Hotel & Restaurant Association of BaguioSeptember 10-12,2009Baguio Country Club

Seminar Objectives:

Give the Hospitality Students an Overview on How to Prepare and Develop Feasibility Studies

Learn the various parts of a basic project feasibility study

Be Familiarized with the formats of a project feasibility study

Lecture / Discussion

Presentation of Feasibility Study formats

Definition of Terms

“Feasible “ / “Feasibility”capable of being done, effected, or accomplished: a feasible plan.

probable; likely: a feasible theory.

suitable: a road feasible for travel.

Capable of being accomplished or brought about; possible.

Used or dealt with successfully; suitable: feasible new sources of energy.

Definition of Terms

Feasibility Study: defined in a business contextIs a thorough and systematic analysis of all factors that affect the possibility of success of a proposed undertaking

Data, facts and other findings presented in the study then become the basis for deciding whether a project is to be pursued, abandoned or revised

A synthesis of separate studies dealing with the market, technical, financial, socio-economic and management aspects of a project

Assumptions

Feasibility StudyIs not an antidote to failure

It’s purpose is to enhance the probability of success of a specific undertaking

It is a result of the belief that a carefully planned activity or project has better chances to succeed than an activity without a previous plan

Who May Conduct a Feasibility Study?

An individual or group of individuals may conduct a feasibility study

Experience in conducting feasibility studies

Fair and neutral with no prior opinion about what decision should be made.

It is important that all necessary data are collected and presented so that the best decision can be made.

What shall you study?

New Business (Product or Service/Technology)

Old Business that Needs Tweaking or Revitalization

A Proposed Innovation of Products/Services / Structure

A New Process / Procedure (Implementation)

Location / Site Selections

Components :

Executive Summary or Project SummaryShould be included at the beginning of the report. Provides the reader with an overview of the feasibility study and will help them see the entire picture before they read the detailsIn 2-3 pages, the main points of the feasibility study are summarized for a quick review by busy administrators and board members /officers. Thus, the executive summary should be concise and include the major findings of the study followed by a recommendation.

Outlined Format

A. Name of the Enterprise / Organization

B. Location

C. Descriptive Definition of the Project

D. Project’s Long Range Objectives

E. Feasibility Criteria

F. Highlights of the Project

G. Major Assumptions and Summary of Findings and Conclusion

A. Name of the Enterprise / Organization

Briefly describe the reason for such choice of name

B. LOCATION

Pinpoint the location • Head Office ? / Main Branch? / Production Site ?

Factors affecting the Choice of Location are :• Sources of raw materials, labor, utilities• City / Governmental Regulations• Proximity to the market• Nature of Available Transportation• Cost of Land and Buildings / Rentals and Leases• Choose a location where maximum efficiency can

be attained at the lowest possible cost

C. DESCRIPTIVE DEFINITION OF THE STUDY

• Related National Program (If Applicable)• Is the Project in line with any government-

encouraged undertaking?

• Affinity to regional or sectoral studies• Is the Project a result of encouraging findings in

certain regions or sectors of the country?

• Project Potential & Proponent• Give a conceptual description of the project’s

potential worth and importance and the men behind it

D. PROJECT'S SHORT TERM & LONG RANGE OBJECTIVES

What does the project expect to achieve in 1 year / 3 years / 5 years / 10 years in terms of size, capacity, volume, worth, role in its industry and in the economy?

E. FEASIBILITY CRITERIA

What were the most important guidelines used to judge the feasibility of the project?

Profitability?

Impact on Socio-economic environment?

F. HIGHLIGHTS OF THE PROJECT/STUDY

1. HistoryHow did the study/project come about?

2. Project Time Table and StatusHow long will it take before the project goes into operation?

3. Nature of the IndustryBriefly describe the:

IndustryProduct Lines, Demand & Supply Situation, History, Growth Patterns, Problems and Potentials, Role in the Economy

F. HIGHLIGHTS OF THE PROJECT/STUDY

4. Mode of FinancingSources of Funds

Financing Terms

Reasons for choosing such sources and terms

5. Investment CostsHow much funds are necessary to make the project operational?

How are these funds allocated?

