Feasibility Study

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Importance of Feasibility Study for New Businesses

Before the start of any business project, it is imperative and best practice to conduct a feasibility study to evaluate the viability and future success of the project. This analysis helps in the decision-making process by identifying risk areas and important aspect, which may not have been previously considered in the proposed business model. Feasibility studies are important as these help in identifying important issues before the start of a project or business especially regarding product or services to be offered, target market, competition, technology, and technical aspects, required financial and human resources.


In respect of businesses the ultimate purpose of any feasibility study is to determine if the business/project/idea under consideration will be profitable or not. This determination is not a simple and straightforward task. For this it should be first established if it is technically feasible and then financial aspects are considered. It involves an enormous amount of data collection and analysis, including inputs from stakeholders. A complete business feasibility plan can have various steps each covering technical, operational, financial, marketing, human resource. etc. However, below are the important steps performed for any feasibility studies:
 
1. Preliminary Analysis
 
As discussed in the preceding paragraph, any feasibility study involves an enormous amount of effort, time & resources which has a financial cost. Due to this reason, instead of initially investing time and cost in a full-fledged feasibility study, at the start preliminary analysis is conducted to see if the proposed project/idea is worthy of proceeding with a detailed feasibility study. 
 
The preliminary analysis involves outlining project outcomes, assessing other similar projects, analyzing potential markets, risk assessment, analysis of competitive advantages. At the end of preliminary analysis, the decision is made either to abandon the idea/project or to proceed further with the detailed study.
 
2. Defining Scope and Options Selection
 
After preliminary analysis, now it is time for details. First step will be to check in details if the project is, technically, financially, operationally feasible along-with considering the detailed legal aspects. This stage will also outline the important timeline of the project with respect to detailed steps involved. Further, this stage also involves selection of suitable options in cases where more than one way is available to achieve a given task or objective. For instance, multiple technological alternatives for a given situation.
 
 
3. Target Market Analysis
 
This is a very important stage and involves collecting target market data and its detailed analysis. The data can be collected from surveys, interviews, competitor analysis and data can also be acquired from the companies specialized in market research. The data collected may pertain to size of market, customer behaviors, demands forecast, substitute products etc
 
 
4. Financial Analysis
 
No project can be considered further if it is not economically viable. This stage determines how the project financing will be done either equity, loan or from internal sources. What will be the interest rates or the cost of equity? Analysis of project revenue and cost and expected cash flows of the project. This stage will result in preparation of opening balance sheet, projected income statement for subsequent years and projected balance sheets at the end of subsequent years. 
 
5. Assessment of Risks
 
This involves analysis and assessment of what can go wrong in respect of the project at different stages. List of all identified risks are prepared with respective classification, risk analysis, and evaluation. This also includes the strategies formulated to manage against each high-risk area. 
 
 
6. Compilation of Data and Report
 
A final report is compiled based on data and analysis done. Key findings and necessary conclusions are drawn for the concerned stakeholders to assist them in making go or no-go decisions. Following is the table of contents of a typical feasibility report:
 
a) Executive Summary
b) Description of business project
c) Technology 
d) Product service marketplace
e) Marketing strategy
f)  Organizational structure/Human resources 
g) Time schedule 
h) Financial projections
i)  Findings & recommendation:
 

Feasibility Study Plan

Our experts at the VA have extensive experience in assisting our clients with feasibility studies for different businesses. Hospital, steel mills, coffee shops, supermarkets, restaurants are the important sectors where we have done successful feasibility studies. For each feasibility study, we ensure input from all concerned stakeholders is considered along-with credible data and expert opinions. A business feasibility study report plays an important part for the development of business plan at the next stage.
 
If you are planning to make an investment in a new business, it would be important to first carry out the feasibility study to check the viability of your proposed business model.

 

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