It’s possible for a great idea to appear great in writing and not work in practice. Perhaps it’s too expensive. Perhaps your staff is lacking in the right skills. Perhaps the need isn’t there. Or maybe, the project just can’t be finished within the stipulated deadline.
This is where a what is a feasibility study comes in handy. A feasibility study serves to help you determine whether an idea can be a reality prior to investing time, people and money.
In simple terms the question what is a feasibility study asks one very important question: can we make this work?
What Is a Feasibility Study?
A feasibility study is a formal evaluation that examines a project, product or other business proposition to see if it is viable, or if there are any obstacles that would hinder its success.
It looks at factors such as:
- Costs and expected returns
- Customer demand
- Available resources
- Technical requirements
- Legal requirements
- Operational capacity
- Project timeline
- Potential risks
The objective is more than just “yes/no”. A well-made what is a feasibility study should provide the decision makers with sufficient information to make a decision: proceed, adjust the plan, or reject.
This typically occurs in the feasibility phase, prior to final project approval and/or substantial resources allocation.
What is a Feasibility Study Important?
It is easy to see that a project can get very pricey if it is not feasible at the outset. You might find if you’ve done your budgeting halfway through that it’s too expensive or your team can’t keep up with the volume.
what is a feasibility study will provide you with the opportunity to identify those issues at an early feasibility stage.
- Reduce financial risk
- Identify potential problems
- Test customer demand
- Understand resource requirements
- Estimate project costs
- Set realistic deadlines
- Compare expected benefits with investment
- Take better go or no go decision
Consider it a reality check before committing!
What Are the 4 Types of Feasibility Studies?
There are multiple areas of analysis that may be required for different projects, but four of these that are commonly used are technical, financial, legal, and operational feasibility.
1. Technical Feasibility
Technical feasibility is a question of whether you have the technology, equipment, infrastructure and skills necessary to complete your project.
For instance, if a company is planning to come up with a new software platform, they must take a look at their development resources, integrations, security needs, and technical skill.
Main question: Can we build it with the resources available?
2. Financial Feasibility
Financial feasibility looks at whether the project makes financial sense. You may review:
- Estimated costs
- Revenue projections
- Operating expenses
- Expected profit
- Break-even point
- Return on investment
It is possible to do a project but it may not be worthwhile.
Main question: Will the financial model be viable?
3. Legal Feasibility
Legal – Evaluates whether the project can function under existing legal, regulatory, contractual, and industry specifications.
These might be permits, data protection regulations, intellectual property, contracts or industry specific regulations.
Main question: Are we legally allowed to do it?
4. Operational Feasibility
Operational feasibility considers the feasibility of operating and maintaining the project.
Staffing, workflows, responsibilities, support and capacity for day-to-day operations must all be taken into consideration.
Main question: Can we operate it successfully?
Some feasibility frameworks also include market and schedule feasibility as separate categories.
What Are the 5 Major Components of a What is a Feasibility Study?
There are multiple sections of a what is a feasibility study but these five are helpful to create a clear analysis.
1. Executive Summary
This provides a snapshot of the project, key findings, and recommendation. This is typically the most easily written part of the study when it is written last.
2. Market Analysis
Market analysis is concerned with your potential customers, competitors, market conditions, and demand possibilities. The aim is to find out if there is a viable market for the idea.
3. Technical Assessment
This section describes the technologies, tools, infrastructure, equipment and expertise needed to complete the project.
4. Financial Analysis
Here you do the cost estimates, the cost of money, the revenue, the profit and the ROI. This is where your feasibility model is very helpful, as it converts your financial assumptions into numbers.
5. Risk Assessment
All projects come with risks. A risk assessment is an investigation to identify potential hazards, and to assess their likelihood, severity and response.
How to Conduct a Feasibility Study in 7 Steps
These are the 7 steps of a simple feasibility plan.
Step 1: Conduct a Preliminary Analysis
Begin by quickly reviewing the idea. Be alert to obvious difficulties that may render the project impractical or impractical.
Step 2: Define the Project Scope
Be specific about the project work and what it will produce, and what it will not produce. Consider relevant considerations including budget, deadlines, and regulations.
Step 3: Research the Market
Research your audience, opponents, pricing and market demand. If it’s a new product or service, this can help you make sure that people need what you are thinking of providing.
Step 4: Build a Financial Model
Use cost estimating to determine the likely cost of the project and the project’s expected returns. Factor in staffing, technology, equipment, marketing, operating costs and so on.
Then find out what will happen if expenses rise or revenues are lower than anticipated.
Step 5: Check Available Resources
Check on your team’s skills, workload, technology and infrastructure. At first, a project can appear to be a promising one, but when you realize who you need to do it and they are already overworked, it’s not so profitable anymore.
Step 6: Identify and Assess Risks
Make a list of the significant risks. When answering each question, think about how likely it is, how serious it could be, and what might be done about it. It can also be easier to follow up on important risks if they are assigned to an owner.
Step 7: Make a Decision
Compile all this information and make a decision on whether or not the project can move forward. The final result can be:
- Go: The project is viable.
- Conditional go: The project can work if certain issues are resolved.
- No-go: The risks or costs are too high under the current plan.
What is a Feasibility Study Example?
Suppose a marketing company is thinking of a fixed-price website project of $100,000. The initial estimate looks profitable. But the feasibility analysis shows that the agency’s senior developer is already working at high capacity.
The project also needs a third party integration, which was not part of the initial estimate. The agency now has two options. It will be able to reschedule the project and quote the integration price individually or refuse the project.
That is the value of a what is a feasibility study. The problem was discovered before the contract was signed rather than halfway through delivery.
Feasibility Analysis vs. Business Case
These two are often confused. To explain feasibility analysis:
“Can we realistically do this?”
A business case asks:
“Should we invest in this?”
They are related but have different functions. The feasibility analysis sample should give decision makers evidence to assess the business case.
How to Improve Your Feasibility Analysis
Wherever possible, use real data. Avoid making estimates based solely on what you wish to occur. Review past projects, costs, resources, customer research and reasonable time frames.
It also facilitates different scenarios to be tested. What if the costs are increased by 20%? What in the event it takes longer than expected? What can be done if sales don’t meet expectations? Situation scenarios can be useful in identifying potential vulnerabilities that may not be apparent in a single positive scenario.
In addition, if your business is also looking for a better way to manage leads, campaigns, and customer activity—and analyze growth opportunities, a CRM like LeadVix can help you organize your sales data in one place.
In Conclusion
The purpose of what is a feasibility study is not to prove that the idea is good. It’s the question of whether or not the idea is feasible.
Conducting a thorough feasibility analysis involves examining financial, market, technology, operational, legal, and risk factors before committing to significant projects.
This is a task that can save you a lot of money if you do it early whether you are introducing a new product, starting a business or undertaking a significant project.
Frequently Asked Questions (FAQs)
What is a feasibility study?
A feasibility study is a process that considers the feasibility of a proposed project or business idea.
What are the 5 elements of a what is a feasibility study?
The five elements include the executive summary, market analysis, technical assessment, financial analysis and risk assessment.
How do I write a What is a feasibility study?
Identify project scope, research market, evaluate technical/operational requirements, develop a financial plan, list project risks, and end with a clear project recommendation.
What are the 7 steps in conducting a what is a feasibility study?
The seven steps are the preliminary analysis, defining project scope, market research, financial modeling, checking resources, assessing risk and making a final go, conditional-go, or no-go decision.