The dynamic nature of today’s business environment has led to

an increase in the risks and uncertainties that are faced by

organizations. The growth in the degree of awareness of the
customers has led to a dramatic increase in competition as more
and more companies are now trying to cater to the needs of these
customers. It has become crucial for businesses to outshine
competition in terms of provision of value to its clients. Survival
in the marketplace has become difficult, however, entering it is an
entire different story. An absence of proper planning and
forethought leads to the failure of entrants. Thus, to ensure
profitability, it becomes essential to conduct some sort of analysis
before plunging into the market. A proper example of this
analysis is the feasibility study.

Why you as a business should not ignore the importance of a

Feasibility Study

The feasibility study acts as an investigative tool to assess the

potential, viability or practicability of a new business. Some
important characteristics of Feasibility study:

* It is an excellent instrument for the prediction of the likelihood of

success or failure of a new business venture.

* It may also be adopted in the case of incorporation of new

products or ideas into the business mix.

* A feasibility study includes all the actions that are needed to be

taken to determine whether a business idea is likely to succeed.
* It is a stepwise process that helps weigh the pros and cons of
each step prior to getting into the actual process.

* It provides results for key decisions that may be, moving forward
with the idea, refining it or leaving it altogether.

The business plan is dependent on the feasibility study. A

feasibility study also determines alternatives and solutions which
may otherwise not have been known. Thus, it becomes critical to
conduct this research before the commitment of business
resources, time and money to a business idea that may not work
as planned as this only leads to further investment for the
correction of previous mistakes. The collection of this data helps
make informed decisions regarding the selection of the most
profitable path. This document scrutinizes all the various factors
related to incorporation and the execution of the business.

How a Feasibility Study can ensure your business will be on track

* A thoroughly executed feasibility study helps the firm in attaining

a broad picture as well as a detailed analysis of the profitability of
its future business.

* It can gain knowledge about the project before investing budget,

time or other resources into it. Sometimes, the scope of the
project may be drastically changed.

* The feasibility study ensures that all determinations are made

prior to jumping into the business and learning about the
shortcomings later. Various alternatives of the conduct of
business are generated and the most optimum one is adopted.

* This study provides invaluable detail and a scrutinized analysis

of the entire business scenario.

* It enhances the success rate as numerous parameters are

evaluated.

* It is also an excellent source of provision of information to the

future investors of the business. They can receive a complete
snapshot of the various factors related to the venture.

* Feasibility studies are prevalent in countless industries

including, but not limited to, the Hotel, Hospitality, Restaurant,
Real Estate, Medical, Office, Industrial industry. A thorough
guidance is provided to ensure that the business starts off on the
right foot.

* This study helps ensure smooth running of the business and

paves way for effective operations.

* It enables the organization to focus on both short and long term

goals. The significance of this document can never be
underestimated as the success or failure of the business is
dependent on it.
Components of Feasibility Study include (but are not limited to),

Financial Feasibility

The financial attractiveness of a particular business idea is

established through a feasibility study. The conduct of any
activity is not possible without monetary resources. This includes
the estimation of all the costs that will play a vital part from the
inception of the project to the operational costs during the later
stages of its lifecycle. One of the most important costs is the
startup capital. The study involves the determination of the funds
required to start a business. Once these are deduced, the
potential sources of generating this capital are also listed.
Another important figure is the return on investment (ROI). The
degree to which an activity yields financial gains is developed.
The potential cash flows of the future are calculated. It also
brings fourth the payback period, which puts forward the amount
of time the investment takes to break-even. All these figures are,
thus, summarized into a singular document.

Economic Feasibility

The economic benefits to be reaped by the business are

ascertained by a feasibility study. It helps provide the degree to
which the economic advantages of the idea are greater than
the economic costs. An accurate analysis of the comparison of
the all the costs to be incurred and the benefits to be received is
conducted. This not only determines the viability of the project,
but also directs the business towards saving itself from an
inadequate allocation of resources. The credibility of the idea is
assessed, and the management achieves a distinct breakdown of
all the various costs it will have to incur from the initiation to the
execution of the entire project. These costs, when weighed
against the benefits that may be generated, result into the overall
economic feasibility of the project.

