Feasibility Study: Ultimate Guide to Conducting and Preparing Them
Last Updated: 12/17/2023
Before investing in a project, you need to conduct a complete analysis of factors that may affect it. Aspects, such as economic, technical, and legal, affect projects differently. As a project manager, you need to evaluate them before you invest. The success of your project depends on how you prepare your feasibility study.
In this guide, you will get insights about the feasibility study, the components of the study, the multiple questions, and reliable tips on how to conduct and prepare a feasibility study.
What is a Feasibility Study?
From its term, a feasibility study is an assessment carried out to check on the viability of a proposed idea or project. The project manager typically carries out the exercise before beginning any other phase, to check on the likelihood of the project performance.
It highlights the project’s fundamental goals, the shortcomings of the project, and its alternative solutions. Besides that, a feasibility study outlines the crucial factors of legal, economic, cost, and time requirements for the project to ensure its success.
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Here are the steps to conducting a feasibility study.
Perform a preliminary project analysis
The phase typically outlines your plan and focuses on the demand than the supply of the proposed product or service. You are then required to weigh the possibility of the success of the project.
Come up with strategic financial statements; Income statements
You need to establish a complete income statement that will estimate both the project’s returns and the investment needed to achieve the project goals. The income statement accounts for the planned services, its costs, and other revenue adjustments.
Do some market research
Good market research is a vital key to the proposed project’s success. It provides you an opportunity to study your market and its responsiveness, its demographic factors, and the competitors involved. The research will also map a clear picture of the realistic revenues to expect from a project.
Develop a plan for the operations
Upon completing the previous steps, it is advisable to lay out the plans for the project operations. It would be best if you did it thoroughly; outline the operation and startup costs, and the fixed investments. It focuses on things including real estate and overheads.
Craft a concise balance sheet
A concise, balanced sheet composes of assets and liabilities estimates of the project. It needs to be more accurate for a better cost overview. You may incur liabilities such as leasing a building and a land property or paying for assets and account receivables.
Do some reviews and analyses of the data
The review and analysis of data is the most crucial step in determining the viability of your project. You may analyze the market research data to ascertain your product’s level of demand or review the competition. You can also re-examine the steps involving the financial statements to ensure accurate estimates for your project.
Go for or turn down the decision
It is the final step involved during a feasibility study. The previous steps will determine if the project is feasible enough for the organization. The decision you make should be worthwhile the time and money the organization spends on the project.
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Most Common Components to Feasibility Study
You might consider the below standard components when conducting or preparing a feasibility study for your project.
An executive summary
You need to develop a piece of descriptive information concerning the proposed project, its products, services, and business plan.
The technological considerations involved
Check for the things you may need for the project. You may acquire the technical requirements you need for the project, considering the organization’s budget.
Existing marketplace for the products and services
It would be best to study the already existing market for the business plan or the proposed project’s products and services.
Marketing strategy
You will provide in detail the strategies used for project marketing. It may span from social media marketing to search engine optimization techniques.
The staffing required
It involves outlining the organizational structure and identifying the human needs required to help the project achieve its goals and objectives.
Time
Project schedule and duration that states the interim expiry dates for the project. It will help you in operating the project within the estimated project time frame.
Financial involved
It includes the balance sheet and profit and loss statements, which map the project’s overview costs. The project profits must outweigh the expenses. An in-depth cost-benefit analysis will give you some clear insights into the financial resources for the project.
Project findings and recommendations
It evaluates the various categories involved in the project and assists in making significant decisions for its goodwill.
Common Questions
Feasibility study comes with an array of questions that managers and team leaders use to understand, implement, and execute whether the laid feasibility strategies are constructive. The piece describes some of the most critical questions that should be appropriately comprehended to succeed in a project proposal.
The level of technical feasibility
Do we have adequate technical resources to make this project achievable enough? Does the company have accurate resources to achieve the planned output? The questions are essential to analyze, compile, and summarize the technical resources needed to achieve the best in a particular project proposal.
