Business Planning & Feasibility Analysis: Models, Feasibility Tests & Real-World Cases

TAKEAWAYS:

• A business plan is a living document that maps goals, strategies, and financial projections—not just a one-time report—and must align with feasibility analysis to avoid costly failures.
• Feasibility analysis (market, technical, financial, organizational) acts as a pre-mortem for startups: 80% of Nepali SMEs fail within 3 years because they skip this step (source: FIBL Nepal).
• The break-even point is the financial litmus test: if your fixed costs + variable costs per unit exceed your selling price, the business is doomed before launch.
• SWOT analysis is not just a checklist—it’s a strategic filter: Daraz’s "Strength" (logistics network) and "Threat" (Khalti’s digital payments) directly shaped its 2023 expansion into rural Nepal.
• Resource mapping (Unit 8) and feasibility analysis are two sides of the same coin: you can’t plan without knowing what resources you have (or lack).
• Exam trick: Always tie your answers to real Nepali examples (e.g., NTC’s fiber rollout, Pathao’s driver incentives) to score full marks—examiners reward contextual relevance.

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1. What Is a Business Plan?

A business plan is a strategic roadmap that outlines:

• Business concept (what you sell, to whom, and why)
• Market analysis (customers, competitors, trends)
• Operations plan (how you’ll produce/deliver)
• Financial projections (revenue, costs, profitability)
• Risk management (contingency plans)

Types of Business Plans

Standard TU-approved structure for MGT237 exams (Image: CC BY-SA 4.0, via Wikimedia Commons)

Why Business Plans Fail (and How to Avoid It)

Real-World Fix: Pathao’s 2018 pivot

• Problem: Initial plan assumed 50% market share in Kathmandu within 1 year (over-optimistic).
• Fix: Used feasibility analysis to adjust:
  • Reduced target to 20% (realistic for a new player).
  • Added driver incentives (₹500/day for rural areas) to improve supply.
  • Result: 30% market share in 2 years (vs. failed competitors like Yeti Taxi).

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2. Feasibility Analysis: The 4 Critical Tests

Feasibility analysis answers: "Can this business actually work?" before you invest time/money. It has four pillars:

A. Market Feasibility

Question: Do customers want this? Can you reach them? Tools:

1. Demand Analysis: Survey 300+ potential customers (e.g., NTC’s fiber survey before rollout).
2. Competitor Benchmarking: Compare prices, features, and gaps (e.g., Daraz vs. Sastodeal).
3. SWOT Analysis:

   flowchart TD
     A["Strengths"] --> B["Weaknesses"]
     C["Opportunities"] --> D["Threats"]
     A -->|"Example:"| E["Nepal’s unbanked population (30%)"]
     B -->|"Example:"| F["High logistics costs in hills"]
     C -->|"Example:"| G["Khalti’s UPI integration"]
     D -->|"Example:"| H["Government import taxes on electronics"]

Worked Example: Kathmandu Traffic Routes (Nepal)

• Problem: A student wants to start a bike-taxi service in Kathmandu.
• Market Feasibility Test:
  • Demand: Survey shows 60% of office-goers in Thapathali prefer bikes over buses (speed + cost).
  • Competitors: Pathao (app-based), local bike taxis (no app, higher fares).
  • Gap: No app-based bike-taxi with real-time tracking in Kathmandu.
  • Decision: Green light—but only if they can partner with bike mechanics (resource constraint).

B. Technical Feasibility

Question: Can you actually produce/deliver this? Checklist:

• Production Capacity: Can your machines handle demand? (e.g., Rashmi Garments’ 2 machines in 1987 → limited to 50 shirts/day).
• Technology: Do you have the right tools? (e.g., Daraz’s automated warehouses vs. manual sorting).
• Suppliers: Are raw materials available? (e.g., NTC’s fiber dependency on Chinese imports).

How Daraz sources products from suppliers to customers (Image: Miguel Garcia Gonzalez, CC BY-SA 4.0, via Wikimedia Commons)

Case Study: Nabil Bank’s Loan Approval

• Problem: A farmer applies for a ₹500,000 loan to buy irrigation pumps.
• Technical Feasibility Check:
  • Land Irrigation Capacity: Bank engineers verify if the land can support pumps (avoids default).
  • Water Source: Check if a nearby river/well exists (real case: 30% loans fail this test).
  • Maintenance Skills: Does the farmer have access to mechanics? (Nabil trains farmers in 80% of approved cases).

C. Financial Feasibility

Question: Will this make money? Key Metrics:

1. Break-Even Analysis:

   • Formula: $$\text{Break-Even Point (units)}=\frac{\text{Fixed Costs}}{\text{Selling Price per Unit}-\text{Variable Cost per Unit}}$$
   • Example: A coffee shop in Pokhara:
     • Fixed Costs (rent, salaries): ₹50,000/month
     • Variable Cost (per cup): ₹20
     • Selling Price: ₹50
     • Break-Even: $\frac{50,000}{50-20}=1,667$ cups/month.
     • Decision: If you sell <1,667 cups, you lose money.

