Feasibility Study: Importance, Types and Examples

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Last updated on Jul 15, 2024

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Reviewed and fact-checked by Sayantoni Das

The growth and recognition of project management training have changed

significantly over the past few years, and these changes are expected to continue
and expand. And with the rise of project management comes the need for a
feasibility study.

It can be thrilling to start a complex, large-scale project with a significant impact on

your company. You are creating real change. Failure can be scary. This article will
help you get started if you have never done a feasibility study on project
management.

Getting certified as a project management professional is simple with Simplilearn's

PMP Certification. Take advantage of this opportunity by enrolling now.
What is a Feasibility Study?

A feasibility study is a comprehensive evaluation of a proposed project that

evaluates all factors critical to its success in order to assess its likelihood of
success. Business success can be defined primarily in terms of ROI, which is the
amount of profits that will be generated by the project.

A feasibility study evaluates a project's or system's practicality. As part of a feasibility

study, the objective and rational analysis of a potential business or venture is
conducted to determine its strengths and weaknesses, potential opportunities and
threats, resources required to carry out, and ultimate success prospects. Two criteria
should be considered when judging feasibility: the required cost and expected value.

In a feasibility study, a proposed plan or project is evaluated for its practicality. As

part of a feasibility study, a project or venture is evaluated for its viability in order to
determine whether it will be successful.
As the name implies, a feasibility analysis is used to determine the viability of an
idea, such as ensuring a project is legally and technically feasible as well as
economically justifiable. It tells us whether a project is worth the investment—in
some cases, a project may not be doable. There can be many reasons for this,
including requiring too many resources, which not only prevents those resources
from performing other tasks but also may cost more than an organization would
earn back by taking on a project that isn’t profitable.

A well-designed study should offer a historical background of the business or

project, such as a description of the product or service, accounting statements,
details of operations and management, marketing research and policies, financial
data, legal requirements, and tax obligations. Generally, such studies precede
technical development and project implementation.

Become a Project Management Professional

 ​ 6%
​ Growth In Jobs Of Project Management Profiles By 2024
​ 22 Million Jobs
​ Estimated For Project Management Professionals By 2027

​
PMP® Certification Training
​ Access to Digital Materials from PMI
​ 12 Full-Length Simulation Test Papers (180 Questions Each)

​ View Program
​
​
Professional Certificate Program in Project Management
​ Receive course completion Certificate in Project Management and Alumni Association Membership from
UMass Amherst
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​ 10 weeks months

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Here's what learners are saying regarding our programs:

​
Katrina Tanchoco
Shell - Manila,
The interactive sessions make a huge difference as I'm able to ask for further clarifications. The training
sessions are more engaging than the self-paced modules, it's easier now that i first decided to take up the
online classroom training, and then followed it up with the self-paced learning (online and readings).

​
Nathan C
PHC Business Manager, Midlands and Lancashire Commissioning Support Unit
I wanted to transition into the Project Management field and wanted the right opportunity to do so. Thus, I took
that leap forward and enrolled in this course. My learning experience was fantastic. It suited my learning style.

Not sure what you’re looking for?View all Related Programs

Understanding A Feasibility Study

Project management is the process of planning, organizing, and managing resources
to bring about the successful completion of specific project goals and objectives. A
feasibility study is a preliminary exploration of a proposed project or undertaking to
determine its merits and viability. A feasibility study aims to provide an independent
assessment that examines all aspects of a proposed project, including technical,
economic, financial, legal, and environmental considerations. This information then
helps decision-makers determine whether or not to proceed with the project.

The feasibility study results can also be used to create a realistic project plan and
budget. Without a feasibility study, it cannot be easy to know whether or not a
proposed project is worth pursuing.

Types of Feasibility Study

A feasibility analysis evaluates the project’s potential for success; therefore,

perceived objectivity is an essential factor in the credibility of the study for potential
investors and lending institutions. There are five types of feasibility study—separate
areas that a feasibility study examines, described below.

1. Technical Feasibility

This assessment focuses on the technical resources available to the organization. It

helps organizations determine whether the technical resources meet capacity and
whether the technical team is capable of converting the ideas into working systems.
Technical feasibility also involves the evaluation of the hardware, software, and other
technical requirements of the proposed system. As an exaggerated example, an
organization wouldn’t want to try to put Star Trek’s transporters in their
building—currently, this project is not technically feasible.
2. Economic Feasibility

This assessment typically involves a cost/ benefits analysis of the project, helping
organizations determine the viability, cost, and benefits associated with a project
before financial resources are allocated. It also serves as an independent project
assessment and enhances project credibility—helping decision-makers determine
the positive economic benefits to the organization that the proposed project will
provide.

3. Legal Feasibility

This assessment investigates whether any aspect of the proposed project conflicts
with legal requirements like zoning laws, data protection acts or social media laws.
Let’s say an organization wants to construct a new office building in a specific
location. A feasibility study might reveal the organization’s ideal location isn’t zoned
for that type of business. That organization has just saved considerable time and
effort by learning that their project was not feasible right from the beginning.

4. Operational Feasibility

This assessment involves undertaking a study to analyze and determine

whether—and how well—the organization’s needs can be met by completing the
project. Operational feasibility studies also examine how a project plan satisfies the
requirements identified in the requirements analysis phase of system development.

5. Scheduling Feasibility

This assessment is the most important for project success; after all, a project will
fail if not completed on time. In scheduling feasibility, an organization estimates how
much time the project will take to complete.
When these areas have all been examined, the feasibility analysis helps identify any
constraints the proposed project may face, including:

● Internal Project Constraints: Technical, Technology, Budget, Resource, etc.

● Internal Corporate Constraints: Financial, Marketing, Export, etc.
● External Constraints: Logistics, Environment, Laws, and Regulations, etc.

Importance of Feasibility Study

The importance of a feasibility study is based on organizational desire to “get it right”

before committing resources, time, or budget. A feasibility study might uncover new
ideas that could completely change a project’s scope. It’s best to make these
determinations in advance, rather than to jump in and to learn that the project won’t
work. Conducting a feasibility study is always beneficial to the project as it gives you
and other stakeholders a clear picture of the proposed project.

