Market Feasibility Report

Naphunsakorn Waiyawuththanapoom, PhD

1. Describing Innovation• Describing innovation characteristics• What is it? What is their component?, any drawing or any initial

design? or physical shape to be presented

• Product features• What are the benefits or adding value out of this innovation?• Is there any originality of this innovation? Or it is replicated from

others? Why?

• Describe competing and substitutes products in detail (conducting detailed product landscape)

Feasibility at glance• All feasibility studies should look at how things work, if they will work, and identify potential

problems. Feasibility studies are done on ideas, campaigns, products, processes, and entire businesses.

• Feasibility studies are assessment tools - not just reports to try and sell your business to investors. They should consider both pros and cons and analyze a variety of potential business scenarios.

• A Marketing Plan maps out specific ideas, strategies, and campaigns based on feasibility study investigations, that are intended to be implemented.

• Think of market feasibility studies as a logistical study and a marketing plan as a specific, planned course of action to take.

What Should be Included in a Market Feasibility Study?Elements to appear in a market feasibility study include:

• Description of the Industry• Current Market Analysis• Competition• Anticipated Future Market Potential• Potential Buyers and Sources of Revenues• Sales Projections

How to Write an Industry Description• Give a brief description of the industry your Innovation is categorized.

Determining your industry is important for doing, applying, implementing, adapting this innovation or for receiving government contracts government incentives, attracting investors, and for receiving grants (if you form as a non-profit).

• Example: The industrial first aid kit industry is a lucrative, fast-growing field, with contract awards as high as $14 million dollars in 2006. Fictitious Business Example (FBE) is being established for the purpose of producing, and providing, quality industrial first aid kits to the United States Government, privately-held and publicly-held companies to improve worker's safety on the job.

Analyzing Your Current MarketThis section of a market feasibility study describes the current market for your innovation. Few hints are:

• If you are offering something so unique that there are few market statistics, you can either use related industry information, or even conduct your own independent study.

• Several ways to conduct your own research for new ideas include: polling Internet forums, questionnaires addressed to targeted consumer groups or the general population, or even customer surveys.

• Any solid evidence you have that there is a demand (or market) for your innovative product or services will help you sell your idea. This is particularly important if you are marketing something unique, or within a very small, specialized market. You need to show that your ideas is novel because you have found a niche and not because there is no existing market for the idea.

• A good indicators for finding out what is selling (and what is not) is employee growth is . This is a good indicator of an industry's overall stability. You can use any other indicators.

• Massive layoffs or few employer or employees, indicates fewer business opportunities.• Where there is demand for something, there should be correlating growth in employment, the number

of new companies being formed, or in the industry's overall combined revenue.

The market analysis • The goal of any market study is

to find the point where supply and demand intersect to supply the right quantity of a good at the right price. Since the world is complex and dynamic, no economist can ever identify that exact point. A market analyst accumulates information on as many factors as possible to make an educated guess.

Component of Market Analysis• The educated guess of a market analysis is based on four basic

components: • the project description, • a demand assessment, • a review of supply, and • a synthesis.

• The first three steps review detailed market information and note the implications for the proposed project. The final stage draws conclusions from those implications. By using this outline, the consultant maintains the path of logic which lead to the study's conclusions.

Project Description The first step of a market analysis is the project description. In this section, you should lay the foundation for a defensible market study. The project description should perform four tasks:

1. Outlining the bounds of the study; 2. Listing the limitations of the study; 3. Describing the potential project; and 4. Assessing indirect economic and site factors.

The first task in any project should be defining the study. You should quickly identify what type of analysis is being performed and for whom. Is the project a highest and best use study for a private developer or a market study of a baseball stadium for a municipality? The background provides the readers with a frame of reference for the copious amounts of information they will encounter in the report.

Listing the limitations of the study • All innovation project limitations should be explained. • For example, most market analyses will assume that market trends

will remain constant and will not consider major shifts such as a possible recession. It is also typically assumed that a use will be operated the same as other similar uses.• If a study is based on outmoded or insufficiently detailed information,

the data's effect on the conclusions should also be noted. Not listing limitations may cause serious misinterpretations of the conclusions.

Factors affecting demand The factors affecting demand for a potential development are those which describe the scale and purchase patterns of market participants. By examining the factors, the analyst attempts to quantify the total level of demand. Some aspects of demand are difficult to quantify and may be assumed to remain constant. Demand can be described by the following: 1. population, 2. income, 3. employment, 4. market trends, 5. relative prices, 6. taxes, 7. interest rate, 8. down payment requirements, and 9. future expectations.

Project Description (cont)• Since general economic indicators can only provide a broad picture of

the market area economy and growth trends, it is necessary to assess trends associated with the potential product. Market trends are often tracked by industry groups. For example, the National Real Estate Index Market Monitor provides information on apartment rents. If the development is targeting a specific use, the group which represents industries in that market may serve as a good contact. For example, the National Sporting Goods Association tracks sports participation rates annually. The Urban Land Institute text, Real Estate Development, provides a comprehensive appendix of sources for market analysts.

Factors affecting supply The factors affecting supply are those which describe the amount of a product in the market place and the price that product is currently receiving. The supply section of a market analysis analyzes the potential competition that a product will have in the market. Supply is a function of the following factors: 1. existing supply; 2. planned supply; 3. competitive environment; 4. availability of land; and 5. the cost of land, labor and capital.

