A Team Is Writing A 25 Page Feasibility Report

Given the significance of a feasibility study in decision making and implementation of the project, many people especially potential investors, financiers or even management lack the practical knowledge of feasibility study. In this regard, it becomes difficult to write a feasibility study which will provide a road map for a particular project. Based on this notion, this book sets to address those practical challenges in preparing a feasibility study. The purpose of the book is to provide practical guide to write a feasibility study to determine the viability of a specific project. Specifically, this will book will provide the description of every important section in a feasibility study with vivid illustration.

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A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY

P R A C T I C A L G U I D E T O F E A S I B I L I T Y S T U D Y

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ISBN:

Library of Congress Cataloging-in-Publication Data

Ndalahwa Musa Masanja

Practical Guide to Writing a Feasibility Study / Ndalahwa Musa Masanja. – 1st ed.

p. cm.

ISBN (pbk.)

1. Practical Guide to Writing a Feasibility Study. I. Ndalahwa Musa Masanja.

TS155.S762 2020

618.5– dc22

Typeset in 10/12pt Calibri (body) by 12

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A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY

P R A C T I C A L G U I D E T O F E A S I B I L I T Y S T U D Y

PREFACE

Everyone wants to open and operate a successful business or project. This is the sole intention

of any project developer or entrepreneur. However, these are confronted with a serious reality.

This reality is that not all business or projects are viable of feasible. In other words, these

projects or business are faced by the difficult issue of long-term sustainability. This the critical

challenge or question confronting all business or projects. In this case, it is important to

conduct a feasibility study to determine the viability or sustainability of the project in the

future. A feasibility study provides a blueprint to determine feasibility of a business endeavor or

a planned project.

A feasibility study is a systematic plan and analysis of the sustainability of a project taking into

consideration factors such marketing, production or technical issues, organizational and

management aspects and financial implications. In other words, feasibility study is the

evaluation and assessment of a proposed project or business. This is an important endeavor

before any further action can be taken. On the hand, it influences the decision or course of

action to be taken by an investor, financier or management of an organization.

There are several benefits of conducting a feasibility study. one the major benefits is that a

feasibility study identifies the merits and demerits of a projects. In reality, it provides a cost

benefit analysis of undertaking a specific activity, project or business. Therefore, someone can

make an informed decision about a specific activity or project. At the same time, a feasibility

study also minimized risks by taking actions without understanding and comprehending their

financial, legal or reputational ramification to an organization or a business. For this reason, a

feasibility study provides a comprehensive understanding about a project or plan. Furthermore,

a feasibility study identifies potential challenges and problems while executing the plan or

project. Moreover, a feasibility study takes into consideration all relevant factors to be

considered in the implementation of the project or plan.

Given the significance of a feasibility study in decision making and implementation of the

project, many people especially potential investors, financiers or even management lack the

practical knowledge of feasibility study. In this regard, it becomes difficult to write a feasibility

study which will provide a roadmap for a particular project. Based on this notion, this book sets

to address those practical challenges in preparing a feasibility study. The purpose of the book is

to provide practical guide to write a feasibility study to determine the viability of a specific

project. Specifically, this will book will provide the description of every important section in a

feasibility study with vivid illustration.

A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY

P R A C T I C A L G U I D E T O F E A S I B I L I T Y S T U D Y

ABOUT THE AUTHOR

Dr. Ndalahwa M. Masanja is a lecturer of Management and Accounting at the University of

Arusha. He has been teaching at several higher education institution including Jomo Kenyatta

University of Agriculture and Technology (JKUAT Arusha Campus), Training Center for

Development Cooperation (MS-TCDC), and Institute of Accountancy (IAA) in Arusha and Dar-es-

salaam. He has been teaching undergraduate and graduate programs at those institutions. He

has been supervising graduate students pursuing the dissertation or thesis research.

He worked initially as an Accountant in a secondary school and then as a Business Manager of a

company located in Arusha. He has worked in the United Stated of America (USA) as an

Accountant and working in different capacity in a printing press, publishing house, logistic

company and the food industry like Pizza hut Michigan. The diverse working environment

provides substantial experience about human resources in relation to their jobs. In this case,

the author is able to provide a diverse perspective of human resource management.

He holds a Bachelor of Business Administration (BBA) in Accounting and Management and a

Master of Business Administration (MBA) in Accounting from the University of Eastern Africa

Baraton (UEAB) in Kenya. Furthermore, He has a doctoral degree (PhD) from Andrews

University in United States of America (USA). At the same time, he has attended multiple

seminars and workshops in research, education and business administration. The author's

formal and informal training provides a deep insight about human resource management in

academics as well as in the industry.