Below are some key benefits of conducting a feasibility study:

● Improves project teams’ focus

● Identifies new opportunities
● Provides valuable information for a “go/no-go” decision
● Narrows the business alternatives
● Identifies a valid reason to undertake the project
● Enhances the success rate by evaluating multiple parameters
● Aids decision-making on the project
● Identifies reasons not to proceed

Apart from the approaches to feasibility study listed above, some projects also
require other constraints to be analyzed -
● Internal Project Constraints: Technical, Technology, Budget, Resource, etc.
● Internal Corporate Constraints: Financial, Marketing, Export, etc.
● External Constraints: Logistics, Environment, Laws, and Regulations, etc.
Become a Project Management Professional

​ 6%
​ Growth In Jobs Of Project Management Profiles By 2024
​ 22 Million Jobs
​ Estimated For Project Management Professionals By 2027

​
PMP® Certification Training
​ Access to Digital Materials from PMI
​ 12 Full-Length Simulation Test Papers (180 Questions Each)

​ View Program
​
​
Professional Certificate Program in Project Management
​ Receive course completion Certificate in Project Management and Alumni Association Membership from
UMass Amherst
​ Expert Faculty: Learn from seasoned industry professionals and certified instructors who bring years of
practical experience and expertise to the classroom

​ 10 weeks months

​ View Program
​

Here's what learners are saying regarding our programs:

​
Katrina Tanchoco
Shell - Manila,
The interactive sessions make a huge difference as I'm able to ask for further clarifications. The training
sessions are more engaging than the self-paced modules, it's easier now that i first decided to take up the
online classroom training, and then followed it up with the self-paced learning (online and readings).

​
Nathan C
PHC Business Manager, Midlands and Lancashire Commissioning Support Unit
I wanted to transition into the Project Management field and wanted the right opportunity to do so. Thus, I took
that leap forward and enrolled in this course. My learning experience was fantastic. It suited my learning style.

Not sure what you’re looking for?View all Related Programs

Benefits of a Feasibility Study

Preparing a project's feasibility study is an important step that may assist project
managers in making informed decisions about whether or not to spend time and
money on the endeavor. Feasibility studies may also help a company's management
avoid taking on a tricky business endeavor by providing them with critical
information.

An additional advantage of doing a feasibility study is that it aids in the creation of

new ventures by providing information on factors such as how a company will work,
what difficulties it could face, who its competitors are, and how much and where it
will get its funding from. These marketing methods are the goal of feasibility studies,
which try to persuade financiers and banks whether putting money into a certain
company venture makes sense.

What Is Included in a Feasibility Study Report?

When starting a business, one of the most important steps is to conduct a feasibility
study. This study will help to determine if your business idea is viable and has the
potential to be successful. Several factors need to be considered when conducting a
feasibility study, including the marketability of your product or service, the
competition, the financial stability of your company, and more. A feasibility study
should cover the amount of technology, resources required, and ROI.

The results of your feasibility studies study are summarized in a feasibility report,
which typically comprises the following sections.

● Executive summary
● Specifications of the item or service
 ● Considerations for the future of technology
● The marketplace for goods and services
● Approach to marketing
● Organization/staffing
● Schedule
● The financial forecasts
● Recommendations based on research

Tools for Conducting a Feasibility Study

Suggested Best Practices

While every project has its own goals and needs, the following are best practices for
conducting a feasibility study.

● Do a preliminary analysis. This includes getting feedback from relevant

stakeholders on the new project. Also, look for other business scenarios.
● To ensure that the data is solid, determine and ask queries about it in the
initial phase.
● Take a market survey to identify market demand and opportunities for the
new concept or business.
● Create an organizational, operational, or business plan. This includes
identifying how much labor is required, what costs, and how long.
● Make a projected income statement that involves revenue, operating
expenses, and profit.
● Create an opening day balance sheet.
● You will need to identify and address any vulnerabilities or obstacles.
● Take an initial decision to go ahead with the plan.

Suggested Components
Here are the some suggested components for conducting a feasibility study:

● Executive Summary: Write a narrative describing the project, product, or

service.
● Technological considerations: Ask yourself what it will take. Are you able to
afford it? How much will it cost?
● Current marketplace: Find out the market for your product, service, or plan
in the local and global markets.
● Marketing strategy: Define in the detailed description.
● Required staff: What human resources are needed for this project?
● Timeline and schedule: Use important interim markers to indicate when the
project will be completed.
● Project financials. Project financials are the different ways managers can
account for money spent and earned on projects. One of the most
important aspects of financial management is creating and tracking
accurate project financials.

Examples of a Feasibility Study

A local university was concerned about the state of the science building, which was
built in the 1970s. School officials sought to determine the costs and benefits of
expanding and upgrading the building, given the scientific and technological
advances over the past 20 years. A feasibility study was therefore conducted.

School officials looked at several options and weighed the costs and benefits of
updating and expanding the science building. There were concerns expressed by
school officials about the project's cost and public reaction. The proposed new
science building will be larger than the current one. The community board rejected
similar proposals in the past. The feasibility study will address these concerns and
any possible legal or zoning issues.
The feasibility study examined the technology requirements of the proposed
concept(new science building), the potential benefits for students, and its long-term
viability. Modernizing the science facility will increase the scientific research
potential and ameliorate its modules. It also would allure new students.

Financial projections provided information about the scope & cost of this project and
also provided information on raising funds. This covers issuing an investor's bonds
and tapping into its endowment. Projections also help determine how the new
science program attracts more fresh students to enroll in offered programs,
increasing tuition and fees revenue.

The feasibility study proved that the proposed concept was feasible, which allowed
for the expansion and modernization of the science building. The feasibility study
would not have allowed school administrators to know if the expansion plans were
feasible without it.

What is the Purpose of a Feasibility Study?

A feasibility study is an important first step in starting a new business. It is a detailed

examination of whether or not a proposed business venture is likely to be
successful. A feasibility study aims to provide information that will help business
owners make informed decisions about their new venture.

The feasibility study will answer important questions about the proposed business,
including:

● What is the target market for this business?

● Who are the competitors?
● What are the costs associated with starting and running this business?
 ● What are the potential risks and rewards associated with this venture?
● How much revenue can this business generate?
● What are the estimated profits and losses for this business?
● What is the potential for growth in this industry?

How Do You Write a Feasibility Study?

