Feasibility Study is defined as the assessment of a project that has been proposed by someone. It is analysis and evaluation of a system and hence is also popularly known as feasibility analysis.
The word feasibility study is used to describe the do-ability factor of a task and focuses on the all-important question of whether we should continue with it or not.
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Meaning of feasibility study
A feasibility study is a determining factor that evaluates whether the project is financially and technically sound and viable. Does it make a good business sense and is it within the feasibility of estimated cost is an important question that is answered by this concept.
The feasibility study is thus an analysis that is carried out by organizations to determine how successful a project is going to be. It is generally conducted when a large amount of money is at stake. A good feasibility study in its report mentions
- Legal requirements
- Financial data
- Policies and research data
- Tax implications and obligations
- Historical Background of the project
- A detailed description of the project
- Details of management
- Details of all the operations
- Accounting statement
Understanding the feasibility study
The initial designing stage of a task or a project that brings together all the elements of knowledge and estimate the level of expertise needed for it is conducted via a feasibility study.
It also offers a quantitative and qualitative assessment of other vital resources, timetable, cost estimate, and identification of critical points.
Steps for a feasibility study
The following steps are taken to conduct a feasibility study
- Carry out a preliminary analysis program and get the feedback on the new concept
- Ask questions about your data
- Conduct market research or survey to enhance the data collection through detailed information
- Review the data and analyze it
- Create a plan of business operational or organizational plan
- Prepare a projected statement of income
- Prepare a balance sheet for the opening day
- Decide to go with or drop the plan
Examples of the feasibility study
A school wants to open another extension, but it is not sure whether it will be profitable or not. It will then carry out a feasibility study to determine whether the school should continue with the project or not.
The evaluation and analysis will take into account material, and labor cost and how disruptive will it prove for the existing students and staff members along with the public opinion regarding the new extension.
After weighing the pros and cons, the study will showcase its finding and show whether it is a viable project or not through the help of a feasibility study. The report will include
- A detailed description of the existing condition
- Evaluation of proposed solutions
- The main problems
- Alternative suggestions that can include
- Systems that need to be developed
- Implementation of priorities
- Instruments required including software, hardware, and staffing
- Data entry
- Total cost budget
- Cost-benefit analysis
- Compatibility with existing systems
- Risk of failure
- Probable expansion
- Expected performance of the new system
- Evaluation of proposed solutions
- Proposed solution
- Reports of the investigation
- Evaluation criteria
- Conclusion
Common types or form of the feasibility study
The common and relevant types and forms of the feasibility study are as follows-
#1. Technical Feasibility –
The technical feasibility assessment is about the outline design and the ability to handle the technical expertise of the project. It measures the particular technical solution and then files its report giving details of
- The economic and human factor
- Possible solutions to the problems
- The specific part of the business that is being evaluated
- Brief description of the business for more assessment.
Technical feasibility has put its focus on understanding the current technical resources of the company and their applicability of the proposed system.
It evaluates the software and hardware and how it can meet the proposed requirements. Next, it looks into the best technique for meeting project requirements and location.
The factors that determine the selection process of a project location are-
- Availability of land at reasonable cost
- Costs related to transportation of outputs and inputs to the location
- Impact of the project on the environment
- Approval for related institutions for license
- Availability of related services like electricity, water, etc
The factors that determine the selection process of a project location are-
- Equipment and tools that are needed for the project
- Construction requirements like roads, storage, and building along with the internal design
- Requirements of financial, managerial, skilled as well as unskilled labor
- Determining the construction period related to the cost of tools, constructions, consultations, and design
- Determining the storage of money, cash, and inputs with contingency and operating costs.
#2. Legal Feasibility
The feasibility study determines whether the proposed system conflicts with legal requirements and ethical considerations or not
#3. Operational Feasibility
The operational feasibility study determines how the proposed system will solve any problem and take advantage of the identified opportunities.
It puts its focus on how the proposed development fits with the objectives and environment of the business regarding existing processes, corporate culture, delivery date, and development schedule.
#4. Time Feasibility
A time feasibility study takes into account the period needed to complete the project. It is a measure of the reasonability of a project and thus determines whether the deadline is desirable or mandatory or not.
#5. Resource Feasibility
A resource feasibility study measures whether you have required resources and the facilities to build and complete the new project and whether it will interfere with the present business operations.
#6. Financial Feasibility
The financial feasibility of a project is estimated via the following parameters
- Estimated cost
- Projected profitability and cash flow
- Current investment
- Financing in terms of debt to equity ratio, capital structure and promoter’s share of the total cost
The financial viability offers information like
- Funding potential
- Repayment terms
- How can the assets be converted to cash
- Details about the assets and their liquidity position
- Sensitivity is the ability of repayment in terms of the following factors
- Adverse economic conditions
- Increase in cost whether small or large
- Slow sales
#7. Managerial Feasibility
The marginal feasibility study is measured with the help of elements like employee involvement, commitment and capability, and management availability.
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