New Venture Feasibility Analysis

New Venture Feasibility Analysis

1. Company Overview Comment [b1]: Good name
Company Name D.I.C.E. (Digital Interactive Customer Comment [HR2]: Do you mean that you
Experience) Solutions would sell your little company to Best Buy, or
Does it company currently exist, or will it be forming? It will be forming. would you sell the IP for your product/service to
them?
Legal structure (sole proprietorship, partnership, corporation, LLC)? Partnership
Comment [b3]: You need to be more specific.
Who are these clients? I also think you need to
What are your objectives and goals for the company (keep small, grow big, franchise)? What is the exit strategy for clearly spell out your goals and not hedge. If
yourselves/ investors (sell to larger company, continue to won, buy out investors…) you want to hedge and gauge the concept first
- Our objectives would be to stay smaller initially to keep costs low and potential profits higher. After the concept you should have a set of stages/milestones you
has been proven and the company is generating a profit we would look at exit strategies such as selling our need to hit. These have to be clearly spelled
out.
service to our clients. However if there is further development potential we would like to stay with the company.
What additional information is needed to describe and organize your company? Comment [b4]: I second what Hans said… It
is unclear. I will add a few writing suggestions.
1.Avoid “are planning, trying etc” and replace
with more assertive we plan or we aim etc.
2. Product/Service Description 2.Start with the most important part. If you have
What exactly is your product or service? What isn't it? Carefully describe. phases in product development number each
one and state what will be the product in each
- We are aimingaim to bring interactive shopping options to customers in their retail stores. Currently, we are one instead of a paragraph which makes it
targeting Best Buy stores as our potential client. We are planning to begin improving costumer experience by difficult to find.
providing them the an interactive entertainment electronics comparison option. According to our current plan, we 3.Read and revise after you have written a
will design a networked box where all TV sets in the retail store will be connected. Using our system, users will be document to avoid grammatical errors.
able choose which TVs to compare in addition to the option to choose the video playing on TVs. Later we are Comment [HR5]: This is not clear. You need
planning to provide a web service where a user (with a cell phone and internet connection) will be able to search to explain exactly how this works. The user
comes to the store. What do they see that’s
the product in which that he is interested, find the specifications for that product and he will be able to buy it online different? How do they interact with the TV’s? If
and pick it up from the register. Moreover, this information can be used as invaluable market research statistics there is someone in front of them, do they have
for the retail store. to wait to use this tool?
Comment [HR6]: Isn’t this possible already
What VALUE do you provide? What is unique about your product/service? What are its features and benefits? Do you through the store website? Can’t someone
have any proprietary rights to the product/service (technology, patents, copyrights, etc.)? Why is your product/service already do this with a smartphone?
superior to the competition, and how is it different? Comment [b7]: Are you going to do this or will
- The value we provide is an enhanced customer experience and inexpensive market research. The enhanced they do it. This can be a great source of value
customer experience is a differentiation point which Best Buy has based their business on and our service will for many firms not just best buy but also OEMs.
allow them to further enhance the customers experience in the store. When we have a prototype operational, we Comment [HR8]: Good. This increases
will have the proprietary rights to the services framework. The product is an attractive service to our client willingness to pay (by how much though – a few
because they are having difficulties differentiating themselves from low-cost and high volume retailers. percent?). Market research also should
increase willingness to pay because they will
better know what the consumer is looking for.
What must be done before you can introduce your product or service to the marketplace? What are the risks?
- A prototype must be created and tested to prove its capabilities. A server, hub, and software platform must all be Comment [b9]: I had mentioned this before
as well. You will need to be clear upfront in
developed prior to testing. terms of how this will enhance customer
experience and for whom. For example if you
How long will it take to bring your product or service to market? What is your timeline? need to login to a website then you must have
- It will take roughly four months to develop a prototype. At this point it should be tested for at least one month smart phone and it is not possible for everyone
to have one. Not everyone will buy a TV, or a
before it is released. camera, some might buy an Ethernet cable or
flash drive and do not benefit from this. You will
What are the one-time start-up and development costs of your business (equipment, deposits, fixtures, etc.) need to do better in terms of identifying the
- For developing the prototype we need following hardware: a hub, a monitor and a computer. We will not invest customer and getting data on your target
customer. Try market research firms to get
any capital into an office structure at this point. some consumer data.
Comment [HR10]: I didn’t understand this.
What additional information is needed to define and develop your product or service?
- Computer hardware and graphics resources and knowledge for developing the physical system and the software. Comment [HR11]: Some specifics would
help. This will help to establish your costs
better.
3. Industry and Marketplace Analysis
