Importance of Business Feasibility Study

Understanding a Business Feasibility Study

As the name suggests, a Business Feasibility Study assesses whether a project or plan is feasible. It is an assessment of the practicality of a proposed project or plan and is part of the initial design stage of any project or plan. The study is conducted to objectively uncover the strengths and weaknesses of a proposed project or an existing business.

Need of a Business Feasibility Study

A feasibility study is conducted to evaluate a project’s viability and address critical questions before proceeding. Key considerations include:

• Identifying and assessing opportunities and threats in the natural environment.
• Evaluating the resources required for the project.
• Determining the prospects for success.
• Checking if the company possesses the necessary resources and technology.
• Assessing whether the company can achieve a sufficiently high return on investment.

Steps in a Business Feasibility Study

Conducting a feasibility study involves several structured steps to evaluate a project’s viability:

• Conduct preliminary analyses.
• Prepare a projected income statement to estimate possible revenues the project can generate.
• Conduct a market survey to determine if the project offers a good or service in demand and the price consumers are willing to pay.
• Plan the organizational structure of the new project, including staffing requirements, number of workers, and other necessary resources.
• Prepare an opening-day balance of projected expenses and revenues.
• Review and analyze internal vulnerabilities that can be controlled or eliminated.
• Decide whether to proceed with the project or plan.

Types of Business Feasibility Study

A feasibility study can be classified into several types, each focusing on a specific aspect of a project. Understanding these types helps in evaluating a project’s viability from different perspectives.

Technical Feasibility

• Hardware and software requirements
• Use of existing or new technology
• Manpower availability and skills
• Site analysis
• Transportation consideration

Financial Feasibility

• Initial investment required
• Resources to procure capital (banks, investors, venture capitalists)
• Expected return on investment

Market Feasibility

• Type of industry
• Prevailing market
• Future market growth
• Competitors and potential customers
• Projection of sales

Organizational Feasibility

• The organizational structure of the business
• Legal structure of the business or the specific project
• Management team’s competency, professional skills, and experience

Learn more about MBG’s Feasibility Study services to evaluate your New Business project’s viability.