The Advantages of Conducting a Project Feasibility Study
By Unknown - January 22, 2018
The
Advantages of Conducting a Project Feasibility Study
A project feasibility study examines a number of variables and can
reveal that even though a project might be profitable or beneficial to your
company, you don’t have the resources to pull it off. A feasibility study might
show that you should go forward with a project but at a specific time.
Conducting a feasibility study helps you determine your likelihood of success
and can indicate how and when to do a project.
Benefit
Analysis
Just
because you can undertake and finish a project doesn’t mean you should pursue
it. A profitable project might drain your resources in other areas or limit
your ability to pursue another project that would provide a larger return on
your investment. Project feasibility studies show you the risk/reward benefit,
opportunity costs and overall return.
Optimal
Timing Identification
A
project that is easy to do in the spring might cause significant stress on your
company if you try to do it in the winter. This all depends on your labor,
production capacity, supply chain, cash flow and financing options. If a
feasibility study doesn’t take into account the time of the year the project
will occur, re-evaluate the study to determine if its projected results will
change depending on when you undertake the project.
Cash
Flow Projections
You
might need to hold off on undertaking a project until you have enough cash on
hand to fund the effort. You might have good sales in January, but if you offer
creditors 90-day terms, you won’t be able to use the cash from those sales to
start your project until April. Include cash flow considerations in any
feasibility study to ensure you can adequately fund a project that, by all
other indications, is a go.
Supply
Chain Management
A
project that seems like a no-brainer might put too much stress on one or more
areas of your company, causing more damage than good to your overall business.
For example, launching a new product could prove profitable on paper but might
need significant marketing planning and execution. If your marketing staff is
already working at full capacity, you will need to divert their time from other
profitable efforts or accept a less-than-optimal effort on your new launch.
Making and selling a product and service can also stress your production,
billing, sales, warehousing and shipping functions.
Labor
Analysis
A good feasibility study looks at the quality of your staff rather than just the quantity. For example, an Internet company’s graphic artists might have plenty of time to help the business launch a print magazine, but these artists might not be trained to create a magazine grid, understand print typography or know how to create sections of a magazine such as departments, columns and feature wells. A sales force that relies on high-volume cold calling using a sales-oriented approach might not be qualified to sell a new service that requires a consultative selling approach.
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