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Feasibility Study Course Lesson 4: How to Write a Financial Feasibility Study

Part 1 - What is a Financial Feasibility Study & Start-Up Capital Requirements

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Purpose of a Financial Feasibility Study: A financial feasibility study projects how much start-up capital is needed, sources of capital, returns on investment, and other financial considerations. It looks at how much cash is needed, where it will come from, and how it will be spent.

What is a Financial Feasibility Study?

A financial feasibility study is an assessment of the financial aspects of something. If this case, for starting and running a business. It considers many things including start-up capital, expenses, revenues, and investor income and disbursements. Other portions of a complete feasibility study will also contribute data to your basic financial study.

A financial feasibility study can focus on one particular project or area, or on a group of projects (such as advertising campaigns). However, for the purpose of establishing a business or attracting investors, you should include at least three key things in your comprehensive financial feasibility study:

  • Start-Up Capital Requirements,
  • Start-Up Capital Sources, and
  • Potential Returns for Investors.

Start-Up Capital Requirements

Start-up capital is simply how much cash you need to start your business and keep it running until it is self-sustaining. You should include enough capital funds (cash, or access to cash) to run the business for one to two years.

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Finding Start-Up Capital Funding Sources

There are many ways to raise capital for your business, but no matter what route you take, investors are more likely to invest, banks are more likely to approve loans, and large corporations are more likely to give you contracts, if you have personally invested into the business yourself.

When you make a list of funding resources, be sure to include anything that you can contribute to the business, including free labor. If you are starting a nonprofit organization, your donated professional time may even be tax deductible for you.

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