He is the author of several books and papers in accounting, management, research and

education. Some of the his books include Introduction to Business Research, A practical guide to

dissertation and thesis writing, Essentials in higher education administration an d a Job

Evaluation for workbook for students pursuing human resource management. In addition, He is

the founding editor of the International Journal of Innovation in Education and Business (IJIEB) a

bi- annual peer review journal publishing innovative articles in business and education.

He has been serving in the administrative and governing boards of institutions in secondary

school and higher learning institutions. He undertakes consultancy in a diverse range of

industries including health, education and research. His wealth of experience has a significant

contribution to the completions of this book.

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P R A C T I C A L G U I D E T O F E A S I B I L I T Y S T U D Y

ACKNOWLEDGEMENTS

First and foremost, I would like to extend my appreciation toward my family especially my wife

for the unwavering support toward the completion of this book. She has been instrumental

toward the success of this endeavor.

During the process of writing the book, the author sought advice and counsel from experts in

the business world and in various sectors. There has been numerous feedback and constructive

critici sm from various experts. My gratitude and appreciation goes to everyone who provided

their advice and feedback for this book.

I extend my gratitude to all businesses and entrepreneurs who contributed toward the final

preparation of this book.

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Preface………………………………………………………………………………………………………………………

1.1 Background of the Study………………………………………………………………………………………..

1.2 Statement of the Problem………………..…………………………………………………………………….

1.3 Objectives of the Study…………………………………………………………………………………………..

1.4 Significance of the Study………………………………………………………………………………………..

1.5 Scope and Limitation……………………………………………………………………………………………..

1.6 Methodology………………………………….………………………………………………………………………

1.6.1 Research Design and Framework…………..………………………………………………………

1.6.2 Sampling Procedure…………….……………………………………………………………………….

1.6.3 Treatment of Data……………………………….……………………………………………………….

1.6.3.1 Internal Rate of Return (IRR)……………………………………………….…………….

1.6.3.2 Payback Period in Years………………………………………….. …………………………

1.6.3.3 Net Present Value (NPV)……………………………….…………………………………..

1.6.3.4 Profit Margin……………………………………………………………………………………..

1.7 Review of Related Literature………………………………………………………………………………….

1.7.1 Marketing Demand……………………………………………………………………………………….

1.7.2 Management and Organization…………………………………………………………………….

1.7.3 Financing………………………………………………………………………………………………………

1.7.4 Technical/ Production…………………………………………………………………………………..

1.8 Definition of Terms…………………………………………………………………………………………………

CHAPTER TWO

MARKETING STUDY

2.1 Product Description………………………………………………………………………………………………..

2.2 Industry Profile…………….…………………………………………………………………………………..…….

2.2.1 SWOT Analysis……………………………………………………………………………………………….

2.2.1.1 Strengths……………………………………………………………………………………………

2.2.1.2 Weaknesses……………………………………………………………………………………….

2.2.1.3 Opportunities…………………………………………………………………………………….

2.2.1.3 Threats………………………………………………………………………………………………

2.3 Demand………………………………………………………………………………………………………………….

2.4 Supply………………….…………………………………………………………………………………………………

2.5 Demand-Supply Analysis/Market Share………………………………………………………………….

2.6 Marketing Plan……………………………………………………………………………………………………….

2.6.1 Promotion…………………………………………………………………………………………………….

2.6.1.1 Television and Radio……………………..…………………………………………………..

2.6.1.2 Billboard and Posters……………………………..………………………………………….

2.6.1.3 Online…………………………..……………………………………………………………………

2.6.1 Pricing……………………………………………………………………………………………………………

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CHAPTER THREE

TECHNICAL AND PRODUCTION

3.1 Process Flow/Operational Process………………………………………………………………………… 85

3.2 Equipment, Furniture and Fixtures…………………………………………………………………………

3.3 Building………….………………………………………………………………………………………………………

3.4 Location…………………………………………………………………………………………………………………

3.5 Layout/Floor Plan…………………………………………………………………………………………………..

3.6 Capital/Scheduling…………………………………………………………………………………………………

3.7 Water Disposal……………………………………………………………………………………………………….

3.8 Location………………………………………………………………………………………………………………….

3.9 Layout/Floor Plan...………………………………..…..………………………………………………………….

3.10 Capacity/Scheduling……………………………………………………………………………………………..

3.11 Waste Disposal……………………………………………………………………………………………………..

3.12 Utilities and Other Operating Costs………………………………………………………………………

CHAPTER FOUR

ORGANIZATION AND MANAGEMENT STUDY

4.1 Form of Organization………………………………………………………………………………………………

4.2 Organizational Structure…………………………………………………………………………………………

4.2.1 Functional Organizational Structure………………………………………………………………

4.2.2 Product/Market Organizational Structure……………………………………………………..

