WHAT IS A FEASIBILITY STUDY?

A feasibility study is a comprehensive evaluation of a proposed project that

evaluates all factors critical to its success in order to assess its likelihood of success.
Business success can be defined primarily in terms of ROI, which is the amount of
profits that will be generated by the project.

In a feasibility study, a proposed plan or project is evaluated for its practicality. As

part of a feasibility study, a project or venture is evaluated for its viability in order to
determine whether it will be successful.
As the name implies, a feasibility analysis is used to determine the viability of an
idea, such as ensuring a project is legally and technically feasible as well as
economically justifiable. It tells us whether a project is worth the investment—in
some cases, a project may not be doable. There can be many reasons for this,
including requiring too many resources, which not only prevents those resources from
performing other tasks but also may cost more than an organization would earn back
by taking on a project that isn’t profitable.

A well-designed study should offer a historical background of the business or

project, such as a description of the product or service, accounting statements, details
of operations and management, marketing research and policies, financial data, legal
requirements, and tax obligations. Generally, such studies precede technical
development and project implementation.

A feasibility study aims to objectively and rationally uncover the strengths and
weaknesses of an existing business or proposed venture, opportunities and threats
present in the natural environment, the resources required to carry through, and
ultimately the prospects for success. In its simplest terms, the two criteria to judge
feasibility are cost required and value to be attained.

A feasibility study evaluates the project's potential for success; therefore, perceived
objectivity is an important factor in the credibility of the study for potential investors
and lending institutions. It must therefore be conducted with an objective, unbiased
approach to provide information upon which decisions can be based.

UNDERSTANDING A FEASIBILITY STUDY

Project management is the process of planning, organizing, and managing resources

to bring about the successful completion of specific project goals and objectives. A
feasibility study is a preliminary exploration of a proposed project or undertaking to
determine its merits and viability. A feasibility study aims to provide an independent
assessment that examines all aspects of a proposed project, including technical,
economic, financial, legal, and environmental considerations. This information then
helps decision-makers determine whether or not to proceed with the project.
The feasibility study results can also be used to create a realistic project plan and
budget. Without a feasibility study, it cannot be easy to know whether or not a
proposed project is worth pursuing.
As part of the feasibility study, project managers must determine whether they have
enough of the right people, financial resources, and technology. The study must also
determine the return on investment, whether this is measured as a financial gain or a
benefit to society, as in the case of a nonprofit project.
TYPES OF FEASIBILITY STUDY

A feasibility analysis evaluates the project’s potential for success; therefore, perceived
objectivity is an essential factor in the credibility of the study for potential investors
and lending institutions. There are five types of feasibility study—separate areas that a
feasibility study examines, described below.

1. Technical Feasibility
This assessment focuses on the technical resources available to the organization. It
helps organizations determine whether the technical resources meet capacity and
whether the technical team is capable of converting the ideas into working systems.
Technical feasibility also involves the evaluation of the hardware, software, and other
technical requirements of the proposed system. As an exaggerated example, an
organization wouldn’t want to try to put Star Trek’s transporters in their building—
currently, this project is not technically feasible.

2. Economic Feasibility
This assessment typically involves a cost/ benefits analysis of the project, helping
organizations determine the viability, cost, and benefits associated with a project
before financial resources are allocated. It also serves as an independent project
assessment and enhances project credibility—helping decision-makers determine the
positive economic benefits to the organization that the proposed project will provide.

3. Legal Feasibility
This assessment investigates whether any aspect of the proposed project conflicts with
legal requirements like zoning laws, data protection acts or social media laws. Let’s
say an organization wants to construct a new office building in a specific location. A
feasibility study might reveal the organization’s ideal location isn’t zoned for that type
of business. That organization has just saved considerable time and effort by learning
that their project was not feasible right from the beginning.

4. Operational Feasibility
This assessment involves undertaking a study to analyze and determine whether—and
how well—the organization’s needs can be met by completing the project.
Operational feasibility studies also examine how a project plan satisfies the
requirements identified in the requirements analysis phase of system development.
5. Scheduling Feasibility
This assessment is the most important for project success; after all, a project will fail
if not completed on time. In scheduling feasibility, an organization estimates how
much time the project will take to complete.

When these areas have all been examined, the feasibility analysis helps identify any
constraints the proposed project may face, including:

Internal Project Constraints: Technical, Technology, Budget, Resource, etc.

Internal Corporate Constraints: Financial, Marketing, Export, etc.
External Constraints: Logistics, Environment, Laws, and Regulations, etc.

BENEFITS OF A FEASIBILITY STUDY

There are several benefits to feasibility studies, including helping project managers
discern the pros and cons of undertaking a project before investing a significant
amount of time and capital into it. Other benefits includes:

1.Feasibility studies can also provide a company's management team with crucial
information that could prevent them from entering into a risky business venture.

