Business Plan vs. Feasibility Study

Feasibility studies and business plans are often confused, but they're quite different. A feasibility study researches the likelihood of your business idea being successful. A business plan takes the information obtained in the feasibility study and explains how the business will operate, market itself, grow and make profits. The feasibility study should precede your business plan --- if your business idea isn't feasible, you shouldn't proceed with your business plan until you rework your idea.

Feasibility Study Identification

Conducted before you start to plan the product, marketing and operations of your business, the feasibility study combines research about the industry, product development, manufacturing, price points, cost factors and operations. It seeks to establish that there's customer demand for your product and whether you can make a profit meeting that demand. It also provides realistic ideas and contacts you can use in planning and launching your business.

Business Plan Identification

Based on the reality revealed by your feasibility study, you can plan how you'll produce your product at a cost that allows you to meet your customers' price needs and still make a profit. Your feasibility study also defines your target customer and assists in creating the marketing plan section of your business plan. Use the feasibility study to estimate the amount of time it will take your business to attract enough customers to produce a profit. When writing your business plan, you can continue to use the feasibility study, which contributes valuable information for your business model, revenue model, target customer, marketing plan, industry discussion, evaluation of competition and contingency plan.

Function

The use of a feasibility study in the process of developing your business idea greatly improves the quality of your business plan and can serve as an additional document that supports your presentations to funding sources such as banks and potential investors. Funding sources are always looking for proof that the business idea is workable; the fact that you can produce a strong feasibility study improves your image as a skillful entrepreneur who's likely to create a successful business.

Significance

Entrepreneurs often skip the feasibility study because it seems to be unnecessary. It's natural for an entrepreneur to be enthusiastic and optimistic about the likelihood of business success, but preparation is an important part of the process. Research and development performed on the business idea prior to writing the business plan reveals the actual feasibility of the idea and the types of things that can go wrong so you can prepare a contingency plan in advance.

Considerations

A feasibility study may reveal that the business idea is flawed. This doesn't necessarily mean you should abandon your idea entirely. Flawed elements of your business idea can be altered according to information revealed through the feasibility study. The process of starting a successful business often requires such adjustments to your plan. However, if your feasibility study reveals little chance of profitable operations because the cost of production is higher than the price the customer will pay, it may be necessary to scrap the idea altogether.

References

• Georgia Cooperative Council: The Feasibility Study vs. the Business Plan