Feasibility Study: What it is and How to do it

When considering a business plan, you are usually not very sure whether it is the best decision to write one. It is at this point that you should evaluate if the business plan is appropriate. A feasibility study is crucial for this step. The study looks at technical details, costs, legal issues, operations, and timelines to see if the project can work well. The feasibility study finds potential problems and benefits, helping you make smart decisions and setting a strong foundation for your project. Doing a feasibility study boosts your chances of success and provides a solid base for creating a detailed business plan.

Conducting a feasibility study follows a structured process to evaluate a proposed project or business idea’s potential success. This helps identify obstacles and assess viability by thoroughly reviewing key factors. A thorough feasibility study is important in the initial stages of a business plan. It determines the project’s worth and potential changes, saving time and money.

The main steps of a feasibility study include initial analysis, projecting income, market research, planning organization and operations, preparing an opening day balance sheet, analyzing data, and making a go/no-go decision.

Business plan consultants can help in making your feasibility study meet your expectations. Business plan writers are experienced with the business plan writing process and they apply the knowledge to write feasibility studies. Unlike business plans, feasibility may cost between $5,000 and $10,000. 

What is a feasibility study

A feasibility study is a thorough evaluation of a project’s or business plan’s practicality and likelihood of success. A feasibility study evaluates the possibility of a project or business plan being practicable and likely to succeed. It involves checking technical details, costs, legal issues, how it will operate, and the timeline. This helps to see if the project can work well. It predicts the future of the project and forecasts the financial future of the business.

A feasibility study usually includes a detailed analysis to find potential problems and benefits. It helps make informed decisions and sets a strong foundation for the project. A feasibility study aids you in making informed decisions and enhances the likelihood of project success. It also provides a firm foundation for developing a thorough business plan.

Types of Feasibility Study

There are various feasibility studies, each having a specific function in a project assessment. Technical Feasibility checks if the necessary technology and resources are available and practical. Economic feasibility determines if a project is financially achievable by looking at the expenses and possible returns. Market feasibility determines if a product or service is in demand. A Legal Feasibility Study ensures the project follows all relevant laws and regulations. Each type aims to make the project doable and sensible from all key perspectives.

Pre-Feasibility Study

A Pre-Feasibility Study assesses if a project idea is worth further investigation in the early stages. It offers different factors for initial examination such as technical needs, market possibilities, financial expenses, and potential profits. The Pre-feasibility study should identify significant obstacles or threats to avoid wasting time and resources. The pre-feasibility study aids in making informed decisions about continuing further investigations by assessing the project’s fundamental feasibility.

A Pre-Feasibility Study examines the project’s concept and framework. It looks at the initial design, technology requirements, and resource availability, ensuring the basic elements are feasible. It also considers the market environment to gauge potential demand and competition. Financially, it provides rough estimates of costs and expected revenue, giving a snapshot of the economic potential. The project’s legal and regulatory constraints are assessed, enabling early identification of potential issues and adjustments before key investments are made.

Technical feasibility study

Technical feasibility studies evaluate whether a project’s technical aspects can be implemented successfully. They are thorough project analyses. It checks the technology, equipment, materials, and expertise needed for the project. The study assesses if the current technology is adequate or if new technology needs to be developed or acquired. It also evaluates whether there are enough technical resources, like skilled workers, and if the project team can manage the technical challenges.

The Technical feasibility study identifies possible technical risks and obstacles affecting the project’s success. It looks at the reliability and efficiency of the technology, the compatibility of various technical components, and any potential maintenance or operational problems. The study also reviews different technical options to find the best solutions. The study thoroughly examines technical aspects to ensure project success. This reduces the chances of technical failures and improves success.

Economic feasibility study

An Economic Feasibility Study looks at the financial aspects of a possible project to assess its viability. When starting a new business, this research assists in determining the various overlooked expenses such as initial investment, recurring costs, and unforeseen expenses. It also looks at potential earnings by considering pricing, sales, and market demand. The primary objective is to provide you with an accurate assessment of your project’s financial soundness and profitability.