2.Such studies help companies determine how they will grow. They will know more
about how they will operate, what the potential obstacles are, who the competition is,
and what the market is.

3.Feasibility studies also help convince investors and bankers that investing in a
particular project or business is a wise choice.

4.Preparing a project's feasibility study is an important step that may assist project
managers in making informed decisions about whether or not to spend time and
money on the endeavor.

5.Feasibility studies may also help a company's management avoid taking on a tricky
business endeavor by providing them with critical information.

6.An additional advantage of doing a feasibility study is that it aids in the creation of
new ventures by providing information on factors such as how a company will work,
what difficulties it could face, who its competitors are, and how much and where it
will get its funding from.

IMPORTANCE OF A FEASIBILITY STUDY

1. Feasibility studies shows the viability of your vision
Every development has started with an idea, and while some have defied the odds set
against them, those ideas rarely went to work without first being evaluated. By
looking at the landscape that surrounds your vision, including where customers would
come from and who you are competing with to gain them, you’ll be able to gauge the
likelihood of achieving your definition of success. It’s important to note that
feasibility studies can also be a critical part “right-sizing” your vision. At the SF
Companies, nearly 40 percent of our feasibility studies yield a “yes-if” result,
meaning that the initial concept can be adjusted to meet the definition of success.

2.Feasibility Studies Help Define Your Goals and Objectives

Ideas are great, but they are only as great as their execution. A feasibility study will
help clarify what goals need to put in place to be successful by providing benchmarks
for a project’s viability. For example, if your community would like to build an
indoor/outdoor sports facility, you may not have a clear picture of the construction
costs. A feasibility study helps you understand your facility’s costs as well as its
revenue earning potential. With this information in hand you can either obtain the
resources needed to complete your project or “right-size” your project based on
available resources.

3.Feasibility Studies Help You Develop A Plan

Like ideas, goals are only useful when you start the work. As you define your goals,
with the help of your feasibility study, you will have a better understanding of the next
steps in the development cycle. From there, a program plan for a “right-sized” facility
can be developed and combined with a financial forecast and economic impact study
to attract funding partners.

4.Feasibility Studies Help Execute That Plan

Arguably the greatest benefit of a feasibility study is that they give you specific
information about what a project requires for it to be sustainable. By understanding
development costs, the competitive landscape, where potential customers will come
from, and revenue potential, you’ll have a feel for the sources of capital, partners, and
business model needed to achieve success. The components of the feasibility study
will serve as a roadmap, describing the most optimal path to creating a new complex.

5.Feasibility Studies Will Give You an Identity

When planning a new sports, recreation, or entertainment facility, you’ll have a
general idea of who you are targeting. However, to attract this valued audience, you
must understand their needs as well as the competitive landscape. A feasibility study
will help you understand what they have to offer.
Other importance includes :

 Improves project teams’ focus

 Identifies new opportunities
 Provides valuable information for a “go/no-go” decision
 Narrows the business alternatives
  Identifies a valid reason to undertake the project
 Enhances the success rate by evaluating multiple parameters
 Aids decision-making on the project
 Identifies reasons not to proceed

COMPONENTS OF A FEASIBILITY STUDY REPORT?

When starting a business, one of the most important steps is to conduct a feasibility
study. This study will help to determine if your business idea is viable and has the
potential to be successful. Several factors need to be considered when conducting a
feasibility study, including the marketability of your product or service, the
competition, the financial stability of your company, and more. A feasibility study
should cover the amount of technology, resources required, and ROI.

The results of your feasibility studies study are summarized in a feasibility report,
which typically comprises the following sections.

1. Executive summary
2. Specifications of the item or service
3. Considerations for the future of technology
4. The marketplace for goods and services
5. Approach to marketing
6. Organization/staffing
7. Schedule
8. The financial forecasts
9. Recommendations based on research

STEPS IN A FEASIBILITY STUDY

Conducting a feasibility study involves the following steps:

 Conduct preliminary analyses.

 Prepare a projected income statement. What are the possible revenues that the
project can generate?
 Conduct a market survey. Does the project create a good or service that is in
demand in the market? What price are consumers willing to pay for the good
or service?
 Plan the organizational structure of the new project. What are the staffing
requirements? How many workers are needed? What other resources are
needed?
 Prepare an opening day balance of projected expenses and revenue
 Review and analyze the points of vulnerability that are internal to the project
and that can be controlled or eliminated.
 Decide whether to go on with the plan/project.
FEASIBILITY STUDY – EXAMPLE
A hospital, for example, aiming to expand, i.e., add an extension to the
building, may perform a feasibility study. The study will determine whether
the project should go ahead.

The people carrying out the study will take into account labor and material
costs. They will also take into account how disruptive the project might be for
staff and patients.

The study may have to gauge public opinion regarding the new extension. In
other words, would the local community be in favor or against such a project?

