A feasibility analysis is useful when you want to see how feasible a business, a project, or an idea is. The concept is not a complicated one, and it comes in handy when you want to launch a new project. Today we are going to see a definition of it, together with a step-by-step guide on how to conduct a feasibility analysis.
Feasibility Analysis Definition
Also called a feasibility study, this analysis looks at how much success can a project achieve. It considers factors such as scheduling, economic, legal, technological, etc. Project managers tend to use the feasibility studies to see what are the potential positive and negative outcomes of a project. This step is usually taken before they invest time and money into it, which makes sense. At the end of the study, you need to know whether the idea, plan, project, or business you have deserves to be implemented.
Keep in mind that a feasibility study is not the same thing as a business plan. While the business plan has a planning function and it shows the actions you need to take if you want to follow your business idea, the feasibility analysis investigates a certain function and finds out if it’s viable or not.
How to Conduct a Feasibility Study
1. Have a Preliminary Analysis
It may sound weird to have a feasibility analysis before you run a feasibility analysis, but it’s necessary. The thing here is that a feasibility study takes time and it can cost you a lot. That’s why it’s important to think well beforehand and see if you really need such a study. Try to assess the demand for your product or service, see what the competition is, what challenges you will need to face, etc.
2. Hire Expert Consultants
The next in conducting a feasibility analysis is to see whether you need an expert consultant or not. If you’re done with the first step and you’re sure it’s worth it, there’s no shame in asking for professional advice. An expert can lead the analysis and take some things off your to-do list. However, depending on your project, you may need to get some commission reports from various professionals (such as engineers).
3. Set a Timetable
Whether you do it yourself or you hire a specialist, you need to set a timetable for the entire study. It can easily extend over a period longer than you’d wish for, which is why it’s useful to have a schedule. If you don’t have a deadline set by others, decide on one yourself and see when should each phase be completed.
4. Market Research and Analysis
Next, you need to perform a market research and analysis. For this, you should start by learning about the market. How would your product or service fit into it? Try to talk to other people in the same field and find as much information as you can about their business/ project/ idea, etc. In this sense, you can use some data from the Economic Census. This is a poll taken every 5 years which offers information about the number of employees, business expenses, sales, types of products, etc.
Alternatively, you can use other methods to assess the market. Identify your potential customers and ask them directly about their needs and wishes. Create a survey and mail it to the people who are directly interested or would have a benefit from your idea. Telephone and email surveys are also a good solution, and so is social media (Facebook, Twitter, etc.).
5. Organizational and Technical Analysis
First, you need to see where you would be working. You may need an office space, a plot of land, etc. Then, think about how would your company need to be restructured. Maybe you need to employ specialized staff, case in which you need to inform yourself if there are such people available. Next, assess the materials you need. Do a thorough research and make a list of all the materials you need for each stage of the project. Are there enough suppliers in the area? Is the material expensive? Also, include information about the technology you may need.
6. Financial Analysis
If you plan to invest in a business, you will need to find out that startup costs. Make up a budget, including all the expenses we listed earlier. Besides, you also need to estimate the operating costs. These refer to the cost of running a business (rent, materials, wages, etc.). It’s useful to have some revenue predictions as well, based on your previous research. Next, think about the funding sources. Can you cover all the costs? Do you have any savings, or can you identify potential investors? Finally, add it all and see whether you can make profit or not.
7. Complete the Feasibility Study
Put together all the information you found. Once you went through all the stages of the study, organize the findings. Look at the profit predictions and see if those make you happy. Do you have enough financing sources to achieve them? Balance the estimated profits against the personal financial needs. Many people often forget to include the human costs as well: time, effort, and attention.
Finally, have a close look at all your findings. Consider the risks and potential benefits. Does the project look promising? Write it all up and spread it around. If you have been commissioned to do this analysis, then you need to hand it over to the person who asked it. If it’s just for yourself, try to get an expert opinion on it from specialists. It’s better to have everything clearly sorted out for any future reference, so make sure you have all the information compiled and organized.
You can see an example of this process in the following clip:
To draw a conclusion, starting a feasibility analysis is a logical project if you take it step by step. Keep in mind that it does require an effort when it comes to time and money, so it’s useful to have a schedule and set deadlines for each phase of the study.
Image source: depositphotos.com