Product$/$Service

Fresh and Easy Meal Kits provide pre$-$portioned fresh ingredients and easy$-$to$-$follow recipes delivered weekly to customers' doors.

Financial Feasibility Report Guidelines

A financial feasibility analysis is conducted to determine the probability of raising enough money to fund the capital requirements and the initial operating expenses of the business. For feasibility analysis, a quick financial assessment is usually sufficient. More rigors at this point are typically not required because the specifics of the business will inevitably evolve, making it impractical to spend a lot of time early on preparing detailed financial forecasts.

The most important issues to consider at this stage are:

$$ Start$-$up Capital Requirements

$$ Overall Attractiveness of the Investment

$1.$ Start$-$up Capital Requirement

$1\mathrm{.}1$ Make a list of the initial operating expenses of the business. It may include, but not limited to:

$-$ raw materials

$-$ hiring and training of personnel

$-$ office or manufacturing space

$-$ equipment

$-$ research and development $($e$.$g$.,$ software development, prototype development etc.$)$

$-$ marketing $($e$.$g$.,$ social media marketing, word of mouth, public relation events etc.$)$

$-$ the initial product rollout.

$-$ business administrative support $($e$.$g$.,$ accounting and financial services etc.$)$

$-$ working capital $($receivables$,$ inventory etc.$)$

The number should be fairly accurate and give you an idea of the dollar amount that will be needed to launch the firm.

$1\mathrm{.}2$ Analyze the feasibility of raising enough money to fund the capital requirements. That is$,$where will you get the money to start your business:

$-$ savings?

$-$ a loan from family$/$friends

$-$ loan from commercial bank? SBA guaranteed loans?

$-$ Equity investors from your social network: family, business angels?

$-$ venture capital?

$-$ Government grants $($SBIR and STTR$)$

Based on the analysis, you may describe the feasibility of raising sufficient funds to meet these needs as feasible, unsure or non$-$feasible, and why.

$2.$ Overall Attractiveness of the Investment

$2\mathrm{.}1$ Analyze a number of financial factors that are associated with promising business opportunities. In the feasibility analysis stage, the extent to which a business opportunity is positive relative to each factor is based on an estimate, or forecast, rather than actual performance $($or detailed forecasts of future performance$).$ The following factors are important to assess regarding the overall financial attractiveness of the proposed business:

$$ Steady and rapid growth in sales during the first $1-3$ years in a clearly defined

market niche

$$ High percentage of recurring revenue$--$meaning that once you win a client, the

client will provide a recurring sources of revenue

$$ Ability to forecast income and expenses with a reasonable degree of accuracy

$$ Internally generated funds will be available within $2-3$ years to finance and

sustain growth

$$ Profitability will be reached in a reasonable timeframe depending upon the

industry norm

$$ Availability of an exit opportunity $($such as an acquisition or in initial public

offering$)$ for investors to convert equity into cash.

You need to support your assessment with hard evidence.

$2\mathrm{.}2$ Complete a simple financial forecast. A simple financial forecast work sheet is presented below:

I. Estimates from Section $1\mathrm{.}1$ and your sales forecast:

A$.$ Annual sales in unit:

B$.$ Price per unit:

C$.$ Variable cost per unit $($production and sales$)$:

D$.$ Fixed costs $($admin$,$ production, and sales$)$:

E$.$ One$-$time start$-$up costs $($eqpmt$,$ mktg$,$ legal, etc.$)$:

F$.$ Working capital $($receivables$,$ inventory, etc.$)$:

II$.$ Calculate estimated annual gross revenues and income:

G$.$ Estimated annual revenues $($A$\backslash$times B$)$:

H$.$ Estimated annual variable costs $($A$\backslash$times C$)$:

I. Estimated annual contribution margin $($G$$H$$D$)$:

III. Calculate break$-$even figures:

J$.$ Contribution margin per unit $($B$$C$)$:

K$.$ Annual break$-$even quantity $($D$-$:J$)$:

L$.$ Ratio of break$-$even to expected quantities $($K$-$:A$)$:

IV$.$ Estimate the money you will initially need to start your business:

M$.$ Total up$-$front funds required $($E$+$F$)$:

N$.$ Additional units to cover up$-$front funds $($M$-$:J$)$:

O$.$ Break$-$even quantity with up$-$front funds $($K$+$N$)$:

V$.$ Calculate financial performance figures:

P$.$ Payback period for startup funds $($M$-$:I$)$:

Q$.$ Annual return on start$-$up investment $($I$-$:M$)$:

R$.$ Variable cost to price ratio $($C$-$:B$)$:

S$.$ Contribution margin ratio $($I$-$:G$)$:

Based on the analysis, you may describe whether the business is financially attractive, and why.

III. Conclusion:

To conclude, you need to summarize what you learned from your assessment of start$-$up capital requirements and overall attractiveness of the investment and rank financial feasibility using a $1-5$ scale. You need to justify the number you selected on the $1-5$ scale and note concerns in the area financial feasibility analysis to guard against and$/$or try to overcome. Describe the most important areas you noted and how you plan to address them.