The growth and recognition of project management training have changed significantly over the past few years, and these changes are expected to continue and expand. And with the rise of project management comes the need for a feasibility study.

What is Feasibility Study?

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.

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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.

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Importance of Feasibility Study

The importance of a feasibility study is based on organizational desire to “get it right” before committing resources, time, or budget. A feasibility study might uncover new ideas that could completely change a project’s scope. It’s best to make these determinations in advance, rather than to jump in and to learn that the project won’t work. Conducting a feasibility study is always beneficial to the project as it gives you and other stakeholders a clear picture of the proposed project. 

Below are some key benefits of conducting a feasibility study:

  • 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

Apart from the approaches to feasibility study listed above, some projects also require other constraints to be analyzed -

  • Internal Project Constraints: Technical, Technology, Budget, Resource, etc.
  • Internal Corporate Constraints: Financial, Marketing, Export, etc.
  • External Constraints: Logistics, Environment, Laws, and Regulations, etc.

Feasibility Study Infographic

Benefits of a Feasibility Study

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

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. These marketing methods are the goal of feasibility studies, which try to persuade financiers and banks whether putting money into a certain company venture makes sense.

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What Is Included in a Feasibility Study Report?

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

  • Executive summary
  • Specifications of the item or service
  • Considerations for the future of technology
  • The marketplace for goods and services
  • Approach to marketing
  • Organization/staffing
  • Schedule
  • The financial forecasts
  • Recommendations based on research

7 Steps to Do a Feasibility Study

  • Perform an Initial Assessment

Start by sketching down a rough outline of your idea. Focus on an untapped requirement, an underserved market, and whether your service or product has a significant edge over the competition. The next step is to figure out whether the scalability factors are too high to pass.

  • Preparing an Income Statement for the Future

This stage necessitates going backward in time. It's important to start with an idea of how much money the project will require to be successful and then determine what kind of financing you'll need to get there. An income statement is built on this basis. What services are very important and how much they'll cost, as well as any revenue modifications, such as settlements, must be taken into consideration here.

  • Execute Market Research or Conduct a Survey

Because the effectiveness of the feasibility study hinges on this stage, be thorough in your research. In the event that your company does not have the means to conduct a competent investigation, it is in your best interest to employ an independent agency to do it.

The most accurate image of the project's financial prospects and potential return on capital will be provided by the market research conducted as part of the project's kickoff phase. There are a number of factors to keep in mind, such as the market's location, demography, the competition, the market's worth, and if the sector is open to expansion.

  • Plan the Structure and Operations of a Company

In order to ensure that the intended project is feasible in terms of its technical, operational, economic, as well as legal aspects, the following procedures must be completed: An effort of this scope is not a shallow, broad-based one. Starting costs, fixed investments, and ongoing expenses need to be included in a comprehensive financial plan for new businesses. Equipment, marketing tactics, real estate, people, supplier availability, overhead, etc., are all included in these expenditures.

  • An Opening Day Financial Statement Should Be Prepared

This comprises an accurate calculation of the company's assets and liabilities. Make a list of everything you'll need, including where to get it, how much it will cost, and any financing options you have. Land, facilities, and equipment may all be leased or purchased; the same can be said for financing for these resources and receivable accounts.

  • Evaluate and Verify All Data

To ensure that everything is in order and that nothing has to be changed or tweaked, the evaluation and analysis are crucial. To be on the safe side, go back and review your work one final time before turning it in. 

Inspect and compare your prior actions, such as your financial statements, with your spending and obligations. Is this still a possibility? Consider risk, assess and manage it, and devise any backup plans you may need at this time as well.

  • Decide Whether or Not to Proceed

You've reached the stage when you must decide whether or not the project is a good investment of time and money. That may seem straightforward, but it's the culmination of a series of processes that build-up to this moment of selection. Other considerations before adopting that binary option include whether the engagement is worth the effort, labor, money and if it aligns with the organization's long-term vision and organizational objectives.

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Best Practices for a Feasibility Study

  • Work more efficiently and successfully by using management software
  • Think beyond the box when it comes to data and technology.
  • Get input from the right people by including them in the process.
  • In order to obtain more data, do market research.
  • Keep in mind your data is reliable by doing your research and asking questions.
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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?

We hope this helped you understand the concept of feasibility study better. To learn more about similar project management concepts, explore our library of Project Management articles or check out our Post Graduate Program in Project Management that covers new trends, emerging practices, tailoring considerations, and core competencies required of a Project Management professional.

About the Author

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Simplilearn is one of the world’s leading providers of online training for Digital Marketing, Cloud Computing, Project Management, Data Science, IT, Software Development, and many other emerging technologies.

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