Comment [HR12]: Break down the costs.
Name and describe the industry in which you will compete? Is this industry characterized by high potential for value
There seems to be a disconnect between this
creation? What trends are important in this industry? section and your numbers. Build your numbers
- The industry that we will be competing in is Business Software and Services. A common trend in this industry is from the bottom up and you should be more
short term profitability and company buyouts. accurate.
Comment [b13]: This is very broad definition
of an industry. This might hamper your industry
analysis or identifying the current buyers and
substitutes.
Even though your idea may be undeveloped, use your best judgment to answer all of the questions.
New Venture Feasibility Analysis
How does this industry segment the market? What is the market you intend to serve? How large is it? What is its growth
potential?
- There are 13 competitors that have a market capitalization of over one billion. There are approximately 150-175 Comment [b14]: This is where an industry
on the stock exchange and 1/3 of them have a market capitalization of less than 20 million. We intend to target analysis would help when you do a business
retailers of electronic goods. plan.
Comment [HR15]: This is not very
What additional information is needed to define your marketplace? convincing. The point here is to identify who
might already be doing what you’re proposing,
or who could easily do it. Who is providing
4. Marketing Strategy services like this to retailers of electronic
Who are the target customers? What motivates customer purchase decisions in this market? What problems are you goods?
solving for them? What are their profiles?
- The target customers will be Best Buy or Ultimate Electronics. They are motivated to purchase products and
services which allow them to increase sales, efficiency, and differentiation through an enhanced customer
experience. Comment [b16]: Is there a tradeoff or do they
purchase everything regardless of the price or
How will the product be priced? What are gross revenues per unit sold? What are anticipated annual sales? alternative options which might be having more
customer service personnel or doing it online.
- The product will be priced on the sales increase in consumer electronics that it will generate. Other companies Where do these numbers come from? Which
have shown 5-10% increase from interactive products and we will follow this guideline. Best Buy has a year? Do you expect them to remain the same
yearlyannual revenue of approximately $40 billion and 41% of this is consumer electronics. Therefore, based on or decline?
the number of stores (roughly 1000) and the potential sale increase (0.5%) we will charge roughly $75,000 per Comment [HR17]: Specific examples would
store. be really helpful. These could also help in
understanding the service/product that you are
providing.
What additional information is needed to create an effective marketing strategy?
- We need to know which segments of our client will be most interested in this service. This will allow for target Comment [HR18]: With this pricing system, it
marketing and catering to their needs and wants. sounds like you will be providing the hardware,
as well as ongoing service. Will this service be
used in all consumer electronics in the store?
5. Distribution & Sales Strategy Would you need a different piece of hardware
What distribution channels will you use (e.g., direct sales, mail-order, wholesalers, etc.)? for each section of the store? How many
sections? Etc.
- We would use direct sales and installation to the clientin client stores. .
Comment [b19]: Is this a fixed cost / onetime
cost or is it recurring service that you offer but is
How will you communicate with your customers (e.g., advertising, promotions, etc.)?
paid for only once.
- We would communicate through press releases. We would also use direct communication, such as web forums
and blogs. Comment [HR20]: I’m unclear on this. If you
are only working with one or two major retailers,
How will your product or service be sold? Who will do the selling (own sales people, manufacturing representatives, etc.)? why would you need press releases? Also, what
do the web forums or blogs do?
- We will be the salespeople and company representatives. We will offer contract buying options that will be
negotiated based on the services. Comment [b21]: You have some network at
one or few Best Buy stores. So you can start
with talking to them about a pilot trial.
What are the costs associated with your sales strategy? Which costs are fixed? Which are variable?
- Prototype and demonstration devices are fixed costs. The variable costs will depend on how many hardware Comment [HR22]: Specifics again are
systems are sold and cost of maintenance and software upgrades. needed here. If you list out all of the
requirements, then put a dollar amount on these
requirements, you will have more meaningful
What additional information is needed to create an effective sales strategy? numbers, or at least some way to discuss their
- More market research to determine the true value of our product. accuracy.
Comment [HR23]: It would seem that if you
6. Operations Plan can demonstrate this concept in one Best Buy
store, and it works, then they will want to adopt
Which operations (manufacturing, transportation, logistics, travel, printing, consulting, after-sales service, and so on) are it in all their stores. Manufacturing the hardware
critical to the success of your business? Which are secondary? would be one difficult problem, and then you are
- Logistics is critical because we want to be able to spread our service as quickly as possible. Client information right that integrating the information from
integration with our system and software will be the major initial challenge. Market data collection is also very several stores together becomes an issue as
you grow. You’ll have to think through exactly
important because it is one of the major services we would be providing our clients. how you will collect, store, and use this data.

