Feasibility Studies: An Intro to Feasibility Analysis

A feasibility study is an analysis of the practicality of a project and its potential challenges that can be presented to investors or used as a guideline by entrepreneurs. It provides an outline of expectations for a successful project and guidelines for determining if a project is worth pursuing. Performing a feasibility study allows entrepreneurs and business owners to assess the risks and rewards of a business venture before creating a complex business plan. They are an essential part of considering any new venture and can help you pursue the most lucrative projects for your business.

 

Quick Navigation

 

Post a Job

Are you a job seeker? Find jobs.

Components of feasibility studies

A feasibility study includes a thorough review of every variable that impacts a project’s practicality. The goal of a feasibility study is to determine if a project is possible and worth pursuing, so including more factors can make it more helpful. While most feasibility studies include several of the same elements, there may be additional categories that are specific to your business. Some of the most important sections are:

 

  • Summary: At the beginning of a feasibility analysis, include a general description of the project and your preliminary plan for its completion.
  •  

  • Market research: All feasibility studies should include a section that provides an overview of the market for a project. This should include a marketing plan, potential for growth, possible competitors and target customers.
  •  

  • Operations: The operations section should discuss the technology, machinery, materials, staffing and other technical details that contribute to running a business. Consider where you will complete your project and how you will access the resources needed to create and distribute products and services.
  •  

  • Organization: A feasibility analysis should also include an outline of how you envision the organization of responsibilities within a project team. List your plans for the corporate or legal structure and the expertise you have for implementing them.
  •  

  • Finances: Review how much money you will need to fund a project and how you will support it financially. Include possible investors or other sources of income and how you project costs and earnings to change over time.
  •  

  • Timeline: The timeline provides a plan for how long it will take for a project to be implemented and list the goals and milestones that show progress.
  •  

  • Recommendations: In this section, make an honest suggestion of whether to pursue a project or not. Use the data you collected to draw conclusions about the possible risks and successes the project could encounter. 

 

A process for conducting feasibility studies

Conducting a feasibility study can be a time-consuming process that includes many different components, so it is important to develop a plan before beginning. A successful feasibility analysis helps business owners and project managers to make a fully informed decision based on research. Use these steps as a guideline when conducting feasibility studies:

 

  1. Create an outline
  2. Write the projected income statement
  3. Perform market research
  4. Plan organization and operations
  5. Create the opening day balance sheet
  6. Analyze your data
  7. Make a final decision

 

1. Create an outline

First, create an outline of every variable that could influence the feasibility of your project. Think about why you are interested in the project and where you see the potential for it to succeed.

 

2. Write the projected income statement

The projected income statement includes your expectations for how much income the project will bring in and how much money you will need to invest to meet that goal. Consider all costs of starting and running your business and other financial obligations when writing the projected income statement.

 

3. Perform market research

Study different aspects of the market such as your competitors, areas for growth, projected demand and demographic influences. Market research will help determine how you will advertise to an audience or create awareness of your project. It helps prepare you for different challenges that your particular market may experience.

 

4. Plan organization and operations

Include a plan for how you will organize the daily operations of your business and the management of its employees. Consider any challenges in assembling a workforce or distributing a product and how to overcome those issues.

 

5. Create the opening day balance sheet

An opening day balance sheet is a list that includes the total cost of all of the assets you will need to launch your project. Include how much each item will cost, where to acquire it,  and possible sources of income. This can include land, equipment and any other starting costs.

 

6. Analyze your data

Once you have prepared the data for your feasibility study, analyze and interpret the information. Consider whether the project has the potential to be profitable and what major challenges could prevent you from achieving that goal.

 

7. Make a final decision

Ultimately, the purpose of a feasibility study is to help you make an informed decision about the future of a project. Think about what risks you are willing to take and how much you are able to invest into each project. Making a decision and committing to it is an important final step in conducting a feasibility analysis.

 

Pros of conducting a feasibility analysis

Conducting a feasibility analysis has countless benefits for a business owner or project manager looking to start a new venture. It is a great way to manage risks and prepare for challenges. 

For example, a library hoping to build a new computer lab could perform a feasibility study to learn about possible grants to fund their expansion and predict community impact. By showing that the project would be both feasible and successful in the community, the library could attract investors and gain public favor for their project.

 

Related: How to Grow Your Business

 

Feasibility study FAQs

Here are the answers to a few common questions about feasibility studies:

 

Who performs feasibility studies?

Many different people can be involved in a feasibility study, including researchers and accountants. Companies often use a team of people to conduct a feasibility study for a new project.

 

When should you conduct a feasibility study?

Feasibility studies should be performed at the beginning of the planning process as they affect the company’s decision to move forward with a project.

 

Ready to get started? Post a Job

*Indeed provides this information as a courtesy to users of this site. Please note that we are not your career or legal advisor, and none of the information provided herein guarantees a job offer.