About Feasibility Studies
Feasibility studies help businesses and organizations evaluate ideas before making an investment. A good idea may face challenges that make it impractical or too expensive to implement. Conducting a feasibility study gives you the opportunity to examine factors that could contribute to the success of a project or business. A feasibility study also reveals trends, opportunities and alternatives that can help to improve the odds for success.
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Function
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The main function of a feasibility study is to examine an idea, product or service in the actual context that it will be used. It helps to identifies enabling and constraining forces. It considers resources required and compares them with resources available. A feasibility study will provide sufficient information to make an informed yes or no decision, based on facts instead of assumptions and emotional attachments to the idea under consideration.
Effects
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Feasibility studies are best used as planning tools. Seeking and collecting the information needed gives decision makers an opportunity to assess potential for profits and risks that may arise while pursuing the planned action. The initial step is answering key questions about what impact a business' or organization's internal environment will have on the proposed activity. The feasibility study must also describe factors in the external environment that will affect the organization or business intended activity.
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Features
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Feasibility studies require a series of steps in order to be completed. Skipping any of these results in flawed data collection and flawed decision-making. A demand study is completed to estimate market size, current demand, future demand. It must answer the question of who currently needs the product or service. It must clarify how the demand is currently satisfied and how the new product or service will gain market share. The demand study also details how the current providers are reaching those consumers and how your product or service will access those distribution channels.
Considerations
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Financial analysis a key step in a feasibility study. It must make a realistic estimate of how much capital will be needed for startup. It must also identify all other costs, such as capital equipment, inventory and human resources costs. Finally, the feasibility study must predict sources of capital, cash flow, how long capital will last during implementation, how profits will become available, how to reinvest or distribute profits and return on investment.
Technical requirements must be spelled out in a feasibility study. The most commonly included requirements are management expertise, physical plant or facilities needed, human resources and expertise available or to be sourced, stable viable lease or land ownership to support activity, raw material for products, production, transportation and utilities.
Benefits
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The feasibility study clarifies an organization's strengths, liquidity, financial resources and expertise. It requires that the business determine what will distinguish its product or service from competitors. It also helps businesses and organizations develop strategies for risk mitigation. It may provide alternatives that help your service or product overcome pitfalls such as governmental regulations, industry licensing, tariffs, cultural obstacle, and political restrictions that may affect potential success and profitability.
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