An Economic Feasibility Study includes a cost-benefit analysis. It compares your expenses with potential earnings. It considers the payback period, net present value (NPV), and return on investment (ROI) to evaluate whether the financial benefits are worthwhile. The research considers market volatility, economic downturns, and risk management techniques. By examining these financial details, the study helps you decide if your project is financially viable and worth pursuing. Think of it like planning a road trip. You need to know the cost of gas, food, and lodging and consider potential detours or breakdowns to ensure your trip is enjoyable and within budget. This way, you are prepared for surprises and can make the best decisions for a smooth journey.

Market Feasibility study

A Market Feasibility Study is a complete examination that assesses the possible need for a product or service in a specific market. This research analyzes market size, trends, and customer requirements to ascertain the feasibility of the proposed project. It involves studying the target audience, and recognizing their likes, actions, and buying ability. The study evaluates if the project has the potential to draw in sufficient customers for success by comprehending the market dynamics.

The Market Feasibility Study examines the competitive environment, pinpointing main rivals and their strengths and weaknesses. It examines obstacles to market entry and assesses the project’s competitive edge. This research also analyses pricing tactics, distribution methods, and promotional strategies to find the most effective way to get started and thrive in the market. The Market Feasibility Study offers a thorough analysis of market conditions to assist stakeholders in making informed decisions regarding the project’s market potential and the chances of achieving commercial success.

Legal feasibility Study

A Legal Feasibility Study is a vital process that thoroughly examines a project’s legal aspects to ensure it aligns with all relevant regulations. It investigates the effects of numerous laws, such as zoning laws, environmental regulations, and standards specific to a particular industry. The analysis also considers all the licenses, permissions, and approvals required by law to move forward. The main objectives are finding any legal roadblocks and ensuring that the project may lawfully function in the selected area and industry.

The Legal Feasibility Study assesses potential legal risks involving contracts, intellectual property rights, and liability. It examines how well the project conforms to safety regulations, labor laws, and consumer protection laws. This study will also consider any current legal conflicts or lawsuits that may impact the project. The Legal Feasibility Study examines legal factors to help stakeholders comprehend legal implications and make informed decisions, preventing legal issues and ensuring smooth project execution within the boundaries of the law.

Components of a feasibility study

A feasibility study must be conducted to assess your project’s or company concept’s viability,  The Executive Summary, Product or Service Description, Technology Considerations, and Marketplace for Product or Service are the components that make up this document. It also extends to Strategy for Marketing, Staffing or Organization, Timeline, Financial Projections, and Conclusions and Recommendations. Every segment is important in deciding the project’s viability and strategic path.

Executive summary

The Executive Summary, typically written last, is the initial and most extensive section of a feasibility study. The purpose is to provide readers with a brief overview of the project or business idea, detailing its main goals, important conclusions, and suggestions. The Executive Summary must sum up key points from all sections of the feasibility study. This includes product or service description, market analysis, technology needs, financial forecasts, and project feasibility evaluation.

An executive summary should;

• Include a brief description of your proposed project or business idea, explaining what it is and why it is being considered. 
• List the target market, demand, and competition as well as the key conclusions drawn from the market research. Mention any important technological factors and how they will be taken into account.
• Provide an overview of the financial projections by describing the expected revenue, costs, and profitability. 

The project’s potential should be clearly stated, using the study’s findings to support its execution. This helps stakeholders quickly understand the project’s viability without reading the entire report.

Description of product/service

The Description of Product or Service gives a detailed overview of the proposed project or business idea. It should include a description of your product or service, highlighting its advantages, features, and special marketing factors. It is essential to describe the product or service’s features, intended application, and unique selling point. This explanation should be thorough to ensure readers fully grasp the proposed idea.

It is important to discuss the target market and the specific issues the product or service is designed to address. Talk about the potential need for the product or service and how it caters to the target market’s requirements. It is beneficial to provide details about any studies or advancements made, models designed, or early reactions received from possible clients. This detailed explanation enables stakeholders to comprehend the product or service’s value proposition and how it could influence the market.