4.2.3 Matrix Organizational Structure/Multiple Command Systems……………………….

4.3 Personnel Requirements…………………………………………………………………………………………

4.4 Qualification Requirements…………………………………………………………………………………….

4.5 Compensation Package…….…………………………………………………………………………………….

4.6 Projected Timetable……………………………………………………………………………………………….

CHAPTER FIVE

FINANCIAL STUDY

5.1 Major Assumptions…………………………………………………………………………………………………

5.2 Capital Requirements/Investments……………………….……………………………………………….

5.3 Preparation of Financial Statements……………………………………………………………………….

5.4 Financial Analysis……………………………………………………………………………………………………

6.1 Stockholder Theory…………………………………………………………………………………………………

6.2 Stakeholder Theory…………………………………………………………………………………………………

6.3 Stakeholders of the Business………………………………………………………………………………….

6.3.1 Stockholders/Owners…………………………………………………………………………………….

6.3.2 Customers……………………………………………………………………………………………………..

6.3.3 Employees……………………………………………………………………………………………………..

6.3.4 Suppliers……………………………………………………………………………………………………….

6.3.5 Government………………………………………………………………………………………………….

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6.4 Environmental Impact Assessment……………………………………………………………………….. 219

FINDINGS………………………………………………………………………………………………………………………

CONCLUSION AND RECOMMENDATION

8.1 Conclusion………………………………………………………………………………………………………………

8.2 Recommendations……………………………………….…………………………………………………………

BIBLIOGRAPHY……………………………….……………………………………………………………………………

A. Research Instrument………………………………………………………………………………………..

B. Curriculum Vitae………………………………………………………………………………………………

C. Tabulated Data…………………………………………………………………………………………………

D. Statement of Retained Earnings……………………………………………………………………….

E. Administrative and Operational Expenses………………………………………………………..

F. Cash Flow Calculation……………………………………………………………………………………….

G. Building, Equipment and Facilities Schedule…………………………………………………….

H. Amortization Schedule for Credit Facility………………………………………………………….

I. Legal Requirement and Documents for the Project……………………………………………

J. Capacity Schedule……………………………………………………………………………………………..

INDEX…………………………………………………………………………………………………………………….……

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Demand…………………………………………………………………………………

Supply……………………………………………………………………………………

Demand and Supply Analysis…………………………………………………

Revenue………………………………………………………………………………..

Television and Radio Advertisement Costs……………………………

Billboard and Poster Advertisement Costs…………………………….

Online and Social Media Advertisement Costs………………………

Equipment, Furniture and Fixtures……………………………………….

Depreciation Schedule………………………………………………………….

Operating and Running Costs………………………………………………..

Administrative and Advertising Costs……………………………………

Personnel Requirement………………………………………………………..

Qualification Requirement……………………………………………………

Compensation Package…………………………………………………………

Projected Timetable……………………………………………………………..

Working Capital…………………………………………………………………….

Capital Expenditure……………………………………………………………….

Total Capital Requirement…………………………………………………….

Projected Income Statement………………………………………………..

Projected Balance Sheet……………………………………………………….

Projected Cash Flow Statement…………………………………………….

Estimated Cash Flows……………………………………………………………

Profit Margin………………………………………………………………………..

Asset Turnover……………………………………………………………………..

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Research Framework……………………………………………………………

Household Income Level………………………………………………………

Process Flow……………………..…………………………………………………

Work Layout Plan…………………………………………………………………..

Organizational Structure…………………………..……………………………

Net Profit……………………………………………………………………………….

Capital Balances…………………………………………….………………………

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CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

This section provides the historical background of the project or

business. It provides a brief but comprehensive description of the

product or services in the feasibility study. In addition, this section

provides the main characteristics of the project. This involves the

reason to write the project, the necessary prerequisites and the

possible results for the completion of the project.

The main purpose of the background of the study focuses on providing

a general idea or overview about the study. The background has to

provide the main prerequisite of the study. This process involves a clear

and focused background of the project. The following are the key

information to include in the background of the study.

1. Primary focus of the project. This involves what the project is

planning to tackle or address.

2. A list of important prerequisites and main reasons to initiate the

feasibility study

3. An ordinary description of how to conduct the feasibility study.

4. A brief explanation of the possible desired outcome of the

project.

In general, the background of the feasibility study is a simple and brief

statement about the project. It provides the rationale to conduct the

study. At the same time, the background provides the underlying

problems that need to be addressed.

