Overview on Feasibility Study & Its Importance
A feasibility study is conducted in order to examine if the proposed business idea or venture can be applied practically. The key function of this study is to verify if the business can be implemented and continued. 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
An ideal feasibility study contains the following elements incorporated in them
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.
Analysis must be conducted on the current business approach. Its strength and weakness must be identified, which may provide further opportunities for the future.
Both the technical requirements and the organizational requirements must be analyzed. Based on the market potential and demands, the technical requirements for the product/service must be assessed. Similarly the objectives of the project, physical and fiscal resources must be assessed in the study.
The course of action and the recommended solutions for the approach selected must be studied. It is also necessary to provide various alternatives for the approach and reasons for opting the particular approach must be explained.
The cost incurred for the selected approach must be evaluated. The estimated total cost for implementing other alternative approaches must be compared with the preferred approach. The cost benefit analysis, return on investment and cost summary must be included.
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.
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