What exactly is a feasibility study?
A feasibility study examines all critical components of a proposed project to assess its viability. Business success depends on return on investment or how much profit the enterprise makes. Community reactions, environmental effects, and other elements might also be positive or negative.
Project managers may use feasibility studies to assess the risk and return of a proposal, but they need to take many steps beforehand.
Understanding Feasibility Studies
A feasibility study evaluates a plan or project’s viability. A feasibility study determines whether a project or enterprise will succeed. The report also anticipates project challenges.
Project managers must assess if they have adequate people, money, and technology during the feasibility study. The research must identify the return on investment, whether a cash gain or a social benefit for a charity endeavor.
The feasibility study may measure revenue versus project operational expenses using a cash flow analysis. The return must be assessed to see if it outweighs the risk of the undertaking.
Benefits of Feasibility Studies
Feasibility studies assist project managers in weighing the merits and downsides of a project before spending time and money. A company’s management team may also learn from feasibility studies to avoid dangerous business ventures.
Companies use such research to plan growth. They will understand their operations, challenges, competitors, and market.
Feasibility studies also persuade investors and lenders that this project or business is worthwhile.
Feasibility Study Method
The organization that needs a feasibility study determines its format. Despite weighting differences, the same elements are implicated.
A preliminary analysis
While each project has distinct aims and needs, there are several best practices for feasibility studies:
- Perform a preliminary analysis by gathering stakeholder feedback on the new idea.
- Analyze and question early research data to ensure its validity.
- Survey or research the market to determine demand and opportunities for the project or business.
- Write an organizational, operational, or business strategy that includes labor requirements, costs, and duration.
- A predicted income statement should contain revenue, operating expenditures, and profit.
- Making an opening-day balance sheet
- Find hurdles and vulnerabilities and learn how to overcome them.
- Initial “go” or “no-go” decision on plan implementation
After thorough diligence, the actual job begins. The following are standard feasibility study components:
- Executive summary: Write about the project, product, service, plan, or business.
- Tech considerations: What does it take? Do you have If not, can you get one? It costs what?
- Current market: Assess the product, service, strategy, or business’s local and global needs.
- Detail your marketing plan.
- Required staff: What does this project need in human capital? Create an organization chart.
- Schedule and timeline: Set milestones for project completion.
- Project finances.
- Conclusions and suggestions: Divide into technology, marketing, organization, and finances.
Feasibility Study Examples
Here are two feasibility studies. The first concerns university expansion. The second is a Washington State Department of Transportation case study using Microsoft Inc. funding.
A university science building
University officials worried about the 1970s scientific building’s age. After 20 years of technical and scientific progress, they sought to evaluate the cost and advantages of modernizing and extending the structure—a feasibility study.
In the preliminary analysis, school administrators weighed the pros and cons of extending and upgrading the science building. The project’s expense and community resistance worried school administrators. The community board has rejected similar ideas for a more extensive scientific facility. These problems and legal or zoning difficulties must be addressed in the feasibility study.
The feasibility study examined the proposed scientific facility’s technology demands, student benefits, and college viability. A contemporary science building would boost the school’s curriculum, research, and enrollment.
Financial predictions highlighted the project’s cost, scope, and how the institution would obtain finances, including a bond to investors and dipping into its endowment. The forecasts also indicated how the new building would increase scientific program enrollment and tuition and fee income.
A feasibility study showed that the scientific building might be modernized and expanded.
Without a feasibility assessment, school managers would not have known if expansion plans were feasible.
A High-Speed Rail Initiative
The Washington State Department of Transportation conducted a feasibility study on a high-speed rail project to connect Vancouver, British Columbia, Seattle, Washington, and Portland, Oregon. A sustainable transportation system was intended to boost Pacific Northwest competitiveness and prosperity.
Our early study established a governance structure for future decision-making. The study interviewed experts and stakeholders, reviewed governance systems, and learned from North American high-speed rail projects to find the best governance framework. Therefore, regulating and coordinating institutions were created to supervise and follow the project if the state government authorized it.
A strategic engagement strategy treats the public, elected officials, government agencies, corporate leaders, advocacy organizations, and indigenous people fairly. The engagement approach was adaptable due to the project’s scale, complexity, and number of cities and towns. A team of executive committee members discussed tactics, lessons from prior initiatives, and outreach frameworks with specialists.
The financial feasibility assessment examined federal, state, and private project funding. Costs were estimated at $24–$42 billion. The high-speed rail revenue forecast was $160 million to $250 million.
The paper divided funding and financing. The budget includes revenue, grants, and municipal/state appropriations. Government bonds, bank loans, and equity investments—interest-bearing loans against future revenue—financed it.
As the project developed, financing sources changed. The initiative started with government funding, but private funding increased over time. Project funding was around $570,000 from Microsoft Inc.
The feasibility analysis shows that improved interconnectivity will improve population management and boost regional economic growth by $355 billion. Better employment and cheaper homes would be available with the upgraded transit infrastructure. The high-speed rail system would reduce traffic congestion.
After agreeing to collaborate on a high-speed rail technology route with British Columbia in 2016, the research began. The Washington State Legislature received the feasibility study in December 2020.
What is the primary goal of a feasibility study?
A feasibility study helps decision-makers assess a project or investment’s viability. It lists known expenses and predicted benefits.
In business, “successful” indicates earnings outweigh costs. Nonprofit success might be judged differently. A project’s communal benefit may justify its expense.
What are the feasibility study steps?
A feasibility study begins with a fundamental analysis. Interview stakeholders, perform market research, and write a business strategy. An initial “go” or “no-go” judgment is made after analyzing all this data.
If approved, the research can begin. This comprises technology concerns, market research, marketing strategy, human capacity, project timetable, and funding needs.
Who does a feasibility study?
A senior management team can perform a feasibility study. If they lack the skills or time, they may hire a consultant.
What are the four feasibility types?
The research examines four project feasibility factors:
- Technical: hardware, software, and expert labor are needed to make them operate.
- Financial: project cost and return estimate.
- Market: Examining the product or service market, industry, competition, consumer demand, sales predictions, and growth estimates
- Organizational: A corporate structure and management team overview
Feasibility studies uncover success indicators to help project managers decide if a project or business endeavor is viable. The report also reveals ROI and venture risks. A feasibility study details the project’s requirements. The information may describe the new product or endeavor, market analysis, technology, labor, funding, and capital sources. Financial estimates, success odds, and a go-or-no-go decision will be in the report.
- A feasibility study may be done before establishing a new firm, increasing a product line, or purchasing a competitor.
- A feasibility study details the predicted costs and benefits of a proposed plan or project to determine its viability.
- It’s smart to have a backup plan in case the primary effort fails.