Like demand, some factors of supply are macro-economic in scope and are rarely examined. The analyst will concentrate on the economic decisions being made in the local market.

Primary Market Area (PMA)• A Primary Market Area (PMA) must be established based on the proposed

project’s location and project type. This is the smallest geographic area from which the majority of support for a proposed project is expected to originate. Accurately defining a project’s market area is crucial to providing an accurate and effective market study. If you defines a PMA which encompasses too large of an area, it is possible that demand for the proposed project will be overstated, which could result in the development of a project that is too large for a particular market. Likewise, if an analyst is too conservative and defines a market area that encompasses too small of an area, it is possible that demand will be understated, potentially resulting in the development of a project that is too small and does not meet the needs of the market. Inaccurately defining a PMA, primarily one that is too large could also result in the identification of inaccurate comparable properties.

Anticipated Future Market (Based on Industry Trends)• This section should include a narrative description, as well as attached spreadsheets,

graphs, or tables to showing trends, statistics, or projections of this current market of your innovation.

• There are no sure-fire ways to tell if an industry will have measurable growth in the future, but you can make logical and reasonable predictions based on trends, past growth, and current markets.

• Don’t forget to justify your assumptions (if any) and don’t forget to quote your reference or source of your information.

• Use Facts, Not Fiction! It is critical in this section that your innovation project are fact-based as much as possible. Any business takes risks; the key is to minimize those risks is by carefully studying already successful businesses. Rather than target just the entire industry, try to isolate similar businesses and study what they are doing, how they are doing it, and their financial track record.

Anticipated Future Market (Based on Industry Trends)( cont.’)• Visit Your Competitors Websites: You can obtain a lot of information just from visiting

company websites and looking over product lines.• Look for discontinued products or services and high-priced items. Somewhere in between

these two things are probably the most stable long-term items. Discontinued means consumers are no longer demanding the product, while high-priced items may indicate a fad.

• Look at Big Companies Strategies: Since big companies spend big bucks on market research, take advantage of their money spent and public information. For example, if you are trying to crack the fast food chain, look at Mcdonal and KFC. What new product lines or services are they offering? Chances are good that they spent millions researching industry trends to develop new product ideas.

• Study Press Releases: Look for press releases about businesses in your industry. Press releases are an advertisement, but they also often tell why a company is branching out, closing a division, or change its product line. They have already done the research for you so do not hesitate to take clues from other businesses.

Research Local Competition in Business• If you are planning to serve only local market, start by identifying every competitor

within your area.• List each competitor. You should closely examine all competing businesses. Consider

their characters (e.g. business focus, nature, target customer, strength and weakness) and how long they have been in business. These things can help you determine how hard it will be to launch your innovation and compete with them.• You should also make note of any similar businesses that have recently gone out of

business. There may be a reason such as poor location, high taxes or operating restrictions, or there may be not enough demand for the product or service in that area to sustain a business. Don’t ignore the past.• Researching competitor information can tell you two things: What works now and

what has not worked.• IF you are planning to expand it at the international level, make sure you did the

similar thing at the country or region you want to expand.

How to Calculate Sales Projections• Sales projections can be a challenge for any new business owner because

there is little, or no track record to support how fast you will grow, or what innpvtaion products or services will sell best.• Sales projections should factor in how much time and money will be

invested into the business, and the markets you will be targeting. For example, if you get your product in the door at Paragon or Tesco, your sales are more likely to grow faster and your profits will be higher than if you sell your product at the local corner store.• For this reason, it is important that you write market feasibility study first.

Your market study will help you decide where to sell your product of services, and what innovation are most likely to generate the most revenue.

Internet based innovation (if any)• If you are have an Internet-based innovation project:

• Estimate the total traffic (number of visitors) to your website each month.• Project anticipated site traffic volume over time.• Use traffic projections to estimate the average number of sales per every 10,000 visits to your site.• Finally, calculate the average amount of each sale.

• The more traffic you can drive to your site, the more opportunities you have for making a sale. Do you have good Search Engine Optimisation (SEO) skills? Do you have your website live and ready to go? These things are important to all internet-based innovation because as your site becomes more popular, you can project an increase in sales.

Tip: Summarize sales projections in the content but attach a spreadsheet showing actual numbers based on sales projections.

How to Identify Potential Customers, Clients, and Contract Sources• This component of your small business market feasibility study should be descriptive.

• Your potential customers, clients, and contract sources should include the following:• A list of current customers, clients, and contracts and the potential for new or renewed contracts.• Any sales leads that may generate new customers or clients.• A list of government contracting agencies with a brief description of what type of contracts they

solicit, and how they pertain to your industry.• A list of market types you currently, or intend to target such as seniors citizens, working mothers,

organizations, specialty retailers, etc.• Depending upon the nature of your business, it may not be possible to associate specific amounts

of revenue with a particular market, but you can at least try to estimate the percentage of total revenue expected from each source.

For example, if you plan to sell products to five specialty stores, list each store you plan to sell to, and a total overall revenue for a category "specialty stores" rather than an amount for each individual store.

• Based on the key components discussed above, a market study should provide valuable insight to the project owner in regards to the competitive position of a particular innovative project, and more importantly, the need/demand for a particular innovative project in a given market. In conclusion, a competitive project is not always needed and a needed innovative project is not always competitive; a good market study should be able to tell the story of what type of product is both needed and competitive within a given market.