Market and Marketing Feasibility

An essential part of the feasibility study is the market feasibility.

All the details of the respective industry are presented in this
section. Important details including the size, retail value and
trends of the industry are gathered. The particular market is also
analyzed along with the future market potential. A detailed
evaluation is required to ensure the success of the business.
The competitive landscape is also prepared. The firm, thus,
adopts the most appropriate strategy of positioning itself relative
to the competition.

The description of the product/service is also determined. All the

variations are considered and analyzed so the most profitable one
may be adopted. A profile of the potential customers is prepared
and the size of the market in terms of prospective buyers is also
estimated. Through the use of historical data, sales projections
may be estimated. Different locations of the target audience are
explored and the most beneficial audience and location may be
selected. The degree of acceptability of the deliverable exhibited
by the proposed target audience may be generated. It ensures
that the right product is produced for the right clients. Pricing
strategies and decisions are taken. It directs the decision makers
to the discovery of the most beneficial opportunities.

Technical feasibility
Another essential is the support system required for smooth
operations of the business. Variations in options related to
logistics may be discovered. It helps one come across the
availability of resources in terms of the required labor, material
and relevant technologies. The potential of the technical
resources available to the firm is estimated. An assessment of
the skills of the technical team is conducted. Any shortcomings
and the ways of meeting them are looked into. It also involves
the evaluation of essential systems including hardware, software
and technological requirements of the overall system.

Organizational and Operational Feasibility

The requirement of the human resource is also scrutinized. The

skills required by the professionals and an estimation of the firm’s
capacity falls under this category. The required background of
the professionals and any shortcoming being faced by the current
human resource of the new business or project are analyzed. In
case of absence of an effective team, hiring decisions may be
made on the basis of the feasibility study. The entire legal and
corporate organizational structure is planned accordingly.
Similarly, this study also helps ensure that the firm has adequate
resources for the running of smooth operations.

Legal Feasibility

Every country has its own respective legal implications. Any

legal requirements that may hinder business activity need to be
considered. This analysis explores all the legal factors that may
conflict with the proposed business. All the relevant laws or
protection acts are taken into account. An organization may save
considerable time and effort by learning any type of locational
constraints its business may face due to legal requirements.

Scheduling Feasibility

The different phases of the lifecycle of the business are planned

and taken into account. The essential milestones and the entire
schedule for their achievement is outlined. Based on the future
projections, the different stages of business activity are estimated.
All the essential activities and their respective times of fulfillment
are enlisted.

Project durability

A lot of investment and precious resources are taken into a single

project. These have to be utilized to their most optimum
capacity. A feasibility study develops the entire path that the
project may follow. It includes vital information like financial
projections. It is only wise to select the business idea or project
that will be the most durable on a long term basis and will endure
financial risks of the future.

Constraints

As a result of the examination, the feasibility study identifies all

the constraints that may be faced by the business. These may
include, but are not limited to, monetary, technical, resource-
related, technological, financial, marketing, logistical, legal,
environmental constraints. An estimation of these constraints
provides a distinct view of all the problem areas where the project
may face hindrances in the future and their root causes.

Key decisions

One of the principal functions of the feasibility study is the

decision of moving forward with the business. Since all the
factors related to the business are taken into account, a clear
picture of the different aspects is produced. Owing to the limited
nature of resources, it is essential to ensure that they are being
utilized in the most appropriate manner. The most advantageous
path needs to be taken as important resources are not only saved
from being wasted on the wrong projects, but also invested into
relatively profitable ones in the future. A firm saves itself from
facing losses, as consideration of the new project becomes
dependent on how the return is analyzed against the investment.
Other than that, a feasibility study also generates concrete
reasons for avoidance of the forethought business. The study is
an exploratory process, as it helps assess various options and
their implications. The go/no-go decision is one of the most vital
in business development as decisions cannot be reversed and it
is always better to take calculated ones instead of fixing wrong
ones in the future.