Technology considerations

The Technology Considerations section of a feasibility study assesses the technical needs and possible obstacles linked to the planned project or business concept. It needs to outline the necessary technology for creating, manufacturing, and distributing the product or service. The analysis includes the current technological environment, pinpointing the tools, software, hardware, and specialized equipment required. Technological Considerations need to address the possibility of obtaining and integrating these technologies, taking into account aspects like expenses, availability, and suitability to current systems.

This section must consider possible technological dangers and obstacles. Recognize potential challenges in development or implementation and suggest ways to address them. Examine the necessity of technical knowledge and assess if the organization possesses the requisite skills or if they need to be obtained from outside sources. Consider the technology’s long-term sustainability, including maintenance, upgrades, and potential future advancements. Stakeholders gain valuable insights into your project’s technical feasibility by analyzing these technological factors and identifying potential challenges that need to be addressed.

Product/service marketplace

The Product and Service Marketplace section studies the market in which your product or service is to be launched. Start by identifying the target audience. Take note of their demographic, geographic, and psychographic characteristics. Understand customers, their needs, preferences, and how products or services fulfill those needs. This section should provide market size and growth forecasts, enabling an understanding of potential product or service needs.

The Product and Service Marketplace section not only identifies the target market but also examines the competitive environment. Determine the main rivals, their advantages and disadvantages, and their current market strategies. This evaluation needs to involve comparing product attributes, pricing, distribution channels, and market dominance. It involves identifying unmet market needs that the proposed product or service can address and analyzing potential entry barriers. Understanding the competition is key to developing strategies to differentiate and seize market opportunities. This detailed market analysis assesses the product’s or service’s potential viability.

Marketing strategy

The Marketing Strategy section discusses the methods for advertising and selling the product or service to the intended audience. It outlines how to attract possible customers and convince them to make a purchase. Establish marketing objectives, such as boosting brand recognition or hitting a sales goal. Proceed by explaining the methods and actions to achieve these objectives, including advertising, social media, content marketing, public relations, and sales promotions. 

The Marketing Strategy section should also cover  Product, Price, Place, and Promotion (the four Ps of marketing). Explain how the product or service will be positioned and its unique value to customers. Discuss the pricing strategy, comparing it to competitors and its impact on customer perception. Describe the distribution channels, such as online platforms, retail stores, or direct sales. Finally, list the promotional activities, including timelines and budgets. A clear marketing strategy ensures all efforts are aligned and effective in reaching the target market and achieving the project’s goals.

Organization or staffing 

The organization or staffing section discusses the personnel needed for carrying out the suggested project or business concept. Include a detailed plan for the organization’s structure, outlining the key personnel responsibilities. First, identify the roles that are required for the project, including those of management, technical specialists, marketers, and support personnel. Describe the education, experience, and background required for each role in detail. Show how these duties contribute to the project’s success.

The organization or staffing section must also cover the staffing strategy, which includes recruitment, training, and retention approaches. The company plans to recruit suitable employees and implement comprehensive training initiatives to ensure they are adequately prepared for their roles. Consider the long-term sustainability of the staffing plan. This involves implementing strategies for employee development and retention to keep a stable and engaged workforce. This section ensures the project has the necessary staffing and organization description for efficient achievement of objectives.

Schedule

The Schedule section outlines a timeline for the entire project. It details important events and due dates throughout the entire process. It must begin with a summary of project stages such as planning, development, execution, and assessment.

• Planning Phase: Tasks might include market research and securing funding.
• Development Phase: Tasks could involve product design and prototype testing.

All tasks and activities should be included along with their expected start and end dates. Any linkages between tasks should also be noted. This helps in identifying the order of jobs that must be completed on time for the project to proceed as planned.

Utilizing visuals such as Gantt charts can effectively display the schedule and monitor advancement. Discuss possible hazards and backup plans for delays. Stakeholders can comprehend the necessary time commitment and track their progress by clearly defining the project schedule. This ensures your project stays on course.

