Feasibility Study

What Is a Feasibility Study?

A feasibility study is an analysis that thinks about a project's all's important factors — including economic, technical, legal, and booking contemplations — to learn the probability of finishing the project effectively.

Regardless of whether a project is practical can rely upon several factors, including the project's cost and return on investment, meaning whether the project produced enough revenue or sales from consumers.

In any case, a feasibility study isn't just utilized for projects hoping to measure and forecast financial gains. All in all, possible can mean something else, contingent upon the industry and the project's goal. For instance, a feasibility study could assist with determining whether a hospital can create an adequate number of donations and investment dollars to extend and build another disease center.

In spite of the fact that feasibility studies can assist with projecting managers determine the risk and return of seeking after a plan of action, several means and best practices ought to considered before push ahead.

Understanding a Feasibility Study

A feasibility study is an assessment of the common sense of a proposed plan or project. A feasibility study investigates the suitability of a project to determine whether the project or venture is probably going to succeed. The study is likewise intended to recognize expected issues and issues that could emerge from chasing after the project.

As part of the feasibility study, project managers must determine whether they have an adequate number of individuals, financial resources, and the suitable technology. The study must likewise determine the return on investment, whether it's measured as a financial gain or a benefit to society, as on account of a nonprofit.

At times, a feasibility study could remember a massive change for how a business operates, for example, a acquisition of a contender. Subsequently, the feasibility study could incorporate a cash flow analysis, measuring the level of cash created from revenue versus the project's operating costs. A risk assessment must likewise be completed to determine whether the return is sufficient to offset the level of risk of going through the venture.

While doing a feasibility study, it's in every case great to have a contingency plan that you likewise test to ensure it's a viable alternative in case the main plan fizzles.

Benefits of a Feasibility Study

There are several benefits to feasibility studies, including assisting project managers with knowing the upsides and downsides of undertaking a project before investing a lot of time and capital into it. Feasibility studies can likewise furnish a company's management team with critical data that could keep them from going into a risky business venture.

Feasibility studies likewise assist companies with new business development, including determining how it will operate, possible snags, competition, market analysis, and the amount and source of financing expected to develop the business. Feasibility studies aim for marketing strategies that could assist with persuading investors and banks that investing in a particular project or business is a shrewd decision.

Devices for Conducting a Feasibility Study

Suggested Best Practices

Albeit each project can have unique goals and necessities, below are a few best practices for conducting a feasibility study:

Conduct a preliminary analysis, which includes getting feedback about the new concept from the fitting partners; think about other business situations and thoughts
Break down and ask inquiries regarding the data got in the beginning stage of the study to ensure that it's strong
Conduct a market survey or market research to recognize the market demand and opportunity for seeking after the project or business
Compose an organizational, operational, or business plan, including recognizing the amount of labor required, at what cost, and for how long
Prepare a projected income statement, which incorporates revenue, operating costs, and profit
Prepare an opening day balance sheet
Distinguish obstructions and any expected weaknesses, as well as how to deal with them
Make an initial "go" or "off limits" decision about moving ahead with the plan

Suggested Components

When the initial due diligence has been completed, listed below are several of the parts that are regularly found in a feasibility study:

Executive summary: Formulate a story portraying subtleties of the project, product, service, plan, or business.
Mechanical considerations: Ask what will it take. Do you have it? On the off chance that not, could you at any point get it? What will it cost?
Existing marketplace: Examine the nearby and more extensive markets for the product, service, plan, or business.
Marketing strategy: Describe it exhaustively.
Required staffing (counting an organizational chart): What are the human capital needs for this project?
Plan and timeline: Include huge interim markers for the project's completion date.
Project financials.
Discoveries and recommendations: Break down into subsets of technology, marketing, organization, and financials.

It's important that a project being considered ought to have the option to create a return that legitimizes the risk implied in taking on the project.

Instances of a Feasibility Study

Below are two instances of a feasibility study. The first includes the expansion plans for a university. The subsequent model is a certifiable model conducted by the Washington State Department of Transportation and had private contributions from Microsoft Inc.

Redesigning a University's Science Building

School authorities at a nearby university were worried that the science building — worked during the 1970s — was obsolete. Taking into account the innovative and logical advances of the last 20 years, school authorities wanted to investigate the cost and benefits of overhauling and growing the building. Therefore, a feasibility study was conducted.

In the preliminary analysis, school authorities investigated several options, gauging the benefits and costs of growing and refreshing the science building. Some school authorities had worries about the project, like the cost and public assessment. The new science building would be a lot bigger, and in the past, the community board had dismissed comparable proposition. The feasibility study would have to address these worries and any potential legal or zoning code issues.

The feasibility study investigated the innovative requirements of the new science facility, the benefits to the understudies, and the long-term reasonability of the college. A modernized science facility would grow the school's logical research capacities, work on its educational program, and draw in new understudies.

The financial projections showed the cost and scope of the project and how the school planned to raise the required funds, which included giving a bond to investors and taking advantage of the school's endowment. The projections likewise showed how the expanded facility would permit more understudies to be enrolled in the science programs, expanding revenue from tuition and fees.