This feasibility study will outline why your business idea is worth pursuing and will
also help you identify any potential risks or problems that could occur. When writing
a feasibility study, there are a few key things to keep in mind:

1. Outline your target market and how you plan to reach them.
2. Discuss your product or service in detail and explain why it is unique and
needed.
3. Outline your financial projections and explain how you plan to make a
profit.

Become a Project Management Professional

​ 6%
​ Growth In Jobs Of Project Management Profiles By 2024
​ 22 Million Jobs
​ Estimated For Project Management Professionals By 2027

​
PMP® Certification Training
​ Access to Digital Materials from PMI
​ 12 Full-Length Simulation Test Papers (180 Questions Each)

​ View Program
​
​
Professional Certificate Program in Project Management
​ Receive course completion Certificate in Project Management and Alumni Association Membership from
UMass Amherst
 ​ Expert Faculty: Learn from seasoned industry professionals and certified instructors who bring years of
practical experience and expertise to the classroom

​ 10 weeks months

​ View Program
​

Here's what learners are saying regarding our programs:

​
Katrina Tanchoco
Shell - Manila,
The interactive sessions make a huge difference as I'm able to ask for further clarifications. The training
sessions are more engaging than the self-paced modules, it's easier now that i first decided to take up the
online classroom training, and then followed it up with the self-paced learning (online and readings).

​
Nathan C
PHC Business Manager, Midlands and Lancashire Commissioning Support Unit
I wanted to transition into the Project Management field and wanted the right opportunity to do so. Thus, I took
that leap forward and enrolled in this course. My learning experience was fantastic. It suited my learning style.

Not sure what you’re looking for?View all Related Programs

7 Steps to Do a Feasibility Study

1. Conduct a Preliminary Analysis

A preliminary investigation is necessary to determine whether a full feasibility study

is warranted. During this stage, key information will be gathered to assess the
project's potential and make a preliminary decision about its feasibility. This should
include a review of relevant documents, interviews with key personnel, and surveys
of potential customers or users.

2. Prepare a Projected Income Statement

To do a feasibility study, you must create a projected income statement. Your
projected income statement will show how much money your business is expected
to make in the coming year. It will include both your estimated revenue and your
estimated expenses. This document will be essential in helping you make informed
decisions about your business.

3. Conduct a Market Survey, or Perform Market Research

Conducting market research is an important step in any feasibility study. By

understanding the needs and wants of your potential customers, you can determine
if there is a market for your product or service. You can also get an idea of what your
competition is doing and how to best position your business to meet the needs of
your target market.

There are a variety of ways to conduct market research. One popular method is to
conduct a survey. You can survey potential customers directly or use data from
secondary sources such as surveys conducted by other organizations. You can also
use focus groups or interviews to get feedback from potential customers.

Once you have gathered your data, you can use it to create a profile of your ideal
customer. This will help you understand your target market and how to reach them.

4. Plan Business Organization and Operations

When starting a business, one of the first things you need is to plan your
organization and operations. This involves creating a structure for your company and
figuring out the logistics of how you will run it. There are many factors to consider
when planning your organization and operations, such as:

● Company Structure: What type of company will you be (sole proprietorship,

partnership, corporation, etc.)? What will the hierarchy look like?
 ● Location: Where will your business be located? Will you have a physical
storefront or operate online only?
● Marketing: How will you promote your business?

5. Prepare an Opening Day Balance Sheet

The opening day balance sheet is a snapshot of the company's financial position at
the beginning of the business venture. The purpose of the opening day balance sheet
is to give an idea of the amount of money that the company has to work with and
track its expenses and income as they occur. This information is vital to making
sound business decisions. The opening day balance sheet will include the following:

● Cash on hand
● Accounts receivable
● Inventory
● Prepaid expenses
● Fixed assets
● Accounts payable
● Notes payable
● Long-term liabilities
● Share

6. Review and Analyze All Data

The feasibility study should include reviewing and analyzing all data relevant to the
proposed project. The data collected should be verified against source
documentation, and any discrepancies should be noted. The purpose of the
feasibility study is to provide a basis for making a decision, and the data should be
sufficient to support that decision.
The analysis should consider both the positive and negative aspects of the proposed
project. The financial analysis should be thorough, and all assumptions should be
documented. The risk assessment should identify any potential risks and mitigation
strategies. The team assigned to the project should review the feasibility study and
recommend the organization's leadership.

Organizational leadership should decide whether to proceed with the project based
on the feasibility study's findings. If the project is approved, the organization should
develop a project plan that includes a detailed budget and timeline

7. Make a Go/No-Go Decision

It is important to know when to cut your losses when starting a business. The
go/no-go decision in a feasibility study comes in. The go/no-go decision is a key part
of a feasibility study, and it can help you determine whether or not your business idea
is worth pursuing.

Making the go/no-go decision is all about risk assessment. You need to weigh the
risks and rewards of starting your business and decide whether the potential
rewards are worth the risks. If the risks are too high, you may want to reconsider your
business idea.

How to Conduct a Feasibility Study

Now, let's discuss a few of the steps we take in order to do the feasibility study.

● To begin, we do a preliminary study of the business case to define what is

included and what we are examining and attempting to find is realistic.
 ● Following that, we generate a forecasted income statement. We need to
understand the revenue sources; how are we going to profit from this?
Where does the income originate? Additionally, we must do a market study.
● We need to find out whether this is a demand for our product. How much
demand does this have? Is there a market for this product or service?
● Plan your company's structure and operations, which is the fourth step.
Specifically, what type of organization do we need, and what resources do
we have? Do we have any specific personnel needs?
● We also plan to generate a balance sheet on the first day. What are the
income and expenses, and how can we be confident we'll be able to decide
whether we're going to make our ROI?
● As a result, we plan to go through and examine all of our data before
making a final decision on whether or not to go forward. In other words, are
we going to pursue this project or business opportunity?

Feasibility Study vs. Business Plan

When starting a business, you must create two very important documents: a
feasibility study and a business plan. While they may seem similar, they are two
different things with different purposes.

A feasibility study is a preliminary document that assesses the feasibility of a

proposed business. It looks at the market potential, the competition, the costs and
benefits of starting the business, and the risks and rewards involved.

On the other hand, a business plan is a more detailed document that outlines how a
business will be run and what its goals are. It includes information about its mission
statement, its products and services, its target market, its finances, and its
management team.
Reasons to Do or Not to Do a Feasibility Study

There are many factors to consider when deciding whether or not to conduct a
feasibility study. The most important question is whether the study will help you
make a better decision.