Financial projections

The Financial Projections section gives a complete estimate of the project’s expected financial performance over three to five years. It should include:

• Revenue Estimates: Provide an overview of anticipated revenue streams. This includes product or service sales, along with projections derived from market analysis and sales forecasts. Consider different scenarios (best-case, worst-case, most likely) to address uncertainties.
• Cost Estimates: Detail expected costs, including:

• Fixed Costs: Rent, salaries
• Variable Costs: Materials, production expenses
• Startup Costs: Initial investments, one-time expenses

• Financial Statements: Provide cash flow statements, profit and loss statements, and balance sheets to show the project’s financial health.
• Key Financial Metrics: Discuss important ratios and metrics, such as:

• Return on Investment (ROI)
• Break-even Analysis
• Net Present Value (NPV)

The financial analysis helps stakeholders understand potential financial risks and rewards. It aids in informed decision-making.

Findings and recommendations

The Findings and Recommendations section summarizes all the research and analysis done during the study. It must start by providing a brief overview of the main discoveries of all preceding parts. This includes market analysis, technical factors, organizational requirements, and financial forecasts. Identify the key observations that affect the possibility of the project.  Indicate any notable positives, negatives, chances, and risks discovered in the analysis. This summary offers a thorough examination of the project’s possibilities and identifies potential challenges that may require attention.

Provide clear and practical suggestions derived from the examination. These suggestions are meant to assist stakeholders in deciding whether to continue with the project and, if they do, how to progress efficiently. If the project is considered viable, detail the subsequent actions, like acquiring funds, starting the development process, or enhancing the marketing plan. If the project is not advised, explain why and propose alternative methods or changes that could enhance feasibility. Cover any remaining unknowns or dangers and suggest plans to reduce them. This section assists stakeholders in making informed decisions and creating a clear plan of action by providing solid recommendations.

How to do a feasibility study

Evaluating the potential success of a proposed project or business idea includes following a structured process when conducting a feasibility study. This process helps identify potential obstacles and evaluates the project’s viability by thoroughly reviewing all significant factors. The systematic method is important as it provides a transparent and independent analysis that stakeholders can rely on for informed decision-making.

In a business plan, a feasibility assessment is essential in the early stages before resources are invested. It identifies whether the project is worth pursuing, what adjustments may be needed, and how to strategically plan for its success. A well-executed feasibility study saves time and money. It prevents investment in unprofitable projects and provides a strong foundation for promising ones. The following are the feasibility study steps:

1. Conduct a Preliminary Analysis

The first step in a feasibility study is conducting a preliminary analysis. Do a quick and simple project idea review to see if it is worth exploring further. It identifies obvious problems or major obstacles early on. This step is like a quick check-up to see if the project has potential before investing time and money into a full feasibility study.

Preliminary analysis is essential for resource savings, as it allows for a stop and reconsideration of the project if significant issues are identified. It helps to avoid wasting effort on projects that are not likely to succeed. By doing this early review, you can focus only on ideas that have a good chance of being successful. This makes the whole feasibility study more efficient and effective.

2. Prepare a Projected Income Statement

Preparing a projected income statement is estimating the future revenues and expenses of the project to see how much profit is expected. This aids in predicting the project’s financial results for a set timeframe, commonly three to five years. The revenue report contains projected sales, expenses related to production, operational costs, and final earnings.

This stage determines the financial feasibility of the project by predicting future revenues and costs. It shows whether the project will make a profit or result in a loss. This data helps in making informed choices on whether to proceed with the project. It also determines the required starting and operating costs for the project, as well as the time needed to begin generating profits. By doing so, you can avoid any potential financial issues and enhance your project’s success.

3. Conduct a Market Survey or Perform Market Research

A market survey or market research collects data about your product or service’s target audience. It involves understanding the requirements and preferences of potential customers, analyzing the competition, and identifying market trends. It displays the characteristics of your clientele as well as how your business can satisfy their needs.

A market survey provides valuable insights that can guide your business decisions. Developing products and services that satisfy consumer wants and boost businesses’ chances of success requires a deep grasp of the market. Recognizing potential obstacles like fierce competitors or evolving market conditions is crucial for developing effective strategies to address these issues. Market research ensures that your project is based on solid data and real customer demand. This increases its chances of success.