The feasibility study exhibited that the project was viable, preparing to establishing the modernization and expansion plans of the science building. Without conducting a feasibility study, the school administrators couldn't have ever realized whether its expansion plans were viable.

High-Speed Rail Project

The Washington State Department of Transportation chose to conduct a feasibility study to build a high-speed rail that would interface Vancouver, British Colombia, Seattle, Washington, and Portland, Oregon. The goal was to make an ecologically responsible transportation system to improve the intensity and future thriving of the Pacific Northwest.

The preliminary analysis illustrated a governance structure for future decision-production. The study included researching the best governance system by talking specialists and partners, auditing governance structures, and learning from existing high-speed rail projects in North America. Subsequently, administering and planning elements were developed to supervise and follow the project whenever approved by the state governing body.

A strategic engagement plan involved an equitable approach with the public, chosen authorities, federal agencies, business leaders, advocacy gatherings, and native networks. The engagement plan was intended to be flexible, taking into account the size and scope of the project and the number of urban areas and towns that sounds included, truly. A team of the executive committee individuals was shaped and met to examine strategies, examples gained from previous projects and met with specialists to make an effort structure.
The financial component of the feasibility study framed the strategy for getting the project's funding, which investigated acquiring funds from federal, state, and private investments. The project's cost was estimated to be between $24 billion to $42 billion. The revenue produced from the high-speed rail system was estimated to be between $160 million and $250 million.

The report bifurcated the money sources among funding and financing. Funding alluded to awards, allocations from the neighborhood or state government, and revenue. Financing alluded to bonds issued by the government, loans from financial institutions, and equity investments, which are basically loans against future revenue that should be paid back with interest.

The sources for the capital required were to shift as the project pushed ahead. In the beginning phases, a large portion of the funding would come from the government, and as the project developed, funding would come from private contributions and financing measures. Private givers included Microsoft Inc., giving more than $570,000 to the project.

The benefits illustrated in the feasibility report show that the region would experience enhanced interconnectivity, considering better management of the population and prod economic growth by $355 billion all through the region. The new transportation system would give individuals access to better positions, affordable housing, and increase collaboration all through the community. The high-speed rail system would likewise assuage blocked areas from automobile traffic.

The timeline for the study started in 2016 when an agreement was reached with British Columbia to cooperate on another technology corridor that included high-speed rail transportation. The feasibility report was submitted to the Washington State land Legislature in December 2020. Starting around 2021, the project still can't seem to start construction.

Feasibility Study FAQs

What Is the Purpose of a Feasibility Study?

A feasibility study is intended to answer whether a proposed project or thought ought to proceed by determining whether the project or plan is viable and doable. A feasibility study can recognize the qualities and shortcomings of the proposed plan.

What Is Included in a Feasibility Study?

Overall, a feasibility study ought to incorporate the level of resources and technology required and the return on investment from the project.

What Is a Feasibility Study Example?

For instance, suppose that a major hospital in the city is hoping to extend its grounds by adding a building. The project managers and hospital administrators carry out a feasibility study to determine the project's cost, including labor and materials for the building's construction.

The study incorporated an analysis of the likely need, the expected number of patients, projected revenues, and operating costs, like staff, specialists, and attendants. The project managers investigated how to finance the project through a combination of financing from nearby financial institutions and donations from rich investors.

The expected risk to the project was considered along with public assessment and interest by the community. The return on investment was calculated and was determined that the forecasted revenue surpassed the expected costs, leading the hospital administrators to endorse the project.

How Do You Write a Feasibility Study?

While composing a feasibility study, the report ought to incorporate a preliminary analysis of the project, expected revenues, a market survey, a description of the product or service, marketing strategy, technology, and resources required. The report ought to likewise incorporate the organizational design of the project, a course of events, and forecasts for the financial outcomes.

What Are the Four Types of Feasibility?

The four types of feasibility include:

Technical: Technology, hardware, and labor required

Financial: The return on investment and the amount of funds expected to pay for the project, including the sources of capital, like a financial institution or investors

Market: an analysis for the market for the product or service, the industry, competition, consumer demand, sales forecasts, and growth projections

Organizational: A framework of the business and the legal structure, as well as a management team analysis that incorporates a measurement of capability, for example, the skills and experience required

The Bottom Line

Feasibility studies assist with projecting managers determine the practicality of a project or business venture by recognizing the factors that can lead to its prosperity. The study likewise shows the possible return on investment and any risks to the progress of the venture.

A feasibility study contains an itemized analysis of what's expected to complete the proposed project. The report might incorporate a description of the new product or venture, a market analysis, the technology and labor required, as well as the sources of financing and capital. The report will likewise incorporate financial projections, the probability of progress, and eventually, a go-or-off limits decision.

Highlights

It's smart to have a contingency plan in case of unforeseeable conditions or on the other hand on the off chance that the original project isn't doable.
Regardless of whether a project is practical can rely upon the project's cost and return on investment, which could incorporate revenue from consumers.
A feasibility study surveys the reasonableness of a proposed plan or project.
A feasibility study thinks about many factors, including economic, technical, legal, and planning to determine whether a project can succeed.
A company might conduct a feasibility study to think about sending off another business or embracing another product line.