Some reasons to do a feasibility study include:

● You are considering a major change or investment

● You want to assess the viability of a new business or product
● You need to understand the risks and potential rewards associated with a
project

On the other hand, some reasons not to do a feasibility study include:

● You are pressed for time and don't think the study will provide enough value
to justify the time commitment.
● You are confident that your idea is feasible, and a study will only confirm
what you already believe.
● The change or investment is not significant enough to warrant the study.

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Conclusion
This article introduces the concept of a feasibility study and provides a few tips on
conducting one. A feasibility study is an important tool for evaluating a project
before starting it. By understanding the feasibility of a project, you can make better
decisions about whether to move forward.

We hope this helped you understand the concept of feasibility study better. To learn
more about similar project management concepts, explore our library of Project
Management articles or check out our Post Graduate Program in Project
Management that covers new trends, emerging practices, tailoring considerations,
and core competencies required of a Project Management professional.

Become a Project Management Professional

​ 6%
​ Growth In Jobs Of Project Management Profiles By 2024
​ 22 Million Jobs
​ Estimated For Project Management Professionals By 2027

​
PMP® Certification Training
​ Access to Digital Materials from PMI
​ 12 Full-Length Simulation Test Papers (180 Questions Each)

​ View Program
​
​
Professional Certificate Program in Project Management
​ Receive course completion Certificate in Project Management and Alumni Association Membership from
UMass Amherst
​ Expert Faculty: Learn from seasoned industry professionals and certified instructors who bring years of
practical experience and expertise to the classroom

​ 10 weeks months

​ View Program
​

Here's what learners are saying regarding our programs:

 ​
Katrina Tanchoco
Shell - Manila,
The interactive sessions make a huge difference as I'm able to ask for further clarifications. The training
sessions are more engaging than the self-paced modules, it's easier now that i first decided to take up the
online classroom training, and then followed it up with the self-paced learning (online and readings).

​
Nathan C
PHC Business Manager, Midlands and Lancashire Commissioning Support Unit
I wanted to transition into the Project Management field and wanted the right opportunity to do so. Thus, I took
that leap forward and enrolled in this course. My learning experience was fantastic. It suited my learning style.

Not sure what you’re looking for?View all Related Programs

FAQs

Q1. What Is the Main Objective of a Feasibility Study?

Feasibility study helps decision makers to determine the success or failure of a

proposed project or investment. It evaluates the predicted cost and benefits of the
proposed project.

Q2. What Are the Steps in a Feasibility Study?

The first step in a feasibility study is to conduct the primary analysis and create the
projected income statement. Followed by doing a market survey and accordingly
planning business operations. The last step is to create a balance sheet to review
and analyze data. Based on your analysis, you can decide whether to go or not go
ahead with the proposed statement.

Q3. Who Conducts a Feasibility Study?

Feasibility study is done by the senior management of the organization. Sometimes,
they take help from mid-senior employees to complete the analysis in short span of
time.

Q4. What Are the 5 Types of Feasibility?

The 5 types of feasibility study are Scheduling Feasibility, Operational Feasibility,

Legal Feasibility, Economic Feasibility, and Technical Feasibility.

Q5. Why is a Feasibility Study Important?

A feasibility study helps in identifying the financial, market and logistical challenges
of a proposed project. It is done by evaluating the estimated funds for the project
and return of investment.

Q6. When is the Feasibility Study Done?

The feasibility study is done before the business plan is created.

Q7. What is the Primary Purpose of Conducting a Feasibility Analysis?

The objective of feasibility study is to assess the financial viability of developed plan
and whether it will be successful or not.
 What Is PERT In Project
Management?

Monique Danao

Small Business and Tech Writer

Reviewed

Kiran Aditham

Deputy Editor

Updated: Jun 4, 2024, 3:47pm

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not
affect our editors' opinions or evaluations.
Table of Contents

​ Definition of PERT
​ How Does a PERT Chart Work?
​ PERT Chart Examples
​ Bottom Line
​ Frequently Asked Questions (FAQs)

In today’s fast-paced business landscape, efficient project management

methodologies are crucial. Program Evaluation and Review Technique
(PERT) is a network diagram that lets businesses manage project tasks. In
this article, we’ll explain everything you need to know about PERT and
show how you can effectively use it to achieve the best outcomes.

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Definition of PERT

Program Evaluation and Review Technique (PERT) is a project

management methodology that visually represents the time it takes to
complete a project. At its core, PERT utilizes a network of diagrams to
visually illustrate the sequence of activities in a project timeline and project
milestones.

During the Cold War, the U.S. Navy developed PERT charts to coordinate
complex defense projects such as the Polaris missile submarine program.
Its primary goal was to provide a structured approach to project planning,
allowing organizations to make informed decisions based on probabilistic
analysis.

Elements of a PERT Chart

Let’s look at some of the most common elements of PERT.
 ​ Nodes: represent activities and tasks within a project. Circles or
triangles usually represent them in a chart.
​ Arrows: the direction of the arrow represents the flow and sequence
of work. An arrow is drawn from the predecessor activity to the
successor activity, illustrating their logical relationship.
​ Float or Slack: refers to how long the team can delay a task without
affecting the project’s completion time.
​ Critical path: refers to the longest path through the network
diagram. A thick line or a different color represents it. Delays on the
critical path will directly impact the project’s duration.
​ Lead time: the amount of time you should take to complete a task
without affecting subsequent tasks.
​ Lag time: the minimum time it takes for a task to follow another.
​ Optimistic time estimate (O): the minimum time required to
complete an activity under the best-case scenario.
​ Most likely time estimate (M): is the most realistic timeframe to
complete an activity.
​ Pessimistic time estimate (P): the maximum time to complete an
activity under the worst-case scenario.
​ Predecessor and Successor Relationships: refer to
dependencies between activities symbolized by arrows connected to
the nodes. In a team, predecessor activities must be done before
another task begins, while successor activities can only start after an
activity is completed.

Advantages and Disadvantages of PERT Charts

Using a PERT chart might look appealing, but it has pros and cons,
depending on your business needs.