2. Profitability Ratios:

   • Gross Profit Margin = (Revenue – COGS) / Revenue
   • Net Profit Margin = Net Profit / Revenue
   • Example: Himalayan Java’s 2023 margins:
     • Gross Margin: 65% (high due to direct farming).
     • Net Margin: 12% (after marketing/logistics).

D. Organizational Feasibility

Question: Do you have the right team and structure? Factors:

• Team Skills: Can your team execute? (e.g., NTC’s IT team for fiber rollout).
• Legal Structure: Sole proprietorship vs. Pvt. Ltd. (tax implications).
• Management Style: Top-down (e.g., Chaudhary Group) vs. flat (e.g., Daraz’s startup culture).

Mermaid Diagram: Organizational Structures

Case Study: Rashmi Garments (1987)

• Problem: Mrs. Agarwal started with 2 machines (₹20,000) but had no formal business plan.
• Organizational Feasibility Issues:
  • No Marketing Plan: Relied on word-of-mouth → slow growth.
  • No Financial Controls: Over-invested in inventory during lean seasons.
  • Solution: Later hired a part-time accountant and used seasonal sales data to adjust orders.

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3. Business Planning Process: Step-by-Step

Exam Tip: Always start with the Executive Summary—it’s the hook for investors/examiners. Example:

"Rashmi Garments, a Kathmandu-based textile firm, aims to supply 500 shirts/month to schools by 2025, leveraging Nepal’s 10% annual school enrollment growth. Initial investment: ₹100,000 for 5 machines."

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4. Feasibility Analysis in Action: Daraz’s Expansion

Scenario: Daraz wants to expand into rural Nepal (e.g., Dhankuta). Feasibility Checks:

Result: Pilot success in 2023 → now 15% of Daraz’s orders come from rural areas.

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5. Common Mistakes in Business Planning (and How to Avoid Them)

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## In the Real World

1. eSewa’s Feasibility Analysis (2016)

   • Idea: Digital payments for utility bills (electricity, water).
   • Market Feasibility: Survey showed 70% of Kathmandu users wanted online payments but only 30% had internet banking.
   • Solution: Partnered with NMB Bank for cash deposits at branches.
   • Result: Now 80% of Nepal’s utility payments go through eSewa.

2. NTC’s Fiber Rollout (2018–2023)

   • Technical Feasibility: Needed backbone infrastructure (undersea cables from India).
   • Financial Feasibility: Break-even at 500,000 subscribers (achieved in 4 years).
   • Organizational Feasibility: Trained 5,000+ engineers for maintenance.
   • Outcome: #1 ISP in Nepal (60% market share).

3. Pathao’s Driver Incentives (2017)

   • Problem: Drivers left due to low earnings.
   • Solution: Dynamic pricing + incentives (₹500/day for rural areas).
   • Feasibility Check: Calculated that ₹300/day was the break-even for driver profitability.
   • Result: 3x driver retention in 6 months.

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## Exam Tip: How to Score Full Marks

1. Structure Your Answer Like This:

   • Introduction: Define the concept (e.g., "Feasibility analysis is a pre-investment evaluation...").
   • Body: Use bullet points + real examples (e.g., "Like NTC’s fiber rollout, Daraz’s rural expansion required...").
   • Conclusion: Summarize with 1–2 key takeaways.

2. Must-Mention Examples (Nepal Focus):

   • Market Feasibility: eSewa, Daraz, Khalti.
   • Technical Feasibility: NTC’s fiber, Himalayan Java’s coffee processing.
   • Financial Feasibility: Nabil Bank loans, Rashmi Garments’ break-even.
   • Organizational Feasibility: Chaudhary Group’s hierarchy vs. Daraz’s flat structure.

3. Avoid These Pitfalls:

   • ❌ Generic answers (e.g., "Feasibility analysis is important" → too vague).
   • ❌ No calculations (e.g., skip break-even formulas → loses marks).
   • ❌ Ignoring Nepali context (e.g., using Uber instead of Pathao → wrong example).

4. Bonus Marks:

   • Draw a simple flowchart (e.g., business planning process).
   • Compare two Nepali companies (e.g., "Unlike NTC’s top-down approach, Daraz uses...").
   • Use real data (e.g., "Nepal’s SME failure rate is 80% within 3 years—feasibility analysis reduces this by 40%").

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## Practice Questions (Exam-Style)

1. Case Study: "Mr. Bikram wants to start a ‘cloud kitchen’ in Lalitpur. He has ₹200,000, can hire 5 chefs, and targets office-goers. Conduct a feasibility analysis for his idea."

   • Your Answer: Use the 4 tests (market: demand for quick meals; technical: kitchen space; financial: break-even at 100 meals/day; organizational: chef training).

2. Short Answer: "Why did Rashmi Garments struggle in 1988 despite having a good product?"

   • Your Answer: Lacked market research (no survey on school demand), poor financial controls (no emergency fund), and no contingency plan for machine breakdowns.

3. Diagram Question: "Draw the business planning process and explain how feasibility analysis fits into it."

   • Your Answer: Use the Mermaid flowchart above and highlight the feedback loop from feasibility to market analysis.