Have you ever wondered that why a feasibility report is so critical to a project’s success? For starters, a proper feasibility study can be a strong base for setting up a project. If it does not support your project then you cannot set your project up. Now that we’ve piqued your curiosity, continue reading to learn what there is to know about feasibility studies.
What is Feasibility Study?
A feasibility analysis is a study carried out by any business to evaluate a potential action from an organizational or financial perspective. The main motive of this study is to take a feasibility test of that specific action to identify and describe the problems that could be used to justify this action.
When one learns of the feasibility study, the next thing that comes to mind is when this study can be carried out. And this can be stated that the feasibility study should be performed then into the project cycle after the business case gets concluded. When a crucial strategic decision has to be taken, the analysis is often used. Situations based upon which the study is performed can either be changed in the location of the business, purchase of any new software or equipment, acquisition of another company, additions employees being hired, etc. All in, a feasibility study is an excellent method for circumstances where the organizational or economic effect is particularly important.
As a result, you already know when it has to be done. But then there’s the issue of ‘why it has to be performed in the first place. The reason behind performing it is that it decides the conditions that will lead to the success of the growing market, so it’s crucial.
Core Elements of this Study
The main elements that you need to consider while performing the feasibility study include:
- Technical Feasibility
- Market Feasibility
- Commercial Feasibility
- Overall risk assessment
- Feasibility of buying an existing business
Steps for Performing Feasibility Study
The following steps are the ones that need to be followed during a feasibility study:
- Conducting Preliminary Analysis: One needs to start by outlining the plan. Unmet requirements, or those in the industry where demand exceeds availability, need a lot of attention. Also noticed on the factor that the product or service gives a distinct advantage or not. Then decisions need to be made if the obstacles are to overcome like too costly, unable to sell successfully, etc.
- Preparing Project Income Statement: Working downstream is required for this move. Begin by estimating how much money you plan to make from the idea, and then determine how much money you’ll need to get there. An income statement’s cornerstone is this. It considers the areas like what programs are available and how much they would cost, and any other revenue changes, such as payouts, should all be considered.
- Conducting Market Survey/ Performing Market Research: Make this process as comprehensive as possible to enhance the validity of the feasibility study. It’s so critical that if your company doesn’t have the money to do one properly, it’s better to pay an outside agency to do it for you.
Through market research, you can get the best picture of the revenues in realistic forms and understand what you can expect from the project. Areas that you need to consider during this research process should likely be demographics, the value of the market, influence on the market, competitors, and your percentage of share, and whether the market is appropriate for expansion.
- Planning Business Operation & Organization: Now it’s time to set up the organization and its activities from the proposed business venture as the foundations of the previous measure have been laid. This isn’t a one-dimensional, broad-brush project. But should be a comprehensive one that includes fixed expenditures, startup costs, and ongoing expenses. The expenses that involve are merchandising methods, equipment, availability of supply, real estate, overhead, etc.
- Preparing Balance Sheet for Opening Day: This area requires a calculation of the liabilities and assets in a precise form. To do so, one needs to list up items that include the object, the source, the rate, and the financing options. Leases or buying property, buildings, and facilities along with investment borrowings and account receivables are likely to be kept under liabilities.
- Reviewing and Analyzing Data: Both of these measures are crucial, but the evaluation and inspection are particularly crucial to ensure that everything is in order and therefore nothing needs to be changed or tweaked. So, take a minute to review your research one more time. Also do examine and compare your prior moves, income return along with your expenditures and liabilities.
- Making Right Decision: You’ve reached the point where you must decide whether the proposal is viable or not. It may seem straightforward, but all of the preceding measures have led up to this stage. Before making a decision, it becomes necessary to consider whether the commitments are worth the time, expense, and money. And it also becomes crucial to consider whether it is in line with the organization’s long-term goals and objectives.
Practices required for a Feasibility Study
- Utilizing Project Management tools like ProjectManager.com for organizing the data and performing reliably and quickly.
- Utilizing templates or technology that can leverage the analyzing process.
- Involving the right stakeholders to get proper feedback.
- Using market research to collect the required data suitable for analysis.
Businesses are advancing rapidly and it can be quite enticing for the businesses to miss the evaluation stages while hurrying up with the completion process. However, moving too fast and skipping over stages can result in misalignment, stalled programs, duplicative jobs, and lastly lost time & money. A feasibility study is thereby important regardless of the sector, as it helps to identify the risks and uncertainties that prevail and improves the chances of your market performance.