Advantages

​ Visualization of Project Activities: Project managers and

stakeholders get a visual representation of the project’s flow, making
it easier to identify critical activities and potential bottlenecks.
 ​ Time Management: A PERT chart assigns optimistic, most likely
and pessimistic time estimates to activities. Done right, project
managers can estimate the time it takes to complete the project
within specific timeframes.
​ Resource Allocation: Project managers can identify required
assets and allocate resources effectively for each project stage to
facilitate completion.
​ Risk Assessment and Management: Project managers can
determine the critical path and identify tasks that significantly impact
project completion. Also, they can find activities that are more
susceptible to delays and develop appropriate contingency plans to
mitigate risks.

Disadvantages

​ Labor-Intensive: Making a PERT chart is a time-consuming and

labor-intensive process. It requires careful analysis of activities and
time estimates, which requires effort and resources.
​ Inaccurate Information: PERT relies heavily on time estimates. If
time estimates are unreliable, they can lead to inaccurate project
timelines.
​ Lacks Flexibility: A PERT chart is challenging to modify when
deadlines change. As project requirements evolve, it can be
challenging to maintain an accurate representation of the project’s
status and financial positioning.

How Does a PERT Chart Work?

Follow these steps to create a PERT chart.

1. Identify Activities: Determine all the activities required to complete

the project. Break it into small, manageable tasks with specific actions or
deliverables.
2. Determine Dependencies: Consider the flow and order of the tasks.
Identify activities the team needs to finish before others can start and
establish the relationships between them.

3. Create the PERT Chart: Construct the PERT chart using nodes to
represent activities and arrows to represent the sequence of tasks. Each
node should have an activity name and corresponding time estimates.

Tasks on similar stages of production but remain on separate branches or

paths are known as parallel tasks. They run independently of each other,
but they can also occur simultaneously.

4. Assign Time Estimates: Assign time estimates showing the expected

duration for completing each activity. There are usually three estimates:
optimistic (O), most likely (M) and pessimistic (P).

Project managers can use the PERT formula to identify task duration based
on different time estimates.
Here’s the formula:

(O + (4 × M) + P) / 6

Let’s say, the optimistic time is 20 minutes, the pessimistic time is 50

minutes and the most likely time is 35 minutes. Using the PERT formula,
we can determine the completion time is around 35 minutes.

5. Define the Critical Path: Calculate the total time for each path by
adding the activity duration. The critical path is the path with the longest
duration.

6. Track Progress: Mark completed activities and adjusted time

estimates as the project progresses.

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PERT Chart Examples

Below are some examples of PERT charts that can help you get started.

Example 1: Designing an E-Book To Get Client Leads

In this PERT chart by Toggl, a team is designing an e-book to get leads and
conversions. The chart shows the different tasks involved in creating an
e-book and their duration.

Example 2: Constructing a House

Construction workers can use a PERT chart to determine the minimum
time to complete a housing project and the predicted risks.
Example 3: Building a Website
Using a PERT chart, designers can monitor the tasks required to build a
website and the time it takes to complete.

Bottom Line

PERT offers a structured approach to planning, scheduling and tracking

complex projects. Project managers can allocate resources effectively and
identify potential bottlenecks by providing a visual representation of the
project flow and critical activities. If you need a solution to help facilitate
project management, check out our article on the best project management
software.
PERT and CPM: Their
Differences and How to
Use Them Together
by Peter Landau | Dec 27, 2022

Project Evaluation and Review Technique (PERT) and Critical Path Method
(CPM) are both useful tools when planning and controlling a project. PERT
and CPM are complementary and both are important analytical techniques
in project management when managing tasks.

There are differences between PERT and CPM, of course, which is why
they work so well together when calculating the time it’ll take to complete
tasks in your project. To better understand that relationship, let’s first define
both, explore how they differ and see the ways they work together when
managing a project.

What Is PERT?
Project managers use PERT as a tool to help them determine how much
time it’ll take to complete a project. This is an essential step toward
developing an accurate schedule. PERT works on a PERT chart, which
maps three-time estimates. One is the optimistic time, or the least amount
of time expected for a task to be done.

Next is the pessimistic time, or the maximum amount of time it’ll take to
complete a task. Finally, there’s the most likely time, which is a reasonable
amount of time to complete the task as long as there are no delays,
bottlenecks, etc. Once these estimates have been recorded, the project
manager then calculates (optimistic time + 4 x most likely time +
pessimistic time) /6.

Then comes the PERT analysis based on the project network diagram
that’s made up of arrows showing the direction of the work and nodes,
which are circles representing the task. It’s called an activity-on-arrows
chart, in which each task or milestone is joined by arrows.

Get your free

PERT Chart
Template
Use this free PERT Chart
Template for Excel to manage
your projects better.
Download Excel File

What Is CPM?
CPM is used to determine the earliest possible starting time for each task in
the project. It’ll also help a project manager determine the critical tasks and
non-critical tasks. This helps when executing the project. If you’re behind
schedule, you know which tasks can be skipped without impacting the
integrity of the work.

Therefore, the critical path is the longest sequence in a network diagram or

the shortest duration for the project to be completed. There are some terms
used in CPM just as there are in PERT. These are early start (earliest time
a project can be started), late start (latest time to start a project), early
finish (earliest completion of a project) and late finish (latest time to
complete a project without causing delays).

The CPM is an activities-on-nodes chart and only links one event to the
next. As you can see, it can take time to figure out CPM. ProjectManager is
project management software with various project views, such as
interactive Gantt charts, which filter for the critical path. There are no
calculations necessary. It’s all done instantly. Then you can set a baseline
to track your planned effort against your actual effort to stay on schedule.
Get started with ProjectManager today for free.
ProjectManager’s Gantt chart filters for CPM and helps you schedule
your projects.

Learn more

PERT vs. CPM: Key Differences

While PERT and CPM are both valuable techniques that help project
managers schedule and control their projects, there are differences
between the two. Knowing these differences when looking at PERT vs.
CPM will help you schedule your project more accurately.

The main difference is that PERT is a visual technique. It helps project

managers plan, schedule and control tasks, also referred to as activities.
CPM is a statistical technique, though it’s also used to plan, schedule and
control. However, it uses well-defined tasks to do so.

Another difference is what PERT CPM does. CPM is used to control cost
and time, and PERT is a must for controlling time when planning. PERT is
also more of a development and research tool. CPM is more often found in
construction project management.

