Carrying out a Feasibility Study
Practical Action
• Calculate the amount of raw materials Typical losses incurred while processing
and ingredients that are needed to
fruits
produce the required weight of product
Process
Typical
each day.
losses (%)
Washing fruits
0-10
II. Equipment required
Sorting
5-50
Calculate the weight of food that should be
Peeling
5-60
processed at each stage (in kg per hour) using the Slicing/dicing
5-10
process chart. Then decide on the type and size
of equipment required. It is preferable to buy
equipment from local suppliers because servicing
and obtaining of spare parts should be faster and
easier.
Batch preparation/weighing
Boiling
Drying
Packaging
Accidental spillage
2-5
5-10
10-20
5-10
5-10
III. Packaging
Rejected packs
2-5
Decide on the type of packaging material and calculate the number of packages that are needed
daily. Take into account the technical requirements of the product for protection against lights,
crushing, air, moisture etc, the marketing requirements and the relative cost and availability.
IV. Number and type of workers
Use the process chart to break down the production into different stages and then decide on the
number of people need for each stage of the process. Include tasks such as store management,
quality assurance and book-keeping.
Each day’s work will initially involve preparation of the raw materials and then move through
processing and packaging. You can have all workers doing the same type of activity throughout the
day but it is often more efficient to distribute different jobs to each worker as the day progresses.
Financial feasibility
After completing the technical feasibility study, you should have sufficient information to
determine the costs involved in production. Additionally, the market survey will have supplied
information about the sale price that could be achieved for the new product. You can now
calculate the expected income and expenditure and the gross profit that can be achieved.
I. Start-up costs
Calculate the start-up capital and initial working capital to determine whether your
savings (also known as equity) will be sufficient to start the business. If not, a loan may
be needed from a bank or other lender.
II. Operating costs
Calculate your fixed and
variable operating costs in
What is gross profit (or loss)?
This is the difference between the expected income and
the total operating costs over the first year, including any
advance based on the likely load repayments. Income is calculated as follows:
market share. If a loan is
Income = selling price per unit x number of units sold
taken, the costs of
repayment should be included in the fixed costs.
III. Income and profit
Calculate the expected sales and income using information from the market survey. The
income depends on both the price of a product and the amount that is sold.
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