4. Plan Business Organization and Operations

Planning business organization and operations states how your business will be structured and how it will run day-to-day. It involves identifying the essential roles and responsibilities within the business, including management, marketing, and production. It establishes operational processes and systems, including product manufacturing, service delivery, and customer service management.

Planning business organization and operation ensures your business has a clear structure and efficient operations. Everyone’s understanding of their roles and responsibilities is facilitated by having a well-organized business plan. This increases efficiency and decreases confusion. It also identifies gaps in skills or resources that require to be addressed before the business is established. Planning your business operations can enhance the efficiency and effectiveness of your organization. This increases the likelihood of your project’s success.

5. Prepare an Opening Day Balance Sheet

Preparing an opening day balance sheet creates a financial summary of your business at the time it starts. This balance sheet includes a breakdown of all assets your business owns, such as cash, inventory, and equipment, along with all liabilities, like loans and debts. It also shows your equity, which is determined by deducting your liabilities from your assets.

Preparing an opening day balance sheet provides a clear picture of the financial position of your business at the start. It helps you understand what resources you have available and what debts you owe. This information is important for making informed financial decisions and for planning how to manage your resources effectively. An accurate opening day balance sheet ensures that you start your business with a solid understanding of your financial situation, helping to set a strong foundation for future growth and stability.

6. Review and Analyze the Data gathered

Reviewing and analyzing the data collected involves reviewing and analyzing all the information carefully. This consists of examining market research, financial projections, and technical requirements. The objective is to understand the importance of the data for the project’s possible achievement. Finding trends, opportunities, and roadblocks that might affect the project is made easier at this stage.

Reviewing and analyzing the data transforms unprocessed data into valuable understandings. Through the examination of the data, you can make educated choices on whether to continue with the project, make alterations, or cancel it. Identifying risks or issues promptly enables you to strategize on how to handle them in advance. Examining and assessing the data guarantees that your choices are grounded in substantial proof, raising the chances of your project’s success.

7. Make a go no go decision

The last phase in a feasibility study is a go/no-go decision. It is choosing whether to proceed with the project regarding the data and analysis gathered. Decide to “go” and proceed with the decision if the data shows that the project is likely to be successful and profitable. If the data shows major risks or low chances of success, you decide to “no-go” and either stop the project or rethink your approach. A go/no-go decision step prevents time, effort, and money wastage on projects that are unlikely to succeed. It ensures that investments are made only in projects with a good chance of meeting your goals. A well-informed, thoroughly analyzed go/no-go decision gives your company direction and increases its chances of success.

What is the purpose of a feasibility study?

Business planning requires a feasibility study to assess the potential success of a project or business concept. A feasibility study aims to assess the value of a project and discover any hindrances and advantages. Here are several reasons why you need a feasibility study and its importance:

• Feasibility study recognizes possible dangers and difficulties linked to the project. Assists in creating plans to reduce these risks.
• Feasibility   study evaluates the financial components, such as expenses, income, and earnings.
• The analysis of the target market, demand, and competition aids in understanding customer requirements and market conditions.
• Feasibility study determines the necessary resources like labor, materials, and technology, aiding in their efficient allocation and management.
• Feasibility study offers data and insights for informed decision-making, reduces uncertainty, and aids strategic planning.
• Feasibility study includes a broad implementation strategy, establishing timelines and milestones, and guaranteeing all project aspects are well-organized and coordinated.
• Feasibility study offers a detailed description that can be utilized to attract investors and secure funding. It also shows the project’s potential and viability to all stakeholders.
• Feasibility study is audited to comply with all legal and regulatory requirements.
• Operational aspects, such as production processes and logistics, are evaluated to ensure their practical implementation and management.
• Feasibility study ensures the project’s alignment with the business’s strategic goals and objectives. This ensures a clear focus and direction for the project.

Businesses can make wise decisions and efficiently plan for a project’s implementation by carrying out a feasibility study. This boosts a project’s likelihood of success.

Is there a difference between a feasibility study and business plan?

Yes, there is a difference between a feasibility study and a business plan.  A project’s success is evaluated through a feasibility study looking at the technical feasibility, market potential,  and financial forecasts. It is usually carried out before beginning a project to determine if it should move forward. On the contrary, a business plan details the execution and management of the project, including strategies for marketing, operations, and finance. The project is created once a feasibility study verifies its potential success.

