A feasibility study is an analysis of how realistic a project is and what problems it might face. It can be shown to investors or used as a guide by business owners. It gives an overview of what to expect from a successful project and how to decide if a project is worth doing.
When entrepreneurs and business owners do a feasibility study, they can weigh the risks and benefits of a business idea before making a complicated business plan. They are an important part of any new business idea and can help you focus on the most profitable projects for your company.
Components of Feasibility Studies
A feasibility study looks at every factor that affects whether or not a project can be done. The point of a feasibility study is to find out if a project is possible and worth doing, so adding more factors can make it more useful. Even though most feasibility studies have some of the same parts, your business may have other parts that are unique to it. Here are some of the most important parts:
At the start of the feasibility analysis, you should give a general description of the project and a rough plan for how to finish it.
- Market research: All feasibility studies should have a section that describes the project’s market. This should include a marketing plan, growth potential, possible competitors, and a list of customers you want to reach.
- Operations: In the operations section, you should talk about the technology, equipment, materials, staffing, and other technical details that help a business run. Think about where you will finish your project and how you will get the materials and tools you need to make and sell products and services.
- Organization: A feasibility analysis should also include a plan for how you think a project team’s jobs should be divided up. Write down your plans for the business or legal structure and the skills you have to carry them out.
- Finances: Think about how much money a project will cost and how you will pay for it. Include possible investors or other sources of income, as well as how you expect costs and earnings to change over time.
- Timeline: The timeline shows how long it will take to finish a project and lists the goals and major steps along the way.
- Recommendations: In this section, be honest about whether you think a project should be done or not. Use the information you’ve gathered to figure out what risks and successes the project might face.
A Process for Conducting Feasibility Studies
A feasibility study can take a lot of time and has many different parts, so it is important to make a plan before getting started. A good feasibility analysis gives business owners and project managers the research they need to make a decision that is based on as much information as possible. When doing a feasibility study, follow these steps as a guide:
1. Draw up a plan
First, make a list of everything that could affect whether or not your project is possible. Think about why you want to work on the project and where you think it could work.
2. Write the expected income statement.
In the projected income statement, you write down how much money you think the project will bring in and how much you will need to spend to reach your goal. When writing the projected income statement, you should think about all the costs of starting and running your business as well as your other financial obligations.
3. Research the market
Look at different parts of the market, such as your competitors, areas with room for growth, expected demand, and the effect of demographics. Market research will help you figure out how to advertise your project or get people to know about it. It helps you get ready for different problems that may come up in your market.
4. Plan how things will be set up and run.
Include a plan for how you will run your business and manage its employees daily. Think about any problems that might come up when putting together a team or distributing a product and how to solve them.
5. Make a balance sheet for the first day.
A balance sheet for the first day of your project is a list of all the assets you will need and how much they will cost in total. Include how much each thing will cost, where you can get it, and how you might make money. This can include land, tools, and any other costs needed to get started.
6. Analyze your data
Once you have gathered the information you need for your feasibility study, you need to analyze and understand it. Think about whether the project could make you money and what big problems could stop you from reaching your goal
7. Make a final decision
At the end of the day, the point of a feasibility study is to help you decide what to do with a project. Think about how much you can invest in each project and how much risk you are willing to take. In the last step of feasibility analysis, it is important to make a decision and stick to it.
Pros of Conducting a Feasibility Analysis
A business owner or project manager who wants to start a new venture can get a lot out of doing a feasibility analysis. It is a great way to prepare for challenges and deal with risks.
For example, a library that wants to build a new computer lab could do a feasibility study to find out about grants that could help pay for the project and to figure out how it would affect the community. By showing that the project could be done and would work in the community, the library could get investors and public support for it.