Operational feasibility
Proposed projects have goals that include building a successful high-quality product targeted to solve a particular existing problem. The operational feasibility study weighs whether the proposed project in question achieves its objective in solving a particular problem, whether the upcoming project will be highly manageable, reliable, efficient, and matches all its necessary operations.
The rate of economic feasibility
Adhering to the famous phrase that goes by, failing to plan is planning to fail, proposed projects highly call for extensive budgeting. Every project component will require a specific amount of finance to plan, build, and execute the project component. Economic feasibility generally entails budgeting for the proposed project, the number of profits outputs in the project, the level of investment terms, and any other relevant money matter. Be sure to appropriately and correctly analyze whether the upcoming project will be highly profitable and good enough. Profits making, investments, and growth have always been the most desired positive consequences.
The time duration
Planning also involves accounting for a specific, definite time to complete the specified proposed project. Structurally plan how long the design work should take, analyzing its financial matters, group collaboration, actual deadlines, etc. Setting definite periods creates focus and determination to make the project highly accurate and useful.
Government policies
Does the proposed project comply with the existing government policies, measures, or any other relevant terms? Adhering to the existing government laws ensures that the proposed product service is valid and efficient to its future users in general.
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Pro Tips
With a clear overview and understanding of some of the crucial questions on conducting a feasibility study, the next step dictates starting and implementing some of the best strategies which put the proposal idea in its inception stage. The below tips involve making it to a successful feasibility study that gives companies, groups, and individuals to start and excel in conducting a feasibility study.
Conduct preliminary study
Conducting a preliminary study exposes a potential individual or group to the actual atmosphere in which their proposed project belongs. The preliminary analysis enhances planning for the upcoming project, studying any related products, seeking any challenges likely to be experienced by the product, etc. Preliminary is essential for preparation, which is an ideal, move in making and achieving the desired product goals.
Review, analyze, and summarize data
Data reviewing and manipulation is significant entirely for contingency planning. Comparing the set of data values achieved in the project activities confirms the efficiency, accuracy, and validity of the proposed project in question. The relevant and accurate data makes it possible to create a visualization of the project components, which aid in planning, commencing the project, and creating efficient decisions that are highly significant.
Prepare the relevant business documents
Relevant business documents carry out specific business purposes to achieve specific objectives. For instance, the balance sheet document outlines data, computes, and compares whether assets and liabilities are accurately equivalent to capital.
Conduct market research
Conducting market research is an essential technique that familiarizes a potential producer to the existing market, exposes one to the potential risks, educates the market, and helps understand the consumers, etc. With excellent and extensive exposure to the market, the producer studies and implements realistic goals which are likely to be achievable in the existing market. Market research promotes preparedness and initiates higher chances of a particular project proposal in the future market.
Positive energy
The right amount of positive energy boosts motivation and is simply one step behind achieving the intended objective. Be sure to be passionate and optimistic in planning, implementing, and succeeding in executing the proposed project. A positive atmosphere also builds a tremendous amount of courage to always continue despite high and low business times.
Conclusion
Feasibility study entails analyzing factors that may affect the successful implementation of your project. As a project manager, you should audit the economic, legal, and technological factors before you make any investment. To prepare a feasibility study, you need to understand its components and the steps involved.
The components need to be correctly analyzed, implemented, and appropriately exercised to achieve more remarkable outcomes. It would be best to comprehend and exercise the best tips and methodologies when preparing and conducting your project’s feasibility study. Before you invest, take time and examine the viability of the project to confirm whether it will be successful.
Commonly Asked Questions
Q: Should I hire external consultants to conduct the feasibility study?
A: It can sometime help to get an objective third-party perspective, but it is important the consultant has experience in your industry. Consultants with expertise in market analysis, financial modeling, and your sector can provide valuable insights. Yet — balance the costs versus value added.
Q: What if the feasibility study shows the project is not viable — then what?
A: Don’t despair. The study findings help you understand what factors need to change to make the project viable. You can use this information to asses and make adjustments to the business model or project until it demonstrates stronger feasibility.
Q: How frequently should feasibility studies be updated?
A: For larger, long-term projects it’s wise to redo the feasibility study every 6–12 months. Market conditions change, so regular updates let you adjust course as needed.
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