In very simple words a feasibility study is an assessment tool of evaluating the potential, viability and profitability of a project, business or an idea. The study is like a magical tool which helps you to see, in advance, whether the project proposed is technically and legally feasible. It also throws light on whether the project is economically justifiable and whether the investment that is to be put into the project will be worth it or not.
Basically, with a feasibility study you can well in advance make sure that the limited resources that your business has, are put to the best use possible with a proper risk assessment done.
Feasibility study: What, Why & How
We’ll now look deeply into the purpose and contents of a feasibility report. A detailed and well structured feasibility study, which is easy to comprehend is a must first step in starting a business. Therefore, availing project management consultancy services to help you conduct a hassle free feasibility study will prove to be cost beneficial. The purpose of a feasibility study is to be able to help you answer the following questions:
What is the return on investment of the project?
What are the risks involved?
What are the ways to mitigate the risks, if they arise?
Will the project be completed according to the schedule and meet the deadline?
What are the other alternatives to the project ?
What are the market demands and the industry trends?
What is the position of the company in the industry and among the consumers?
Referring to these questions and accordingly formed answers, the management will be able to decide whether to go or not to go ahead with the proposed project. It avoids getting into tricky and risky business situations. A feasibility study proves beneficial to the various stakeholders to make an informed decision. Well a hidden benefit of conducting the different types of feasibility study is that you can gather information which can aid in starting a new business venture if the forecasts indicate towards one!
As for the components of a feasibility study, it basically includes information on the:
- Execution plan
- Marketplace for the goods/services
- Target audience
- Technical considerations
- Investment planning
- Organisational structure
- Staffing procedure
- Marketing strategies
- Information regarding the product
There are different types of feasibility studies conducted to assess the practicality of the business in various domains such as technical, legal, economical, operational, organisational, managerial etc. All these domains will be clubbed under five different types of feasibility study which we’ll discuss in detail in the next section.
What are the 5 different types of feasibility study?
A feasibility study becomes the deciding factor for the various stakeholders and investors to invest their time, effort and money into your proposal. It becomes the face of credibility of your business idea therefore; make sure that the studies carried out are brief, detail-oriented and accurate. So, the five basic types of feasibility study are:
Technical feasibility tests the accessibility of technical resources i.e hardware and software and the technology present and whether the business model is compatible with it. If the technical resources already exist, then the study will ascertain whether the technology can be upgraded and customised.
Technical feasibility also dives into the following aspects:
- Analyse the technical skills and requirements of the company’s technical team members.
- Examine whether the relevant technology meets the capacity and budget.
- Ascertain that the software chosen is compatible and user friendly.
- Transportation logistics and website analysis.
- Whether the proposed technology exists or not.
One of the most important types of feasibility study is economical feasibility study as it alone can determine whether the project will be carried forward or not. Economic feasibility study helps the business to gauge the cost benefit ratio and make informed decisions accordingly. It helps the business owners and managers to:
- Assess the costs to be incurred on technology, human resources, marketing etc.
- Assess the cost effectiveness of the plan.
- Calculate whether the benefits will outweigh the cost.
Market feasibility study focuses on assessing the industry type of the business, the industrial trends, competition of the business’s products and/or services, marketing strategies and improvements and preparing sales projections to forecast sales and revenue. To be very precise, market feasibility study comprises of:
- Type of industry
- Marketing strategies
- Consumer preferences
- Existing customer base
- Competitors and potential consumers
- Growth prospects in the market
- Sales forecasting
Operational feasibility study determines how well the proposed project is able to solve the issue and takes advantage of the opportunities identified during the study conduction. A major component of this type of study is the human resource and their efficiency. Operational feasibility study involves taking into consideration following issues:
Is the management supportive of the new plan?
- Government regulations
- Labour objections
- Human resources issues
- Will there be cost deduction or improved profits in lieu of the project being implemented?
- Legal aspects
- Will the customers, investors and other stakeholders be affected?
- Is the current workforce equipped enough to welcome the change?
- Is the workforce ready to invest their time and efforts in getting trained?
And so on.
Financial feasibility study helps gauge the financial strength of the business.It answers the question whether the business will be able to provide for the financial resources required for the plan to be executed. Financial feasibility study is important to understand the fiscal viability of the project and involve following aspects to be taken into consideration alongside SWOT (strengths, weakness, opportunities and threats) analysis :
- Expected return on investment
- Ways to procure the investment required ( bank, investors etc.)
- Initial investments
- Balance sheet analysis
- Anticipate financial risks.
Feasibility study is a professional’s work and hiring a professional to carry out the tasks they excel in, will save you, your time and money. As there are different types of feasibility studies, so are there different kinds of professionals. A project management consultancy company can provide you with the best suited people according to the industry sector you operate in.
Kamtech has been working in the consulting business for two decades now, so we can assure you of being satisfied with our services. Our efficient and effective team of project management consultants having experience in diverse fields are at your disposal to help you conduct these time consuming feasibility studies.
Reach out to us for a no-obligation consultation today!