G. MAJOR ASSUMPTIONS, SUMMARY OF FINDINGS & CONCLUSION ON THE FOLLOWING:

MARKET FEASIBILTIY

TECHNICAL FEASIBILITY

FINANCIAL FEASIBILITY

SOCIO-ECONOMIC FEASIBILITY

MANAGEMENT FEASIBILITY

G. MAJOR ASSUMPTIONS, SUMMARY OF FINDINGS & CONCLUSION ON THE FOLLOWING:

MARKET FEASIBILTY

TECHNICAL FEASIBILITY

FINANCIAL FEASIBILITY

SOCIO-ECONOMIC FEASIBILITY

MANAGEMENT FEASIBILITY

The Centerpiece of the Market Study is really the answer to these basic questions:

1. Is there a demand for my product or service?

2. If So, can my marketing program effectively meet this demand?

• A NEGATIVE response to either questions prevents the project from materializing

Components of a Market StudySize, Nature, and Growth of Total Demand for the Product

Description and Price of the Product / Service to Be Sold

Supply Situation and Nature of Competition

Factors affecting the Market of the Product / Service

Appropriate Marketing Program for the Product / Service

Components of a Technical FeasibilitySelecting the :

Production / Manufacturing Process

Machinery Capacity & Design

Machinery Supplies

Production / Plant Location

Production/Plant/Site Layout

Structure Specification

Raw Materials and their Sources

Components of a Technical FeasibilityDetermining the :

Quantity and Quality of the Products / Service

Labor Requirements

Utilities Required

Waste Disposal Method

Transportation Necessary (If Applicable)

Components of a Technical FeasibilityEstimates of the Total Project Cost and Enumerating the Major Items of Capital cost

Detailed Estimated Production/Overhead Costs that will go into operations

Take into consideration the Technical Development in the industry which may affect the technical soundness of the project

Components of a Financial FeasibilityMajor Assumptions

Total Project Costs

Initial Working Capital Requirements

Alternative Source of Financing Considered if any

Sources of Financing the Project

Beginning the pro-forma financial statements

Financial Analyses(You may obtain the services of a competent accountant for this endeavor)

Components of a Financial FeasibilityMajor Assumptions

Total Project Costs

Initial Working Capital Requirements

Alternative Source of Financing Considered if any

Sources of Financing the Project

Beginning the pro-forma financial statements

Financial Analyses(You may obtain the services of a competent accountant for this endeavor)

Components of a Socio-Economic Study

Employment and Income (Individual or Families)

Taxes it will contribute to the Government / City

Supply of commodities

Demand for Materials, specifying the use of local materials to aid local producers

Components of an Organization/Management Study

Basic Considerations:Marketing Organizations (Market Study)

Labor (Identified in the Technical Study)

Finance & Administration

Draft Organizational Chart

Qualifications & Functions Defined

Components of an Organization/Management Study

Form of OwnershipSingle Proprietorship

Partnership (General / Limited)

Cooperative Organization (Consumers, Producers, Marketing or Financing)

Officers & Key Personnel

Project Schedule

Components of an Organization/Management Study

Officers & Key Personnel

Project Schedule

Market StudyIs there a demand for my product or service?

Can My Marketing Program Meet this Demand??

A negative response to either question prevents the project from materializing

Technical StudyProduct / Service Quality – Can it compete with existing competing ones?

Product / Service meets its intended use?

Distinction from others of the same category

Technical StudyProduct / Service Quality – Can it compete with existing competing ones?

Product / Service meets its intended use?

Distinction from others of the same category

Resource Availability & Accessibility

Focal Point: Most efficient way of allocating resources to produce the desired product / service quality at the lowest possible cost

Are they available in sufficient quantities and at reasonable costs?

Financial StudyFinancial Statements Preparation should boil down to Long Term Profitability / Sustainability

Enough Sources for initial capital requirements?

Financing Arrangements and Terms Reasonable and Viable?

Socio-Economic StudyA matter of determining whether the society and the economy derive net positive gains from the project

Effects of the Project on Environment, Morality & Socio-Economic Growth

Organization & Management Study

Organizational Set Up Optimally Effective?

Recommended Officers/Management are the best qualified under the circumstances?

Optimum effectiveness refers to the ability of the organizational set up to carry out its functions effectively while having the lowest manpower level possible

Organization & Management StudyClear and precise identification of duties & responsibilities/flow of authority/manpower level requirements

Fewest men possible shall be considered most appropriate for the project

Examination of qualifications – suitability for positions in terms of ability to meet demands

Evaluate the Project Study for its Overall Success based on objectives.

“Focusing your life solely

on making a buck shows a

poverty of ambition. It

asks too little of

yourself. And it will

leave you unfulfilled.”

- US President Barack Obama

“Making your mark on the world is hard. If

it were easy, everybody would do it. But

it's not. It takes patience, it takes

commitment, and it comes with plenty of

failure along the way. The real test is not

whether you avoid this failure, because you

won't. it's whether you let it harden or

shame you into inaction, or whether you

learn from it; whether you choose to

persevere.”

- US President Barack Obama

PREPARED BY:

EVANGELINE PAYNOFood & Beverage Outlets ManagerBaguio Country Club

For the Hotel and Restaurant Association of Baguio