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Feasibility Study - YouTube
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feasibility studies also called
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feasibility analyses are an important
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step in the entrepreneurial process this
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video will explain what a feasibility
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study is how it differs from a business
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plan and explain the process for
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completing one in extension we are
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routinely approached by individuals who
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pose a question along the lines of I
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just purchased 20 acres what should I do
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with it this situation is the perfect
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example to demonstrate the purpose and
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use of a feasibility study the new
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landowner in the spiring small-scale
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farm or food business owner may have
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numerous ideas that they are considering
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the options may be something they've
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always dreamed about doing something
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that they've read about or something
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that others are telling them would be a
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good idea without a framework in which
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to explore the business options it can
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be difficult to determine which is sound
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enough to move forward with this is
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where performing a feasibility study is
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valuable the central question that
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feasibility study is intended to answer
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is this is this a valuable idea to
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proceed with that is will the business
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idea generate sufficient cash flow and
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profits withstand reasonable risk offer
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long term viability and fulfilled
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business goals the process of performing
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a feasibility study for each potential
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business venture should lead to a
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narrowing down of ideas to the one that
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merits complete development so what is
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the process for performing a feasibility
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analysis well there are three pieces a
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market analysis a technical or
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production analysis and the financial
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analysis let's take a closer look at
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each the market analysis section looks
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at and assesses the demand for a product
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or service the target market or customer
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competition and market channel and
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outlets when the sesang demand try to
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determine not only whether demand exists
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but also the level of demand that is how
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much of your product is a customer
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likely to purchase along with how often
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what's the target market for your
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product or service successful marketing
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depends on accurate targeting of the
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customers that may want to purchase from
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you where do these individuals live what
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is their income what is their family
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status how do they think about issues
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such as small businesses or local
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products answering this these types of
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questions will allow you to profile the
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population segment most likely to
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purchase it's important to research your
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potential competition as well how many
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competitors are their information to
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focus on includes trying to understand
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what they do well what weaknesses may
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exist and how your business and product
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would differ from theirs
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finally assess the potential market
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outlets for your product in the
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corresponding channels for getting your
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product to those outlets for instance do
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you envision having a retail location on
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your farm or at your place of business
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or do you wish to sell your products at
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farmer's markets grocery stores or
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specialty stores your decision on market
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outlets could depend on requirements and
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outlet may have regarding how they
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receive products that is the
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distribution channels they utilize will
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they accept deliveries direct from you
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or do they require the use of a specific
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distributor the technical analysis looks
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at facilities labor and management and
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inputs what facilities and equipment is
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required for the production and
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processing of products where can you
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obtain these will you be able to service
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or repair the equipment and if not how
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close is a reliable technician if your
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proposed business venture does well can
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you handle in an expansion or will that
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require drastic remodeling or new
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construction reliable and quality labor
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and management are critical to every
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business estimate the number of
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employees you may need not only that
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what knowledge and skills will they need
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to possess will you be willing to train
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people do you possess the knowledge and
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skills to manage this new venture
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how can you handle any weaknesses that
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exist when it comes to inputs you want
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to make sure that you have a complete
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grasp of all the items needed to produce
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a process market and sell your product
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or service this includes everything from
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water to ingredients to labels from
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where will you source your inputs and
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will you
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be able to obtain them on the schedule
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you need them for our inputs of the
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quality or have the characteristics that
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you require
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finally the financial analysis looks at
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start-up costs operating costs financing
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revenue projections and profitability
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startup costs are the costs required to
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acquire any needed land build facilities
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purchase machinery and equipment obtain
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licenses certifications or any other
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requirements for starting the venture
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now the only do you need to know how
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much startup costs will be but also how
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they will be financed do you have the
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cash available or will you be financing
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through loans or investors operating
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costs are the ongoing costs both fixed
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and variable associated with running the
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business and producing the product fixed
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costs are expenses that don't change
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based on the amount you produce for
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instance rent and insurance are fixed
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costs variable costs are those expenses
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that do change or vary with your level
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of production examples of variable costs
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include raw materials such as seed or
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ingredients electricity and packaging
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materials you'll want to understand how
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the operating costs change over time for
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instance are there months when
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production increases thereby increasing
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variable costs how will you finance your
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potential business venture will you need
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to take out a loan from a bank do you
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plan to apply for grants perhaps you
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know some potential investors
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researching understand the requirements
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and implications that come with all
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sources of funding to wrap up the
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financial analysis look at the potential
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revenue that will be generated by the
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business this will be determined by how
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you price your product in the quantity
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that you sell finally estimate the
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profit that results at this point you
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may be wondering whether a feasibility
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study is the same as a business plan
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after all much of the information we
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just discussed is contained in a
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business plan however feasibility study
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is not a business plan recall the
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question that a feasibility study is
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intended to
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answer is this a profitable idea to
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proceed with the feasibility study is a
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cursory analysis to determine whether
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your business idea makes sense and is
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profitable a business plan on the other
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hand is a detailed plan for how you will
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achieve success with goals objectives in
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other pro forma financial statements
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among other information a well conducted
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feasibility study is the first step to a
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successful business not only do
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feasibility studies narrow down the
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alternatives you may be considering but
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it will provide focus to your endeavor
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by highlighting opportunities that may
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exist in weaknesses that need to be
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addressed through your business plan
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you
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