It is important to determine how the stakeholders will respond. A stakeholder

is a person with an interest or concern in a project, business, or organization.

Hospital stakeholders are, for example, doctors, nurses, other hospital staff,
patients, hospital visitors, and the hospital’s owner. Members of the local
community may also be stakeholders.

Those conducting the study go through all the pros and cons of the project.
They then weigh them against each other. Finally, they determine whether it is
a good idea to go ahead.
A local university was concerned about the state of the science building, which
was built in the 1970s. School officials sought to determine the costs and
benefits of expanding and upgrading the building, given the scientific and
technological advances over the past 20 years. A feasibility study was
therefore conducted.

Another example is about some School officials looking at several options and
weighed the costs and benefits of updating and expanding the science
building. There were concerns expressed by school officials about the project's
cost and public reaction. The proposed new science building will be larger
than the current one. The community board rejected similar proposals in the
past. The feasibility study will address these concerns and any possible legal
or zoning issues.

The feasibility study examined the technology requirements of the proposed

concept(new science building), the potential benefits for students, and its long-
term viability. Modernizing the science facility will increase the scientific
research potential and ameliorate its modules. It also would allure new
students.

Financial projections provided information about the scope & cost of this
project and also provided information on raising funds. This covers issuing an
investor's bonds and tapping into its endowment. Projections also help
determine how the new science program attracts more fresh students to enroll
in offered programs, increasing tuition and fees revenue.

The feasibility study proved that the proposed concept was feasible, which
allowed for the expansion and modernization of the science building. The
feasibility study would not have allowed school administrators to know if the
expansion plans were feasible without it.

TOOLS FOR CONDUCTING A FEASIBILITY STUDY

Suggested Best Practices
While every project has its own goals and needs, the following are best
practices for conducting a feasibility study.

 Do a preliminary analysis. This includes getting feedback from relevant

stakeholders on the new project. Also, look for other business scenarios.
 To ensure that the data is solid, determine and ask queries about it in the
initial phase.
 Take a market survey to identify market demand and opportunities for the
new concept or business.
 Create an organizational, operational, or business plan. This includes
identifying how much labor is required, what costs, and how long.
 Make a projected income statement that involves revenue, operating
expenses, and profit.
 Create an opening day balance sheet.
 You will need to identify and address any vulnerabilities or obstacles.
 Take an initial decision to go ahead with the plan.
 Suggested Components
 Here are the some suggested components for conducting a feasibility
study:

 Executive Summary: Write a narrative describing the project, product, or

service.
 Technological considerations: Ask yourself what it will take. Are you able
to afford it? How much will it cost?
 Current marketplace: Find out the market for your product, service, or plan
in the local and global markets.
 Marketing strategy: Define in the detailed description.
 Required staff: What human resources are needed for this project?
 Timeline and schedule: Use important interim markers to indicate when
the project will be completed.
 Project financials. Project financials are the different ways managers can
account for money spent and earned on projects. One of the most
important aspects of financial management is creating and tracking
 accurate project financials.

HOW TO CONDUCT A FEASIBILITY STUDY

Now, let's discuss a few of the steps we take in order to do the feasibility
study.

 To begin, we do a preliminary study of the business case to define what

is included and what we are examining and attempting to find is
realistic.
 Following that, we generate a forecasted income statement. We need to
understand the revenue sources; how are we going to profit from this?
Where does the income originate? Additionally, we must do a market
study.
 We need to find out whether this is a demand for our product. How
much demand does this have? Is there a market for this product or
service?
 Plan your company's structure and operations, which is the fourth step.
Specifically, what type of organization do we need, and what resources
do we have? Do we have any specific personnel needs?
 We also plan to generate a balance sheet on the first day. What are the
income and expenses, and how can we be confident we'll be able to
decide whether we're going to make our ROI?
 As a result, we plan to go through and examine all of our data before
making a final decision on whether or not to go forward. In other
words, are we going to pursue this project or business opportunity?

CONCLUSION
Feasibility study examines the viability or sustainability of an idea, project, or
business. The study examines whether there are enough resources to implement it, and
the concept has the potential to generate reasonable profits. In addition, it will
demonstrate the benefits received in return for taking the risk of investing in the idea.

These studies analyze strengths, weaknesses, opportunities, and threats to

determine whether the proposals are cost-effective and beneficial to a company’s
long-term success. Furthermore, investors can benefit from evaluating the problems
and solutions listed in the study and determine whether a proposed project is the right
choice.
A feasibility study should critically assess a proposal to build a facility, and enable the
client (the owner) to make an informed decision about whether to proceed with the
proposed project.

It should consider all the alternatives within the scope of an identified need in order to
establish the most effective investment of funds. It should analyse the social and
financial impacts of the proposal and identify the risks involved by studying:
the marketplace
usage and management issues
the facility components
location options
financial viability.