What Is a Feasibility Study?
A feasibility study is an analysis that takes all of a project's relevant factors into account—including economic, technical, legal, and scheduling considerations—to ascertain the likelihood of completing the project successfully. Project managers use feasibility studies to discern the pros and cons of undertaking a project before they invest a lot of time and money into it.
Feasibility studies also can provide a company's management with crucial information that could prevent the company from entering blindly into risky businesses.
Understanding Feasibility Studies
A feasibility study is simply an assessment of the practicality of a proposed plan or project. As the name implies, these studies ask: Is this project feasible? Do we have the people, tools, technology, and resources necessary for this project to succeed? Will the project get us the return on investment (ROI) that we need and expect?
The goals of feasibility studies are as follows:
- To understand thoroughly all aspects of a project, concept, or plan
- To become aware of any potential problems that could occur while implementing the project
- To determine if, after considering?all significant factors, the project is viable—that is, worth undertaking
The Importance of Feasibility Studies
Feasibility studies are important to business development. They can allow a business to address where and how it will operate. They can also identify potential obstacles that may impede its operations and recognize the amount of funding it will need to get the business up and running. Feasibility studies aim for marketing strategies that could help convince investors or banks that investing in a particular project or business is a wise choice.
When doing a feasibility study, it’s always good to have a?contingency plan that you also test to make sure it’s a viable alternative in case the first plan fails.
Tools for Conducting a Feasibility Study
Suggested Best Practices
Feasibility studies reflect a project's unique goals and needs, so each is different. However, the tips below can apply broadly to undertaking a feasibility study. You may, for example, want to do the following:
- Get feedback about the new concept from the appropriate stakeholders
- Analyze and ask questions about your data to make sure that it's solid
- Conduct a market survey or market research to enhance data collection
- Write an organizational, operational, or a business plan
- Prepare a projected income statement
- Prepare an opening day balance sheet
- Make an initial "go" or "no-go" decision about moving ahead with the plan
Once you have finished your basic due diligence, you might consider the elements below as a template of items to include in your study:
- Executive summary: Formulate a narrative describing details of the project, product, service, plan, or business.
- Technological considerations: Ask what will it take. Do you have it? If not, can you get it? What will it cost?
- Existing marketplace: Examine the local and broader markets for the product, service, plan, or business.
- Marketing strategy: Describe it in detail.
- Required staffing (including an organizational chart): What are the human capital needs for this project?
- Schedule and timeline: Include significant interim markers for the project's completion date.
- Project financials.
- Findings and recommendations: Break down into subsets of technology, marketing, organization, and financials.
- A feasibility study assesses the practicality of a proposed plan or project.
- A company may conduct a feasibility study if it's considering launching a new business or adopting a new product line.
- It's a good idea to have a contingency plan in case of unforeseeable circumstances, or if the original project is not feasible.
Real-World Example of a Feasibility Study
An elite college in a wealthy suburb of Boston had long desired to expand its campus. It kept putting off the project, however, because the administration had certain reservations, including whether it could afford to expand. The college also worried about public opinion of the neighborhood—the original home of this college for more than 100 years. As in the past, the community board had rejected similar types of development proposals. Finally, the college wondered if specific legal and political issues might impinge upon its plan.
All of these concerns and unknowns are apt reasons to proceed with a feasibility study, which the college finally did undertake. As a result, the school now is forging ahead with its expansion plans without needing to leave its historic home. If it had not taken the time and effort to conduct a feasibility study, the college would never have known whether its dreamed-of expansion could become a viable reality.