PERT and CPM also differ in terms of how they estimate. For example, as
we’ve seen above, PERT uses a three-point method to forecast time, while
CPM only has one measure for estimating. They also differ in that PERT is
used with time is more valuable than the cost in planning. CPM is more
about finding a reasonable time estimate for projects.

You can see that PERT and CPM are different in that PERT is used trying
to predict the time of tasks. CPM is used once those tasks are predictable.
Also, CPM separates critical and non-critical tasks while PERT doesn’t
make a distinction between the two.

Free PERT Chart Template

If you’re ready to start using PERT, download our free PERT chart template
for Excel. It will help you perform a PERT analysis in less time. The
formulas are baked in, and the diagram is made—all you need to do is
input your project values.

Free Critical Path Method (CPM) Template

This free critical path method template allows you to list down your tasks
and map them using a network diagram that’s designed to help you use the
CPM formula to estimate the total duration of your projects and identify the
critical path by calculating which activities have no slack.

Using PERT and CPM in Project Management

As mentioned, PERT and CPM are staples of project management
planning and controlling. This is critical as project management is all about
controlling the time and cost of the project. Project managers use both
PERT and CPM to break up large, complex projects into smaller tasks to
minimize time and cost.

PERT and CPM are used as a means to make projects more effective and
efficient. When managing projects, PERT and CPM helps project managers
know how long the project and individual tasks will take. It helps them
determine the best start and end dates for those tasks. They can also see
which are critical to the success of the project and which are not. Also, they
can find out how long they can delay non-critical tasks and still remain on
schedule.
Both PERT and CPM have distinct uses in project planning and controlling.
They’re estimating tools and as such key to creating a project schedule,
which is an essential part of project management. When used together,
they provide a more conservative forecast of a project’s schedule, but also
costs and resources as they reveal a more conservative timeframe for
those tasks.

PERT/CPM Chart Example

The first part of doing a PERT CPM is identifying the tasks that make up
the project. You’ll also want to figure out the immediate predecessor for
each and any task dependencies there might be. Then you’ll want to
estimate the duration of each task. The time you forecast is noted over the
arrows. In our example, that’s weeks. You can use days, weeks or months.

After you’ve made the estimates for your tasks, then you can begin building
the PERT chart starting on the left and moving toward the right. The
farthest left is the beginning and the farthest right is the end of the project.
The arrows connect the nodes or milestones and indicate the time spend
on tasks.
Benefits of Using PERT and CPM
It should be clear what the advantages of using PERT CPM are. PERT is
an ideal tool for scheduling tasks on projects and helps you figure out the
critical path. Together they help you determine the schedule so you can
coordinate the work of your project team.

Make Timely Decisions

Project managers can also use PERT and CPM to make timely decisions
when executing the project. These choices help prevent delays and deliver
projects on time. PERT is great for what-if scenarios and the critical path
helps to identify different uncertainties in the project.

Using both PERT and CPM will promote the coordination of departments
involved in the project. It facilitates decision-making for cross-functional
teams with ample data that helps with project management. You can also
analyze all tasks to see if the project will be completed within the budget.
Related: Free Construction Estimate Template for Excel

Long-Term Project Planning With Milestones

While there’s a hurdle to understanding CPM and doing the calculations is

time-consuming, once cleared there are many advantages. CPM helps with
outlining long-term planning while identifying critical tasks, making it easier
to plan, schedule and control the project. This leads to greater productivity
and better resource management.

PERT, on the other hand, identifies milestones and the sequence of tasks
in the project. It’s a visual tool, which helps everyone on the project team
understand it. PERT charts should be updated throughout the life cycle of
the project to ensure its benefits.

ProjectManager Combines PERT and CPM

To get the benefits of PERT and CPM without having to spend time on
calculations, you need project management software. But not all project
management software is the same. ProjectManager is online project
management software that has Gantt charts that can filter for the critical
path and show you what is critical and non-critical when managing your
project.

Track Progress in Real Time

Projects change and to stay on top of those changes you need to

constantly review and revise your PERT and CPM. Our software is online,
which means the data you see is live. Our real-time dashboards give you a
high-level view of the project. There’s no setup required and our dashboard
is configured for you, unlike lightweight tools. You can toggle over any time
and capture the time spent on tasks, workload, costs and more to keep
your project running smoothly.

Get In-Depth Reporting

Estimates are best guesses, but when you’re managing a project, accuracy
is key. Our real-time reports are easy to generate with only a couple of
keystrokes. Each is customizable so you can filter to see only the real-time
data you want, whether it’s a status report, task and time progress or one of
the many others. You can make better decisions with detailed, real-time
data. Then share the reports with stakeholders to keep them updated.
Gantt charts are better than PERT charts, not only because ours filters for
the critical path, but they help you manage tasks, subtasks, link
dependencies to avoid delays, manage resources and so much more. Files
can be shared, tasks commented on and anyone tagged to bring them in,
which connects your team across departments or timezones. Go beyond
PERT and CPM with our robust software.

ProjectManager is award-winning software that helps you plan, manage

and track projects. Our tool empowers teams with a collaborative platform,
multiple project views and more. Join teams at Avis, Nestle and Seimens.
Get started with ProjectManager today for free.
What Is the Critical Path In Project
Management?

In project management, the critical path is the longest sequence of tasks

that must be completed to execute a project. The tasks on the critical path
are called critical activities because if they’re delayed, the whole project
completion will be delayed. To find the critical path, project managers use
the critical path method (CPM).

What Is the Critical Path Method (CPM)?

The critical path method (CPM) is a project management technique that’s

used by project managers to create an accurate project schedule. The
CPM method, also known as critical path analysis (CPA), consists in using
the CPM formula and a network diagram to visually represent the task
sequences of a project. Once these task sequences or paths are defined,
their duration is calculated to identify the critical path.
Get your free

Critical Path Template

Use this free Critical Path Template for Excel to manage your projects
better.

Download Excel File

Finding the critical path is very helpful for project managers because it
allows them to:

​ Accurately estimate the total project duration.

​ Estimate the time that’s necessary to complete each
project task.
 ​ Identify critical activities which must be completed on
time and require close supervision.
​ Find out which project tasks can be delayed without
affecting the project schedule by calculating slack for
each task.
​ Identify task dependencies, resource constraints and
project risks.
​ Prioritize tasks and create realistic project schedules.

