quickly as possible to have cash flow to operate. |
Conclusion—briefly summarize your justification for your overall assessment.
Hot Dog City is a timely entry into the market place to fill a void for the type of food product offered. In addition, by making it as “green” as possible will help to market this product to a more socially, health conscious consumer. This type of business has excellent margins and profitability if it generates high demand. This location helps insure that there is demand for these and other food products on a daily basis with thousands of consumers walking past this intersection daily.
First Screen
From “Preparing Effective Business Plans” by Bruce R. Barringer
Part 1: Strength of Business Idea
For each item, circle the most appropriate answer and make note of the (-1), (0), or (+1) score.
| Low Potential (-1) | Moderate Potential (0) | High Potential (+1) | ||
| 1. | Extent to which the idea:
| Weak | Moderate 0 | Strong +1 +1 |
| 2. | Timeliness of entry to market | Not timely | Moderately timely 0 | Very timely |
| 3. | Extent to which the idea “adds value” for its buyer or end user | Low | Medium | High +1 |
| 4. | Extent to which the customer is satisfied by competing products that are already available | Very satisfied | Moderately satisfied | Not very satisfied or ambivalent
+1 |
| 5. | Degree to which the idea requires customers to change their basic practices or behaviors | Substantial changes required | Moderate changes required | Small to no changes required +1 |
Part 2: Industry-Related Issues
| Low Potential (-1) | Moderate Potential (0) | High Potential (+1) | ||
| 1. | Number of competitors | Many | Few 0 | None |
| 2. | Stage of industry life cycle | Maturity phase or decline phase | Growth phase 0 | Emergence phase |
| 3. | Growth rate of industry | Little or no growth | Moderate growth 0 | Strong growth |
| 4. | Importance of industry’s products and/or services to customers | “Ambivalent” | “Would like to have” 0 | “Must have” |
| 5. | Industry operating margins | Low | Moderate | High +1 |
Part 3: Target Market and Customer-Related Issues
| Low Potential (-1) | Moderate Potential (0) | High Potential (+1) | ||
| 1. | Identification of target market for the proposed new venture | Difficult to identify | May be able to identify 0 | Identified |
| 2. | Ability to create “barriers to entry” for potential competitors | Unable to create -1 | May or may not be able to create | Can create |
| 3. | Purchasing power of customers | Low | Moderate | High +1 |
| 4. | Ease of making customers aware of the new product or service | Low | Moderate | High +1 |
| 5. | Growth potential of target market | Low | Moderate | High +1
|
Part 4: Founder- (or Founders-) Related Issues
| Low Potential (-1) | Moderate Potential (0) | High Potential (+1) | ||
| 1. | Founder or founders experience in the industry | No experience | Moderate experience | Experienced +1 |
| 2. | Founder or founders skills as they relate to the proposed new venture’s product or service | No skills | Moderate skills | Skilled +1 |
| 3. | Extent of the founder or founders professional and social networks in the relevant industry | None | Moderate | Extensive 0 |
| 4. | Extent to which the proposed new venture meets the founder or founders personal goals and aspirations | Weak | Moderate | Strong +1 |
| 5. | Likelihood that a team can be put together to launch and grow the new venture | Unlikely | Moderately likely | Very likely +1 |
Part 5: Financial Issues
| Low Potential (-1) | Moderate Potential (0) | High Potential (+1) | ||
| 1. | Initial capital investment | High | Moderate 0 | Low |
| 2. | Number of revenue drivers (ways in which the company makes money) | One | Two to three 0 | More than three |
| 3. | Time to break even | More than two years | One to two years 0 | Less than one year |
| 4. | Financial performance of similar businesses | Weak | Modest | Strong +1 |
| 5. | Ability to fund initial product (or service) development and/or initial startup expenses from personal funds or via bootstrapping | Low | Moderate | High +1 |
Overall Potential
Each part has five items. Scores will range from -5 to +5 for each part. The score is a guide—there is no established rule-of-thumb for the numerical score that equates to high potential, moderate potential, or low potential for each part. The ranking is a judgment call.
