Parts of a
Feasibility Study
Business managers and entrepreneurs undertake feasibility
studies to determine whether a proposed project or business venture will be
able to sustainably generate a profit. Feasibility studies can be broken into
several component parts, including a definition of the proposed project, a market
analysis, an analysis of financial feasibility and an assessment of technical
readiness. When combined, the different parts of a feasibility study provide
insight into a venture's likelihood of success or failure in the marketplace.
Proposed Project Description
Defining and describing a proposed project or business venture lays the foundation for feasibility analysis. If you are analyzing a project, go into detail about project timelines, deliverables and resource requirements. If you are analyzing a business, detail the products and services that it will offer, the proposed target market and any extraordinary resource needs introduced by the business model. Focus on the requirements of implementing the venture, rather than details such as business names and organizational structures.Market Analysis Section
Analyze the industry and market targeted by the proposed venture. Measure the size of the market and its demographic makeup using census data or other survey sources. Define a target market segment according its behavioristic, geographic and psychographic characteristics. Analyze any competing businesses or projects that are planned or already at work in the market. With this information in hand, try to determine whether there is truly a viable market for the output of the project or business, and whether it is truly possible to gain market share from existing competitive forces. In highly saturated markets with entrenched competitors, for example, it may be less feasible to build a new brand than to provide contractor services to the strongest competitors.Technical Feasibility Section
Consider the requirements for specialized equipment or facilities, copyrights, patents, labor and expertise for the venture in question, and determine whether or not you either have these resources on hand or are reasonably able to obtain them. Technical requirements can range from special permits and licenses from multiple government agencies to specialized vehicles or professionally licensed specialists. Obtaining resources, especially highly educated technical employees, can greatly increase the cost of building a proposed venture, but moving forward without them can lead to the quick failure of a project or closure of a new business. For any resources you do not have on hand, consider the cost of obtaining and retaining them.Financial Feasibility Section
Determine how much the proposed project or business start-up will cost to implement, as well as how much it can be expected to earn. Consider all of the resources and capital investments required up front. Calculate any financing requirements that will arise, and analyze the potential sources of financing available, such as business loans or outside investment. In this section, try to ascertain whether the project or business can be expected to earn a consistent profit and whether you or your business currently has access to the cash or financing required to get the idea off the ground.
Click here to follow me on LinkedIn!
0 comments