Feasibility Study

Overview

A feasibility study aims to objectively and rationally uncover the strengths and weaknesses of an existing
business or proposed venture, opportunities and threats present in the environment, the resources
required to carry through, and ultimately the prospects for success. In its simplest terms, the two criteria
to judge feasibility are cost required and value to be attained.

A well-designed feasibility study should provide a historical background of the business or project, a
description of the product or service, accounting statements, details of the operations and
management, marketing research and policies, financial data, legal requirements and tax obligations.
Generally, feasibility studies precede technical development and project implementation.

A feasibility study evaluates the project's potential for success; therefore, perceived objectivity is an
important factor in the credibility of the study for potential investors and lending institutions. It must
therefore be conducted with an objective, unbiased approach to provide information upon which
decisions can be based.

Common factors

The acronym TELOS refers to the five areas of feasibility - Technical, Economic, Legal, Operational and
Scheduling.

Technical feasibility

This assessment is based on an outline design of system requirements, to determine whether the
company has the technical expertise to handle completion of the project.

When writing a feasibility report, the following should be taken to consideration:

• A brief description of the business to assess more possible factors which could affect the study

• The part of the business being examined

• The human and economic factor

• The possible solutions to the problem

At this level, the concern is whether the proposal is both technically and legally feasible (assuming
moderate cost). The technical feasibility assessment is focused on gaining an understanding of the
present technical resources of the organization and their applicability to the expected needs of the
proposed system. It is an evaluation of the hardware and software and how it meets the need of the
proposed system.
A feasibility study is an evaluation and analysis of a project or system that somebody has proposed. We
also call it a feasibility analysis. The study tries to determine whether the project is technically and
financially feasible, i.e., is it technically or financially viable? Financially feasible, in this context, means
whether the project is feasible within the estimated cost.

A feasibility study also determines whether a project makes good business sense, i.e., will it be
profitable?

Put simply; the study is an analysis of how easily or successfully we could complete something. It also
tries to determine how profitable or unprofitable it might be.

When large sums of money are at stake, companies and organizations typically carry out feasibility
studies.

Feasibility study vs. business plan

The term is similar to a business plan, but the meaning is not the same. When somebody has an initial
business idea, the company carries out a feasibility study.

The study aims to flesh out the possibilities in that business idea.

The business plan, on the other hand, describes the company, its goals, strategies, and financial
projections (forecasts).

A feasibility analysis tells you whether something will work. A business plan tells you how it will work.

Definition of feasibility

The word ‘feasibility‘ means the degree or state of being easily, conveniently, or reasonably done. If
something is ‘feasible,’ it means that we can do it, make it, or achieve it. In other words, it is ‘doable’
and also ‘viable.’
A viable business, for example, is one we expect will make a profit every year for a long time.

On an Iowa State University webpage, Mary Holz-Clause and Don Hofstrand write:

“A feasibility study is an analysis of the viability of an idea.”

“The feasibility study focuses on helping answer the essential question of ‘should we proceed with the
proposed project idea?’ All activities of the study are directed toward helping answer this question.”

A viability study is similar to a feasibility study. However, the viability study only looks at how profitable
or commercially successful an idea or project might be. It does not determine whether something is
doable.

Feasibility Study

According to BusinessDictionary.com, a feasibility study is: “An analysis and evaluation of a proposed
project to determine if it (1) is technically feasible, (2) is feasible within the estimated cost, and (3) will
be profitable.”

Feasibility study – example

A hospital, for example, aiming to expand, i.e., add an extension to the building, may perform a
feasibility study. The study will determine whether the project should go ahead.

The people carrying out the study will take into account labor and material costs. They will also take into
account how disruptive the project might be for staff and patients.

The study may have to gauge public opinion regarding the new extension. In other words, would the
local community be in favor or against such a project?
It is important to determine how the stakeholders will respond. A stakeholder is a person with an
interest or concern in a project, business, or organization.

Hospital stakeholders are, for example, doctors, nurses, other hospital staff, patients, hospital visitors,
and the hospital’s owner. Members of the local community may also be stakeholders.

Those conducting the study go through all the pros and cons of the project. They then weigh them
against each other. Finally, they determine whether it is a good idea to go ahead.

Cost vs. value

In its simplest terms, the two main criteria to determine whether a project is feasible are:

How much will it cost?

What value will the project bring upon completion?

A good feasibility study

According to Wikipedia, a good feasibility study should provide:

1. A historical background of the project or business.

2. Accounting statements.
3. Details of all the operations and management.
4. A detailed description of what it is.
5. Financial data.
6. Tax implications and obligations.
7. Legal requirements.
8. Marketing research data and policies.