Overview on Feasibility Study & Its Importance
Feasibility studies are important because they can assist in the formation of business plans and cross-functional assignments. Market Feasibility Study determines the depth and condition of a particular market and its ability to support a particular development. The main objective of a market feasibility study is to understand the market to determine if enough demand exists to make the venture successful.
A feasibility study is conducted in order to examine if the proposed business idea or venture can be applied practically. The business can either be a startup, expansion of a current business or taking over an existing business.
Conducting a feasibility study helps in determining if the proposed business can sustain for a long term and endure the financial risks that may incur. It also helps to plan the project and identify the potential possibilities or threats that can provide reasons to avoid investing in the business venture.
When to Conduct Feasibility Study
Feasibility study can be an expensive and time-consuming process. It is therefore necessary to identify the right time to conduct the study. An entrepreneur or investor must be aware of all aspects of the business in order to utilize the feasibility study effectively.
An outline for one or more business model must be clearly defined and initial market analysis must be conducted before initiating the feasibility study. This pre-feasibility study can be conducted by the entrepreneur, the committee members or by hiring external consultants.
If the market seems unfavorable, or is not viable to proceed with the business idea, the time and money required to do the feasibility study can be saved. On the other hand, if the outcome of the initial analysis is favorable, we can proceed with the feasibility study and incorporate the market analysis conducted into the study.
Essential Elements for an Effective Feasibility Study
The scope of the feasibility study must be clearly defined. Factors that might affect the business, problems that might incur in business, opportunities in the market should be addressed within the scope.
A well-defined feasibility study should include:
- Historical overview of the company or project
- Information on products or services/Technical Feasibility
- Operational and control details/management
- Market research and policies
- Financial data & reports/economic benefits
- Legal requirements and tax obligations
Once all the elements are included in the study, a final review must be conducted. It increases the accuracy of the study. The feasibility study can be approved, rejected, revised at this stage by determining the success/failure of the business/venture based on the final analysis report.
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