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P R A C T I C A L G U I D E T O F E A S I B I L I T Y S T U D Y

Illustration of the Background of the Feasibility Study

The subject of business incubation has been a prominent and ongoing

subject under discussion. The introduction can be traced in the 1950

and has gained traction in the last decade (Mckenzie, 2017). This

practice has been focusing on improving the skills in business especially

entrepreneurship and starting small business especially start-ups. At

the same time, it has also been gaining traction in the manufacturing

sector where by appropriate training is provided to ensure the effective

and efficient production of goods and services.

The whole process of business incubation involved providing a safe and

nurturing space for small entrepreneurs and potential entrepreneurs to

start and operate their business. This involves providing

entrepreneurial knowledge, skills, expertise and possible experiences in

different areas confronting entrepreneurs. In addition to this, the

expertise and experience provided will help these potential

entrepreneurs to navigate the unknown treacherous environment of

entrepreneurial activities (Monista, 2019).

In developed countries, business incubators have been the norm for

any small size business endeavor. Specifically, Silicon Valley in San-

Francisco in USA has been an epicenter for start-up business activities.

This involves providing financial assistance and expertise in starting and

operating the business (Cirdonom 2018). Other areas are following

trend like London, Tel-aviv and other global cities who have been

promoting business incubators.

From an African point of view, South Africa, Nigeria and Kenya have

been leading the way on business incubators (Ozolo, 2020). Other

countries like Rwanda have made significant strides to create a

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knowledge based economy (Nkurunzinza, 2019). In this case, Tanzania

has been lagging behind. For this matter, this is a feasibility study to

determine the viability to open a business incubator in Tanzania.

1.2 Statement of the Problem

This section explains the underlying problem or challenges that have

prompted the feasibility study. Specifically, problem requires explaining

or describing the underlying reality of the problem. At the same time,

the problem includes the negative consequences of the underlying

problems or challenge. It is also appropriate to provide authoritative

references, sources and statistics to substantiate the underlying

problem. Ultimately, this explanation should draw the necessity and

importance of solving the problem.

Illustration of Writing the Statement of the Problem

The rising concern of business survival is a subject of great concern in

Tanzania. Recently, we have seen the business initiatives and a lot of

funds dedicated for those projects or activities. However, there are

limited success stories of these businesses. Most of these businesses

are plagued by inadequate knowhow and experience in conducting a

business. Given these challenges and problems, these issues normally

threaten the survival of small and medium sized businesses in Tanzania.

Recent statistics indicate that one in ten businesses survive in the

current business environment in Tanzania (Masinda, 2018). Further

data provided by the Tanzanian Bureau of Statistics indicate that most

of the businesses fail between 3rd and 6th month from inception

(Masanja, 2020). Moreover, reports from SMEs in Tanzania reveal that

the majority of the entrepreneurs lack the basic skills required to

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successfully operate their business and therefore realized the full

potential of the business.

Based on various sources and statistics above which indicate a clear

lack of appropriate knowledge and experience of business in Tanzania,

this study intends to determine the viability of starting a business

incubator to groom small and medium business owners and operators

in Arusha.

1.3 Objectives of the Study

The objectives states what the researcher intends to achieve or

accomplish in the feasibility study. These objectives can be categorized

as general objectives and specific objectives. The general objective is

the main purpose or goal of the feasibility study.

The specific objectives are short-term and mostly narrow in nature.

They are formulated to achieve the general objective of the feasibility

study. Specifically, the specific objectives might be financial, marketing,

operational or production, management or organizational goals. All

these objectives have the sole purpose to achieve the overall goal or

general objective of determining the viability of a certain project or

business.

On the process to developing objectives, it ensures that the following

must be integrated in the formulation of objectives in a feasibility

study.

1. The objectives should be specific. The objectives should be precise

to what they intend to achieve.

2. The objective should be measurable. The objectives should be

quantifiable

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3. The objectives should be achievable. Any objective should be

attainable.

4. The objectives should be realistic. It is imperative to set objectives

which reflect the reality.

5. The objectives should be time specific. In other words, these

objectives can be attained at a specific period of time.

Financial objectives

Financial objectives are goals or targets of a feasibility study that can be

described in monetary terms. This means that financial objectives affect

the financial income, assets, liabilities, equity and cash flow of the

feasibility study. In other words, the goals have a direct or indirect

effect on the financial statements including income statement, balance

sheet and cash flow statement of the feasibility study. The following are

few examples of the most common forms of financial objectives in

feasibility study.

1. Increase in revenue or revenue growth.

2. Increase in profits or profit margins which can be illustrated by

the difference between revenue and cost.