Once done by hand, the critical path can now be calculated automatically
with project scheduling software equipped with Gantt charts, which makes
the CPM method much easier. ProjectManager is project management
software that helps you quickly implement the critical path method. Build a
project schedule on our award-winning Gantt chart, then simply filter for the
critical path. When it’s time to execute, your team can collaborate with a
task list, kanban board or calendar. And you can track everything with
dashboards and reports to ensure you stay on track. Get started today
absolutely free.
ProjectManager can calculate the critical path for you on our award-winning
Gantt charts—learn more.

The critical path method was developed in the late 1950s by Morgan R.
Walker and James E. Kelley. The origins of the critical path method are
closely related to the Program Evaluation and Review Technique (PERT), a
similar method that is commonly used in conjunction with CPM in project
management.

CPM vs. PERT

The critical path method (CPM) and program evaluation and review
technique (PERT) are both project scheduling techniques. But they aren’t
interchangeable. We’ve been talking about CPM, but before we compare it
to PERT let’s define the term.

PERT is used to get accurate time estimates for complicated projects. It

uses an algorithm to calculate the estimated duration for unpredictable
activities. It focuses on events and milestones on a PERT chart with nodes
in the wireframe when developing projects.

However, while these are two different techniques, PERT and CPM can be
used together for project planning and scheduling. The difference between
them lies in that PERT is about time planning and time management, while
CPM is about time and budgeting. PERT delivers a project quickly and
CPM gets the project done on budget and on time.
Now that we know what’s the critical path of a project, we can learn about
the critical path method (CPM), an important project management
technique that’s based on this concept.

Related: Free Project Plan Template

When Should You Use Critical Path Analysis?

Critical path analysis is another way of referring to the critical path method.
As noted, it’s used by industries with complex projects, such as aerospace,
defense, construction and product development.

Therefore, critical path analysis is a crucial first step in developing a project

schedule. It’s done early in the life cycle of a project, usually in the planning
phase, but it’s not unheard of to have CPM as part of a project proposal
before the project has been approved.

By understanding which are the critical tasks in a project you can focus on
getting those done if time, resources and costs are an issue. Knowing this
in advance of executing a project will help you deliver that project
successfully.

Free Critical Path Template for Excel

Need help getting started with a critical path analysis for your project?
Download this free critical path template for Excel. All the formulas are
embedded, the network diagram is made—all you have to do is input your
values.
What Is the Importance of CPM in Project
Management?

Projects are made up of tasks that have to adhere to a schedule in order to

meet a timeline. It sounds simple, but without mapping the work, your
project scope can quickly get out of hand and you’ll find your project off
track.

Using the critical path method is important when managing a project

because it identifies all the tasks needed to complete the project. It then
determines the tasks that must be done on time, those that can be delayed
if needed and how much float or slack you have.

When done properly, critical path analysis can help you:

​ Identify task dependencies, resource constraints and

project risks
​ Accurately estimate the duration of each task
​ Prioritize tasks based on their float or slack time, which
helps with project scheduling and resource allocation
 ​ Identify critical tasks that have no slack and ensure
those are completed on time
​ Monitor your project progress and measure schedule
variance
​ Use schedule compression techniques like crash
duration or fast tracking

Critical Path Diagram

As you can see in this critical path diagram, project activities are
represented by letters and the critical path is highlighted in green. Tasks F,
G and H are non-critical activities with float or slack. We can also identify
task dependencies between the critical path activities, and also between
activities (A, F and G) or (A, H and E), which are parallel tasks.

Critical Path Method (CPM) Formula

Before we learn how to use the CPM formula, we need to understand some
key CPM concepts.

​ Earliest start time (ES): This is simply the earliest time

that a task can be started in your project. You cannot
determine this without first knowing if there are any task
dependencies
​ Latest start time (LS): This is the very last minute in
which you can start a task before it threatens to delay
your project timeline
​ Earliest finish time (EF): The earliest an activity can be
completed, based on its duration and its earliest start
time
​ Latest finish time (LF): The latest an activity can be
completed, based on its duration and its latest start time
​ Float: Also known as slack, float is a term that describes
how long you can delay a task before it impacts its task
sequence and the project schedule. The tasks on the
critical path have zero float because they can’t be
delayed

The critical path method formula has two parts; a forward pass and a
backward pass.

Forward Pass in CPM

Use the CPM diagram and the estimated duration of each activity to
determine their earliest start (ES) and earliest finish (EF). The ES of an
activity is equal to the EF of its predecessor, and its EF is determined by
the CPM formula EF = ES + t (t is the activity duration). The EF of the last
activity identifies the expected time required to complete the entire project.

Backward Pass in CPM

Begins by assigning the last activity’s earliest finish as its latest finish. Then
the CPM formula to find the LS is LS = LF – t (t is the activity duration). For
the previous activities, the LF is the smallest of the start times for the
activity that immediately follows.

Related: 12 Free Project Scheduling Templates for Excel

Critical Path Method Example

Let’s take a look at a critical path example to better understand how the
critical path method is used in project management. Although it’s high-level,
it can help you visualize the meaning of a CPM schedule.

We’ll use this critical path diagram to explain the elements that make up the
critical path analysis process. To keep things simple, we’ve already done
the calculations for this example using the CPM formula.
The above critical path method example shows the critical path for getting a
website online. All the tasks that are scheduled to build and launch the
website are shown in the rectangular nodes.

Some of the tasks are being done at the same time as others. For example,
the work on defining a target market is being done as the design is being
done and the content for the site is being drafted.

However, not all these tasks are equally important. Some aren’t critical to
getting the site live by the deadline. That’s where the critical path comes in.
It has identified by the colored arrows all the tasks that must be done in
order to complete the project plan on time.

Critical Path Method Steps

Now that you know the key concepts of the critical path method, here’s how
to calculate the critical path in 8 steps.
1. Collect Project Activities

Use a work breakdown structure to collect all the project activities that lead
to the final deliverable.

2. Identify Task Dependencies

Determine which tasks are dependent on other tasks before they can
begin. Use your judgment and your team members’ feedback. Failing to
define task dependencies correctly makes the critical path method useless.

3. Create a Critical Path Diagram

A CPM diagram or network diagram, depicts the order of activities.