How will you produce and deliver your product/service? What will you do in-house, and what will you purchase (make vs. Comment [b24]: This is important from a
security standpoint as well. I am unclear what
buy)? logistics implies in this case. Is it distributing the
- We will do in house assembly of the physical system from pre-fabricated parts and we will develop the software. product to stores or managing data. Be more
specific.
What will it cost to produce and deliver your product or service? Estimate fixed costs (plant, equipment, etc.) and variable Comment [b25]: Break this down to show
costs (labor, materials, etc.) how you arrive at this figure.
- We will need $ 220,000 $ to produce and deliver our product. Comment [HR26]: Where did you get this
number? You need a lot more detail here.
Even though your idea may be undeveloped, use your best judgment to answer all of the questions.
New Venture Feasibility Analysis
What additional information do you need understand and cost your operations?

8. Financial Plan
Summarize estimates made in previous sections: Comment [b27]: So you say you will charge
$ 75000 per store, then it seems there is a
A Annual unit sales: 20 discrepancy here or am I missing something?
How many per store do you need?
B Price per unit: $75,000 There needs to be greater detail here.
C Variable cost per unit (production and sales): $5,000
D Fixed costs (R&D, admin, production, and sales): $5,000
E One-time start-up costs (eqpmt, R&D, mktg, legal, etc) $10,000
F Working capital required (receivables , inventory, etc) $10,000

Calculate estimated annual gross revenues and income:

G Estimated annual revenues (A*B): $1,500,000
H Estimated annual variable costs (A*C): $100,000
I Estimated annual contribution margin (G-H-D): $1,395,000

Calculate break-even figures:

J Contribution margin per unit (B-C): $70,000
K Annual break-even quantity (D/J): 0
L Ratio of break-even to expected quantities (K/A): 0.00

Estimate the money you will initially need to start your business:
M Total up-front funds required (E+F): $20,000
N Additional units to cover up-front funds (M/J): $0
O Break-even quantity with up-front funds (K+N): 0

Calculate financial performance figures:

P Payback period for startup funds (M/I): 0.01 years
Q Annual return on start-up investment (I/M): 6975%
R Variable cost to price ratio (C/B): 0.07
S Contribution margin ratio (I/G): 0.93
Do these numbers look attractive enough to proceed? How can they be improved?

- These number do look attractive. As for now they are just estimations and they can be improved by getting more
specific numbers for production and legal costs. Comment [HR28]: These numbers look very
random. I suggest that you think of how you are
going to make it through the first year.
Therefore, you make one unit, figure out how
How much cash will you need to start your business? Where will you get it (savings, a loan, venture capital, an angel…)? much it will cost to do, and keep costs as low as
- We need $ 100,000 $ to start the business. As for now we plan to get it form savings, loans and angel investors. possible. Then in year 2, a lot of your fixed
costs will be less, and you will be able to sell
What other information do you need for your financial projections? more.
- Actual hardware costs that will get more precise after a prototype has been built. Comment [b29]: Seems to be too high unless
you justify this better.
Comment [HR30]: Do you think that you
really need or want this much money? This
business idea seems like it could be feasibly
done for much less.

Even though your idea may be undeveloped, use your best judgment to answer all of the questions.