3. Decrease the cost of goods sold or manufactured, a strategy to

maximize gross profits which will translate into higher net profits.

4. Decrease the overhead cost that are indirectly attributed to

profitability and sustainability of the feasibility study.

Illustration of financial objectives

The following are the financial objectives of this feasibility study

1. To determine the capital requirements for starting a business

incubator in Arusha, Tanzania

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2. To determine the sources of financing for the business incubator

located in Arusha, Tanzania.

3. To identify the critical financial assumptions for the development

of the pro-forma financial statements

4. To prepare projected financial statements for the business

incubator located in Arusha, Tanzania.

Marketing Objectives

Marketing objectives are goals or targets set by a project to promote its

products or services to certain customers or stakeholders in a given

period of time. In other words, marketing objective provides the

promotional or advertisement strategy to attain the project or

feasibility study objectives. It leads to awareness and provides

information about the project or feasibility study.

Illustration of the Marketing Objectives

The following are the marketing objectives of this feasibility study

1. To determine the marketing demand and supply of the business

incubators in Arusha, Tanzania

2. To formulate a marketing mix (Price, Product, Promotion and

Distribution) that will make the business incubator competitive in

Arusha, Tanzania.

3. To develop a marketing strategy to increase activities in the

business incubator

4. To identify a niche in the market for the business incubator

located in Arusha, Tanzania.

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Operational or Production Objectives

Operational or production objective refers to goals or targets to

execution or implementation of the main purpose of the feasibility

study. It refers to targets on the daily execution of the project or

feasibility study. In addition, it focuses on the producing goods or

services in a specific project.

Illustration about the Operational and Production Objectives

The following are the operational and production objectives of this

feasibility study.

1. To determine the type of business incubator to be initiated in

Arusha, Tanzania.

2. To identify the appropriate and adequate equipment and facilities

for the business incubator in Arusha, Tanzania.

3. To locate a strategic area that small and medium entrepreneurs

can access the business incubator in Arusha, Tanzania.

4. To formulate the operational process of the business incubator in

Arusha, Tanzania.

5. To identify operational and legal requirements to operate a

business incubator in Arusha, Tanzania.

Management or Organizational Objectives

Management or organizational objectives provides targets about the

mission and vision of the feasibility study. These objectives provide the

direction of the project and therefore they are critical for the success of

the project. Furthermore, these objectives state the form of business,

organizational structure and management of human resources during

the execution of the feasibility study.

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Illustration of Management or Organizational Objectives

The following are the management or organizational objectives of the

feasibility study

1. To determine the type and form of business that will enhance the

growth of small and medium size entrepreneurs in Arusha,

Tanzania.

2. To determine the most appropriate form of set up of the business

incubator in Arusha, Tanzania.

3. To identify the duties and responsibilities to be accomplished at

the business incubator located in Arusha

4. To determine competitive remuneration packages for employees

at the business incubator in Arusha, Tanzania.

1.4 Significance of the Study

The significance of the study provides the benefits of the study to

different parties and stakeholders. In other words, the significance

provides an explanation on how the study will be advantageous to

various beneficiaries especially the society. The following issues are

important in writing the significance of the study.

1. The significance of the study provides the contribution of the

problem or broad problem in education and knowledge in

general.

2. The significance of the study will illuminate the contribution to

the current literature.

3. The significance of the study states who will benefit from the

feasibility study. This includes who will benefit from the study

and what they hope to benefit from the feasibility study.

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Illustration of the Significance of the study

This section clearly provides the benefits of this study to different

stakeholders. The following are the benefits accrued from this

feasibility study.

Firstly, the implementation of the proposed project will nurture small

and medium size entrepreneurs in their business activities. Small

business need guidance and training about operating and expanding

their business operations. This training is instrumental and critical

toward promoting small business in Tanzania especially in Arusha.

Secondly, this study will be important for researchers to gain

knowledge and understanding in starting a business incubator in

Arusha, Tanzania. Specifically, the feasibility will contribute to the body

of knowledge and to broaden the perspective of business incubators.

Third and lastly, this study will help the government and local

authorities to understand the necessity of business incubator as a tool

to foster small and medium size business growth in Tanzania and

specifically in Arusha.

1.5 Scope and Limitation of the Study

This section provides the coverage and the boundaries of the feasibility

study. It refers to the parameters and the areas the feasibility study will

explore and investigate. This includes the location to conduct the

investigation and the time framework to complete the feasibility study.

Moreover, the scope and limitation provides the type of information to

be included in the study. At the same time, the limitations might

include the constraints beyond the ability of the researchers which

might jeopardize the execution of the feasibility study.