4. Estimate the Timeline

To use the critical path method, you’ll need to estimate the duration of each
task. Use data from past projects and other sources of information such as
subject matter experts.

5. Use the Critical Path Formula

The critical path uses an algorithm, also referred to as the CPM formula.
That algorithm has two parts, the forward pass and the backward pass. The
forward pass is determined by using the earliest start for each activity (ES)
and the earliest finish (EF). The ES of an activity equals the EF of the one
before it. The EF is calculated by EF = ES + t (the duration of an activity).
The backward pass assigns the last activity’s EF as its latest finish. Then
use the CPM formula to find the LS, which is LF – t. For the activities
before that, LF is the smallest of the start times for the next activity.

6. Identify the Critical Path

The activities with 0 float make up the critical path. All of these critical path
activities are dependent tasks except for the first task in your CPM
schedule. All project tasks with positive slack are parallel tasks to the
critical path activities.

7. Revise During Execution

Continue to update the critical path diagram as you go through the project
execution phase. These critical path analysis steps determine what tasks
are critical and which can float, meaning they can be delayed without
negatively impacting the project schedule. Now you have the information
you need to plan the critical path schedule more accurately and have more
of a guarantee you’ll meet your project deadline.

You also need to consider other changes or constraints that might change
the project schedule. The more you can account for these unexpected
events or risks, the more accurate your critical path schedule will be. If time
is added to the project because of these constraints, that’s called a critical
path drag, which is how much longer a project will take because of the task
and constraint.

Benefits of Using CPM in Project Management

There are many reasons to use the critical path method. It’s a great project
management tool to help you deliver your project on time and within
budget, but we’ve already discussed that at length. Here are some other
benefits of using CPM.

Critical Path Analysis Improves Team Communication

It fosters better communication within the project team. Everyone is

involved in providing input and that brings the expertise of various project
team members together for the better good of the project as a whole. This
includes subcontractors, architects, electricians, construction managers,
etc.

CPM Helps Prioritize Tasks

Naturally, having determined the critical path is going to help you prioritize
your work. You know the tasks that must be done and that gives you wiggle
room if there are issues with time or cost. You might not get every activity
done, but you’ll get the ones finished that are critical to the project.

CPM & PERT Help Create Accurate Schedules

The critical path method will help you make a more accurate project
schedule, especially when you use it in conjunction with PERT charts. You
can estimate better and discover areas of risk and prepare to respond to
them to avoid costly delays.

CPM & Gantt Charts Help Map Out Project Plans

Another benefit is the visual nature of CPM, especially when mapped on
the timeline of a Gantt chart. Having a visual element to communicate the
project schedule is always a plus. Not everyone absorbs information in the
same way. Visual tools help teams better understand what’s expected of
them and when it’s expected.

CPM Training Video

Do you still have questions about the critical path method? In this video,
Jennifer Bridges PMP, explains how to find the critical path using a CPM
diagram.

CPM & Project Management Software

As stated, the critical path method (CPM) was first invented in the late
1950s. During those times, project scheduling software didn’t exist, and
project managers had to calculate the critical path manually.

Fortunately, today there are many project management software

alternatives that can help with the critical path process. Most of them use
Gantt charts to represent CPM diagrams and calculate the critical path, but
their feature sets vary greatly. One of the most commonly used project
management software to identify the critical path is Microsoft Project.
However, it has major drawbacks that make ProjectManager a better
choice.

Here are some of the main features that you’ll need as a project manager
to properly use the critical path method for your scheduling process.
Must-Have Features of
Critical Path Software
DependenciesDashboardsLive DataPlanned vs. ActualsBaselinesReports

Link Tasks and Avoid

Bottlenecks
Tasks that are dependent on another need to be a part of your critical
path calculation. There are four types: those that are start-start,
start-stop, stop-start and stop-stop. By identifying these task
dependencies, you can avoid bottlenecks later in the project.

How to Find the Critical Path With

ProjectManager
Figuring out the critical path by hand takes time, and it must be done
throughout the project, which is why using project management software
streamlines the process. ProjectManager is award-winning software that
automates the critical path method process for you.

Our online Gantt chart filters for critical path, links dependent tasks and is
integrated into a full project management software. Sign up for a free
30-day trial of our software and follow along to build a dynamic Gantt chart
and automatically calculate your critical path in a few easy steps.

1. Start a Project With a Gantt Chart

Managing a project on Gantt charts allows you to both plan and schedule in
one place. Add your tasks and their durations, and they’ll automatically
appear on a project timeline, allowing you to see your whole project at
once.

In the software, upload your tasks manually or upload a pre-existing

spreadsheet. Add task descriptions, deadlines, priority, tabs and assign
them to one or more team members. We also provide templates to help
you get started.
2. Add Task Dependencies

In the software, connect your dependent tasks on the Gantt chart by

dragging one onto the other. You’ll see a dotted line indicating that the
tasks are linked, and you can then define the type of dependency it is.

3. Set the Project Baseline

Setting the baseline is possible when you’ve finished making your project
schedule, complete with deadlines and costs. The baseline captures your
data and uses it to compare against your actual progress.

On the Gantt chart, create your baseline for the project by adding the start
date to the task and when it’s due to be completed. These planned start
and end dates will be compared to your actual project data and show you
whether you’re on target.

4. See the Critical Path

Easily find the critical path of your project by using our critical path filter.
This helps you know what must be done to complete the project and shows
if you’re experiencing any slippage.

5. See Your Overview With a Dashboard

Now that you’ve got your project planned out, viewing it from a dashboard
is the best way to get a high-level view of your progress.

From the dashboard view, track if your project is proceeding as planned.

Our dashboard monitors several project metrics, such as variance, tasks
and more, automatically calculating your data to display it in easy-to-read
charts and graphs.
6. Report on Progress

Reporting is crucial to pull data from your project and get and share
insights into how it’s doing. Reports come in many varieties, which together
provide a snapshot of the whole project’s performance.

Easily generate reports on the critical path, task progress, project status,
costs and more in the software. We do the calculations for you, and you
can filter the results to show just what you want to see. Our reporting
feature is done automatically with one click.
ProjectManager is an online tool that gets real-time data to determine how
accurate your planned schedule is to the actual one, so you can adjust
immediately if necessary. See how it can help your project by taking this
free 30-day trial.