| Score (-5 to +5) | Overall Potential of the Business Idea Based on Each Part | Suggestions for Improving the Potential | |||||||
| Part 1: Strength of Business Idea | +3 |
| Do more market research to make sure menu items create customer demand. | ||||||
| Part 2: Industry-Related Issues | +1 |
| Continue to monitor market for entry of any competitors. Start coming soon advertising. | ||||||
| Part 3: Target Market and Customer-Related Issues | +2 |
| Utilize social media to start building customer base as to open date and menu | ||||||
| Part 4: Founder- (or Founders-) Related Issues | +4 |
| Identify other employees for operations and incorporate into build out phase. | ||||||
| Part 5: Financial Issues | +2 |
| Work business plan to keep operating costs low | ||||||
| Overall Assessment |
| Need to have social media presence immediately to build customer lists and suggestions. Also build anticipation. |
Summary
The goal is to open a hot dog/hamburger restaurant in the Chicago downtown business district. There are three main places that compete across the entire area which has thousands of people every business day. There are many restaurants that have similar food but few in direct competition. The key is to have quick good food. Instead of relying on processed food, anything and everything that can be made fresh will be. All paper goods used will be “green” with little to no plastics used. By utilizing social media, making the food as tasty and “healthy” as possible, working with speed to recognize the limited lunch times that patrons have, we will make a desirable product.
This industry has excellent margins and if you work to keep your overhead low, there is excellent profit potential.
Elevator Pitch
Hot Dog City
Food is a dynamic and constantly growing business. People need to eat. In the downtown area of Chicago, Illinois you either bring lunch or buy it. There are hundreds of thousands of people each work day in a small two square mile area that needs to eat.
In Chicago, hot dogs were a food staple in Chicagoan’s diet since the great depression in the 1930’s. You could say that hot dogs are imprinted in their dna. As the food industry has changed you find less and less hot dog/fast food places that are independently owned and not part of a chain. Today in the food industry there is a strong emphasis on fresh, non-processed food. The fast food giants are feeling the pinch and trying to change.
An opportunity exists to lease a space in downtown Chicago in the northwest corner of the central business district. There are direct competitors that make hamburgers and french fries, but only one direct competitor within a half mile range of this location.
Within the last six months an iconic hot dog place that had been open for 62 years closed.
The mayor of Chicago even came to have one last hot dog and say goodbye to Harry the owner. There is a hot dog desert in that corner of the business district. In addition, there are no food businesses of a fast food menu that focus on fresh, make what you can in house type food products. We can fill two niche needs by opening this fast food restaurant.
The start up capital will be about $125,000 to secure the lease, purchase the equipment and then build out and install the restaurant in the ground level storefront space in the business high rise district. Studies has measured that the foot traffic on the corner where the storefront is located is in the area of 4000 to 5000 people daily. If the business handles 400 customers per day at an average of $10 revenue, that is $4000 per day or $20,000 per week. With food costs of approximately 36%, industry standards, you net margin is $12,800 per week or $55,000 per month. With rent fixed at $3,500 per month, the only big cost to manage is payroll. The initial investment should be paid off within the first two years. This is cushioned because you will have to market the restaurant heavily to get customers to know that you are there. It will take time to work up to 400+ customers per day, but the demographics and lack of direct competition will
lead to the goal of handling that many or more people.
Ownership will consist of any investors and three cousins with extensive food service and business experience. The investors will have a passive say in the management of the business. First is Naveed Arshad, Naveed has eight years of business and purchasing experience. Naveed will be responsible for sourcing all food components and ensuring their availability for use. In addition, he will price out all equipment and construction requirements to ensure the best quality at the smallest price. Michael Yashar has over thirty years of business and fast food experience. He has owned his own pizza place, worked in numerous fast food restaurants and been in management for FedEx. He is currently a practicing lawyer and will provide management and legal expertise. Joseph Plonka has six years management experience in fast food. He understands purchasing, management, production, and marketing. His strong emphasis is on social media and its emerging role in all aspects of business today.