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Illustration of the Scope and Limitation of the Study

This feasibility study is expected to be conducted in Arusha, Tanzania.

This study will cover one city and six districts which are located in

Arusha region. The city is Arusha City and other districts are Arusha

rural district (Arumeru), Karatu, Longido, Meru, Monduli and

Ngorongoro.

Specifically, small and medium size entrepreneurs will be involved in

this study. The feasibility study will be conducted in six months. This

study will begin in January 2020 and it is expected to be completed by

30th June 2020.

Some the anticipated constraints include the reluctance of the small

and medium entrepreneurs to participate in the study due to negative

attitude toward the research process. At the same time, time might be

another constraint due to the large geographical location of the region

of Arusha. However, the chief investigator is expected to provide

adequate information to the research participants to dissolve their

reluctance to participate in the study. Furthermore, the feasibility study

will involve other research assistants to administer the questionnaire to

the vast geographical area of Arusha region. This will help the

researcher to meet the dateline and therefore complete the study in

the stipulated time.

1.6 Methodology

The methodology provides the specific procedures or techniques

applied to collect and analyze the data of the study. This methodology

permits the reader to critically analyze the authenticity of the research

results or findings. To authenticate the research results involves

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determining the validity and reliability of the survey or questionnaire,

methods of collecting data and the analysis and interpretation of the

study.

This section provides sources of data used in the study. This includes

the use of primary and secondary data. The methodology includes the

research design, sampling procedures, and treatment of data.

Illustration of the Methodology

Sources of Data

The sources of data were both primary and secondary data.

Primary Data

The primary data was collected using

1. A survey or questionnaire was the main instrument for data

collection for the study. The questionnaire was validated by 5

experts in academia and 5 professionals in business. The

recommendations from those experts were incorporated in the

survey. At the same time, the data collected from the expert will

determine the content validity using content validity index.

Furthermore, construct validity will be determined using factorial

analysis.

2. Observation will be applied to determine the viability of opening a

business incubator. Observation method will be unstructured. In

unstructured is conducted in an open and free manner without

any preconceived or predetermined variables or objectives to

achieve in the study. This method is beneficial due to the fact that

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observation provides direct access to the research participants

and provides flexibility in the data collection process.

Secondary Data

The following secondary data source will be used as a strategy to collect

adequate data for the feasibility study.

1. Collect survey from the Tanzania Bureau of statistics about small

and medium sized business.

2. Records from the chamber of commerce about small and medium

sized business located in Arusha.

3. Journal articles and publications about business incubators

promoting small and medium sized business globally and locally in

Tanzania.

4. Legislation and local policies supporting small and medium sized

business via the nurturing of business incubators.

Research Design and Framework

The research approach will be quantitative and the research design will

be descriptive and exploratory in nature. The descriptive research

design will be used to describe the different characteristics and

attributes of the small and medium sized entrepreneurs in Arusha. At

the same time, exploratory design will be used to examine the need

and demand of small and medium sized entrepreneurs in relation to

knowledge and expertise in establishing a sustainable business plan and

model.

The research frame provides the illustration of the research design to

be applied in the feasibility study. Specifically, it provides the detailed

step by step procedures to conduct the research.

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DEMAND

Questionnaire/Survey administered

to small and medium size

entrepreneurs on the need of a

business incubator in Arusha

SUPPLY

Questionnaire/Observation of

business incubator establishment in

Arusha.

SURVEY AND ANALYSIS OF

• Marketing Plans

• Productions and Operations

• Financial and Accounting

• Organizational and Management

• Economic Desirability

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Sampling Procedure

The study managed to acquire appropriate data from the Chairman of

the Association for small and medium size business in Arusha. There are

a total of 48321 small and medium businesses located in Arusha. Due to

the large number of the targeted small and medium businesses, the

study applied the sampling formula to determine the sample size of

small and medium entrepreneurs who will participate in this feasibility

study. According to Masanja (2018) the sampling formula is provided

below.

n = __N___

(1+Ne2)

n = ____48321____ = 396.7 =397 entrepreneurs

(1+48321(0.052 )

Where n = sample size

N = number of population

e = Margin of error

The study applied the 5% margin of error and an estimated sample size

of 397 small and medium size business entrepreneurs located in

Arusha.

Treatment of Data

The data collected from the questionnaire administered to small and

medium size entrepreneurs were checked and cleaned. Data cleaning

involves the process of modifying data to remove irrelevance and

inaccurate information. Specifically, this activity involves identifying

incorrect, irrelevant, and incomplete answers from the filled

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questionnaires and replacing or removing those responses from the

data coded. The whole process of data cleaning improves the efficiency

of the results for data analysis and therefore improves the data quality.

