Economic Feasibility
Definition: The economic feasibility step of business development is that period during which a break-even financial model of the business venture is developed based on all costs associated with taking the product from idea to market and achieving sales sufficient to satisfy debt or investment requirements.
Objective: The objective of the economic feasibility step is to develop a financial model of the business venture.
Product: The product of this step is a complete integration of the technical product information and the market study into one or more break-even financial models.
Business Activities: The business activities common to this step are those necessary to develop a conceptual plan for a business venture based upon one or more financial scenarios.
During the economic feasibility step, the following activities must be completed.
Develop a financial analysis that identifies break-even scenarios based upon unit prices, volume of sales, and costs
Determine whether the business opportunity presents sufficient profit margins to justify a business venture
Assess the merits of licensing the opportunity compared to venturing
Business Information: Completion of the economic feasibility step usually will result in a go/no-go decision concerning the business venture, and if the decision is positive, identification of sources and uses of seed capital for the development phase.
Assessment:
Does the venture demonstrate a positive economic feasibility?
Have you developed a break-even financial analysis for the venture?
Does the venture offer financial returns that justify investment?
Have you compared the merits of licensing to venturing?