Feasibility Study Vs Business Plan

Why is the feasibility study important for the startup business plan?

A feasibility study determines if the project or startup is likely to succeed before investing time and money. It identifies potential problems, market demand, and financial requirements that are included in the startup business plan. This provides a clear picture of the project’s viability. The information is important for creating a compelling business plan, as it ensures that it is based on realistic assumptions and reliable data.  a business plan might be built on uncertain foundations without a feasibility study. This leads to higher risks of failure.

How do you write a business plan?

Creating a business plan requires various essential steps, each dedicated to a specific aspect of your business. Provide an executive summary, a description of the company, market research, an organization and management structure, and information about the products and services. This includes the name, address, mission statement, goals, and reseach and development activities. Create a sales and marketing strategy that addresses price, sales, market positioning, and promotional strategies. Add a request for funding, financial forecasts, and additional materials to an appendix.

Tips for Writing a Business Plan

• Use simple language and avoid jargon.
• Make realistic assumptions and projections.
• Your business plan should be well-organized and free of errors.
• Review and update your business plan regularly. This allows you to reflect changes in your business or the market.

A comprehensive business plan guides your business strategy and aids in securing funding or support.

What is the importance of a business plan?

A business plan’s main purpose is that it provides a clear path for your business. It establishes your goals and the steps to achieve them. It helps you understand your market, identify the target customers, and analyze your competition. You can control costs and predict revenue by making a financial plan. A business plan sets up an organization within your company, guaranteeing that everyone is aware of their responsibilities. It helps attract investors and secure funding by showing that you have a trustworthy strategy. A business plan prepares you for challenges. It keeps you focused and increases your chances of success.

What are the components of a business plan?

A business plan has several key components. The plan begins with an Executive Summary, detailing the business structure, ownership, and uniqueness. It is followed by a detailed Company Description and Market Research explaining the industry, target market, and competitors. The Organization and Management section outlines your business’s internal structure, listing key roles and team members. The Products or Services section describes what you offer and its benefits. Marketing and Sales Strategies attract and retain customers. Financial Projections provide a forecast of your revenues, expenses, and profitability. The Appendix includes any supporting documents.

These components are closely related to a feasibility study. The market analysis is the first step in both the business plan and feasibility study, aiming to comprehend demand and competition. Both of them also need a thorough examination of finances to guarantee the project is feasible and long-lasting. Organizational planning is a frequently seen factor, making sure that the correct team and structure are established. A feasibility study determines if a business concept is worth pursuing. The business plan details the steps to make that concept into a successful business.

How much do business plan writing services cost?

Business plan writing services cost from $2,000 to $25,000 depending on the complexity, research level, and the writer’s skill level.  A simple business plan is less detailed, whereas a complex business plan is more detailed. Investing in a professionally written business plan shows that your business is equipped with a well-structured and clear plan for achieving success.

How much does a feasibility study cost?

A feasibility study ranges from $5,000 to $10,000 depending on the complexity, analysis level, and expertise of the research consultants. An extensive feasibility study that identifies risks, financial projections, market conditions, and operational requirements is the reason the investment is necessary. Businesses can improve decision-making and boost their success rates by making investments in feasibility studies. This avoids expensive errors. For expert help, seek business plan consultant services. Hiring business plan writers would be cheaper compared to the value received.

Can business plan consultants do a feasibility study for a continuity business plan?

Yes, business plan consultants can assist with conducting feasibility studies for a continuity business plan. Business plan consultants possess knowledge in market research, financial analysis, and strategic planning, all essential elements of feasibility studies and business plans. Experts can perform in-depth market analysis to comprehend demand and competition that would affect the progress of a business. They assess the financial feasibility of a project, pinpointing potential risks and obstacles.

Business plan consultants assist in defining the operational needs and structure of the organization, ensuring a comprehensive examination of all project aspects. Consultants use their expertise and abilities to offer important advice and direction. It improves the chances of a project being successful.