How to Conduct a Project Feasibility Study

A feasibility study can determine whether a business project makes sense.

Determining whether an idea presented by an entrepreneur or aspiring entrepreneur presents a realistic foundation for the launching of a dynamic business can be an in-depth process. A project feasibility study can provide an overview of the issues that can affect the entrepreneurial project. It can identify any hurdles that could significantly affect the proposed business's chances of success in the current environment. In short, a feasibility study aims to conclude whether the idea for the project makes good business sense.

Instructions

1. Examine the market issues that could affect the project. Define the market as specifically as possible and state whether the market is growing, shrinking or remaining at about its present size. Determine whether the existing market is big enough to make the project worthwhile.

2. Identify any competitors that exist in the market along with their strengths and weaknesses. Explain how you plan to deal with the competition, either by attempting to take over their market shares or by establishing your own niche in the market. Explain how the location of your business is likely to affect its success.

3. Delineate the critical organizational and technological issues for the project, after you have concluded the portion of your study on the market. Describe why the proposed organizational structure is the best one for your project. Include information on who will serve on the board of directors, who will manage the business and what qualifications are required for the management team.

4. Delineate the technological issues that could affect your project. This part of the study can vary substantially depending on the type of project. For example, a dog-walking business will have significantly fewer technological concerns than a manufacturing business. Even if your project requires only a computer and phone line, this is the place to address that information.

5. Analyze the project's financial issues for the final part of your study. Include estimates of capital requirements, including startup costs. Calculate estimated earnings. Estimate the return on investment for any investors in the project. Include sources of financing such as banks, lending institutions or private investors.

Tips & Warnings

• Be brutally honest in describing the strength of your competition and how potential customers are likely to react to your business as it attempts to thrive in the market.

References

• University of Wisconsin: Conducting a Feasibility Study
• University of Nebraska-Lincoln: Feasibility Studies