What Is a Feasibility Study?

What Is a Feasibility Study?

Let me tell you directly: a feasibility study is an assessment of how practical a proposed plan or project really is. It analyzes whether the project is viable and likely to succeed, and it identifies potential issues that could come up along the way.

Key Takeaways

You need to know that a feasibility study evaluates a proposed plan's success potential by breaking down its costs and benefits in detail. Companies often use them when launching new businesses, adding product lines, or acquiring competitors. And remember, it's smart to have a contingency plan ready if the main idea doesn't pan out.

Understanding Feasibility Studies

As a project manager, you have to figure out if you have the right people, money, and tech for the job. The study looks at the return on investment, whether that's financial profit or some societal benefit. It might include cash flow analysis, comparing revenue to operating costs, and a risk assessment to see if the returns justify the risks. Here's a tip I'll give you: always prepare a contingency plan to test as an alternative if your first idea fails.

Benefits of Feasibility Studies

These studies let you, as a project manager, weigh the pros and cons before sinking time and money into something. They give your management team the info to steer clear of bad investments. You'll learn how your company can grow, how it will operate, what obstacles might appear, who your competitors are, and what the market looks like. Plus, they help convince investors and bankers that your project is worth their money.

How to Conduct a Feasibility Study

The format varies by organization, but the core factors stay the same, even if their importance shifts. Start with a preliminary analysis: get feedback from stakeholders on the concept, analyze the data to ensure it's solid, do market research to check demand, write up an operational or business plan, project your income statement with revenue, costs, and profit, prepare a balance sheet, identify vulnerabilities and how to handle them, and make that initial go or no-go call.

Suggested Components

Once the basics are done, dive into the details. Include an executive summary narrating the project details, technological needs and costs, an examination of the existing market, a detailed marketing strategy, staffing requirements with an organizational chart, a schedule with timelines and milestones, thorough financials, and findings with recommendations broken into technology, marketing, organization, and finances.

Examples of Feasibility Studies

Take a university looking to upgrade its 1970s science building: officials weighed options, addressed concerns like costs and zoning, explored tech needs and student benefits, projected finances including bonds and endowment use, and confirmed viability, leading to approval. Without it, they wouldn't have known if the plan made sense.

Or consider Washington's high-speed rail project connecting Vancouver, Seattle, and Portland: the study set a governance framework, engaged stakeholders equitably, outlined funding from government and private sources like Microsoft, estimated costs at $24-42 billion with revenues of $160-250 million, highlighted benefits like economic growth and reduced traffic, and progressed with funding by 2024.

What Is the Main Objective of a Feasibility Study?

The main goal is to help you decide if a project or investment will succeed by identifying costs and benefits. For businesses, that means financial returns beating costs; for nonprofits, it could be community benefits justifying the expense.

What Are the Steps in a Feasibility Study?

It begins with preliminary analysis: interview stakeholders, do market research, prepare a business plan, and decide go or no-go. If yes, cover tech considerations, marketplace study, marketing strategy, human capital, schedule, and financing.

Who Conducts a Feasibility Study?

Senior managers in your organization might handle it, or if they lack expertise or time, outsource to a consultant.

What Are the 4 Types of Feasibility?

You look at technical feasibility with hardware, software, and labor; financial with costs and returns; market with industry analysis, demand, and forecasts; and organizational with business structure and management needs.

The Bottom Line

In the end, a feasibility study shows you if a project is viable by identifying success factors, ROI, and risks. It details the new venture, market analysis, needed tech and labor, financing sources, projections, and a final decision on whether to proceed.