The following are some of the financial ratios and capital budget

techniques that are applied to analyze and evaluate the financial

viability and sustainability of the feasibility study.

Internal Rate of Return (IRR)

The internal rate of return is a method applied in capital budgeting to

determine the profitability of proposed project or feasibility study. The

internal rate of return relies on a discount rate that takes into

consideration the net present value (NPV) of all cash flow from a

proposed project to be equal to zero. The formula for internal rate of

return is provided below

0 = NPV = ∑_ Ct ____ - C0

T=1 (1+IRR)t

where:

Ct =Net cash inflow during the period t

C0 =Total initial investment costs

IRR=the internal rate of return

t=the number of time periods

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Payback Period in Years

The payback period is the amount of time it takes to gain back the

original cost of a specific investment. The best case scenario of a

payback period is the least amount of time and therefore the

investment is desirable and attractive for investment purposes.

Payback Period = Initial Investment

Annual Cash Flow

Net Present Value (NPV)

The net present value is the difference between the present value of

cash inflows and outflows in a specific period of time. It is normally

applicable in capital budgeting and investment planning to determine

the profitability of a proposed project of investment in the future.

NPV = ∑_ _CF t__ - C0

T=1 (1+i)t

Where:

CFt = Net cash inflow-outflows during a single period t

I = Discount rate or return that could be earned in

an alternative investment

t = Number of timer periods

A positive Net present value shows that the projected earnings

generated by the project or investment in real currency (e.g. Tanzania

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Shillings) surpass the projected cost in real currency. In other words, an

investment with a positive NPV will be profitable and desirable to invest

while a negative NPV will be a loss and therefore undesirable for

investment purposes. Based on this concept, an investment with a

positive NPV should be considered for investment.

Profit Margin

Profit margin refers to common profitability ratios which indicate the

proportion of each sales shilling earners as new income or alternatively

the profitability based on sales. It is an indicator to determine a project

or business endeavor is making money. In other words, it represents

the percentage of sales that have been translated into profits.

Profit Margin = Net Income

Sales

Review of Related Literature

Business incubator is an integral part in any business development.

Most business es have realized the importance business incubators in

the growth and sustainability of business and entrepreneurial activities

around the world. This has lead to the rise of the number of business

incubators in different regions around the world. Specifically, the issue

of business incubators is a topic of discussion in the business arena

today.

In order to gain a broad and deep understanding of business incubator,

it is imperative to define and explain the concept. In particular, business

incubator refers to an organization established to promote the

expansion and growth of entrepreneurial activities through an

application of business support resources and services that include

financial, social, moral, and physical support that creates sustainable

business activities. These programs are normally supported by private

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companies and government entities such as NGO, colleges and local

authorities.

On the issue of the main purpose of business incubators, it is a space to

create an ecosystem for thriving and sustainable business. Specifically,

the purpose of business incubators is to establish and expand small

business by providing critical and essential support through financial

and technical services. In addition, business incubators provide a

working space at low rates or even for free. Furthermore, business

incubators provide technical and financial advice for developing a

successful business. This advice extends to legal advice to open and

operate a business entity will all necessary documents. Moreover, the

business incubators provide marketing and promotional advice so small

and medium sized business and strategically advertises their business

by creating a market niche.

The time of business incubation varies depending on the nature of the

business. This is due to the fact that some businesses require a lot of

time in the establishing the necessary requirements while some

business require minimum time (Moritz, 2019). Normally on average,

business incubation takes two years where by these business share

resources such as internet, telephone, production equipment and other

resources in effort to minimize the start-up and operational costs for a

small or medium sized business endeavor.

Marketing

Demand

Based on the statistics provided by Chamber of commerce in Tanzania,

the results indicate that there is a growing of small and medium size

business in Tanzania. Specifically, there are 54 new business opened

every month in Arusha. These businesses offer a variety of services in

different sectors which have an instrumental impact on the economic

output of Tanzania.

However, these businesses are crippled with lack of adequate

knowledge, skills, expertise and experience in operating successful

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business activities in their locality. At the same time, these businesses

lack the financial and technical resources to ensure their sustainability

in the long-run. For this reason, the statistics support this notion and

indicate that every 10 business registered, only 3 would survive and

grow to become big and sustainable business (Rapont, 2020).

Further data analysis reveals that there is lack of business incubator to

nurture small and medium size business in Arusha. These business

incubators provide instrumental guidance to open and operate

successful businesses which contribute to the economy of a particular

locality and the nation at large. In this case, there is a demand for

business incubators in Arusha to provide appropriate financial and

technical resources to start and grow small and medium sized

businesses.

Management and Organizations

The management and organization of small and medium sized business

is normally a daunting task for most of the entrepreneurs. This involves

navigating the legal requirements to open a small or medium business.

More so, the financial and technical hurdles required to open a

sustainable business. In this case, a business incubator can provide

appropriate and adequate guideline to navigate these treacherous

business environments. In this case, a business incubator will offer the

following services to new and existing entrepreneurs

1. The business incubator will assist in the planning of the business.

These planning activities include turning an initial concept or idea

into a viable business plan for implementation.

2. The business incubator will help in launching the business. This

process involves translating the business plan into reality. In other

words, register and filling for a new business with all necessary

legal document required by law.

3. The business incubator will assist in the management of the

business. This involves providing financial and technical advice

wherever possible. At the same time, monitoring the daily

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operations for the business to ensure its survival and success in

the long-run.

4. The business incubators will help the growth of the business.

These activities include securing new funding, locations and

potential customers to increase the market share of the business.

This is an integral part of any small or medium sized business in

Arusha.

Form of Business

The first challenging task for any small or medium sized business is to

determine the form of business. This is because of tax purposes and

legal obligation to operate as a business entity. Normally, there are

three forms of business which are a sole proprietorship, partnerships,

and a corporation or a company.

This business incubator will registered as a corporation. A corporation is

an organization formed by a group of two or more people and operates

as a single or legal entity. This means that the business incubator will be

separate and distinct from its owners. In this sense, a corporation will

have the rights and responsibilities that individual hold including

entering binding contracts, loans and other legal binding obligations.

One the most essential characteristic of a corporation is limited liability.

Limited liability implies that the shareholders enjoy the profits through

the dividends and stock value increment. However, the stakeholders

are not personally liable for the company debts. Moreover, it is a not

always that corporations are meant for profits. Sometimes the purpose

of the corporation is for social entrepreneurial purposes whereby

benefits are for the welfare of members or a particular community. This

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is the best form of business since it is possible to raise funds as a legal

entity to fund and support small and medium sized business.

Financing

It is mutually understood in developed and developing countries that

small and medium size businesses have limited access to financing.

These financial constraints limit the operations and expansion of these

businesses. In Tanzania, 16% of small and medium size business gain

access to loans and funding from financial institutions (Mashimba,

2018). At the same time, those few business who have access to loans

and funding are subjected to a long bureaucratic process that tend to

discourages small and medium entrepreneurs. The lack of funding has a

detrimental effect to the survival and growth of the business.

The difficult in small and medium financing is the lack of a formalized

setting to track the business. It is relatively difficult to enforce loan

payments when the entrepreneurs can evade paying their outstanding

loans. In this setting, financial institutions are required to develop

stringent loan policies which are difficult for small and medium

businesses to meet. For instance, small and medium size businesses

should have a registered title of a property to qualify for a loan. This

makes it extremely difficult to acquire a loan to expand a business.

Although there are organizations which have bridged the gap by

providing short-term loans to small and medium business in Tanzania,

most of the organizations are considered loan sharks. The interest is

relatively high to a point where it is difficult to payback the loans

incurred by small and medium sized business. Based on these

difficulties, it is essential to develop a business incubator which will

provide legal advice for small and medium sixed business to secure

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funding to operate and expand their businesses. In addition to this, the

business incubator will identify potential funding. But at the same time

the business incubator will provide short-term funding to small and

medium size business located in Arusha.

Technical/Production

Cost of Operation/Maintenance

The entrepreneurs from small and medium sized business must apply

for admission in the program. The admission criteria vary depending on

the nature of the business. However, the main criteria depend on the

business idea and the implementation of the business plan.

Business incubators provide entrepreneurs with office space and

administrative services for business ideas in the initial stages. These

services are associated with the cost of operations of the business

incubator. The cost of operations can vary depending on the services

offered by the business incubator.

Definition of Terms

This is a list of main or common words used in the feasibility study. The

definitions of terms provide the operational definition of the main and

common words or terms used in the study. The definition provides an

explanation and understanding of how these terms or words are

applied in the feasibility study.

Illustration of Definition of Terms

Business Incubator is a legal entity that assists and provide services to

small and medium sized businesses or entrepreneurs on how to start,

manage and expand their businesses .

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Medium-Sized Enterprises is a legal entity with 50 to 99 employees.

Micro-Sized Enterprises is a legal entity with fewer than 5 employees.

Small-Sized Enterprises is a legal entity with 5 to 49 employees.

Small and Medium Sized Enterprises or Business (SMEs) are defined as

micro, small and medium size enterprises that include manufacturing,

commerce and services excluding direct farming activities.

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