What is Feasibility Study?

Business projects or ventures are very big in terms of size, investment involve, and resources required but there is always uncertainty about the success or failure of a business so to determine the credibility or likelihood of success of the business we do a feasibility study of projects.

So, in this article today we get an overview of what is a feasibility study and the types of feasibility studies, what is a feasibility report, the Components of the feasibility report, and its advantages.

► What is a Feasibility Study?

A feasibility study is the study of a proposed project or plan and it evaluates the practicality or viability of the project in order to determine whether the project will be a success or a failure.

A feasibility study examines all aspects of a proposed plan or project and ensures that the project should be legally and technically feasible as well as project is economically and environmentally sound.

Conducting a feasibility study is always important for a business and its potential stakeholders because shows a clear picture of the proposed project.

◉ Feasibility Study Meaning

  • Feasibility study means an assessment of the practicality of a proposed plan, procedure, or method.
  • A feasibility Study refers to a detailed analysis that considers all of the critical aspects of a proposed project in order to determine the likelihood of its success.

► What is the Feasibility Report?

A feasibility report is defined as comprehensive documentation of a feasibility study that tells us about the viability of the proposed project. The feasibility report is the outcome of the feasibility report.

In another word, a feasibility report is defined as a summarized, structured, and well-documented report which is the result of the feasibility report.

► Types of Feasibility Study

  1. Technical Feasibility
  2. Economic Feasibility
  3. Legal Feasibility
  4. Financial Feasibility
  5. Operational Feasibility
  6. Scheduling Feasibility

✔ 1. Technical Feasibility

Analysis of technological resources and competency required to complete the project.

Analysis of technicalities hardware and software and managerial and manpower capabilities to handle them is needed to how institutional capabilities meet the need of the proposed system.

✔ 2. Economic Feasibility

An economic feasibility report helps in analyzing the cost-benefit analysis of the project.

The economic feasibility study provides an assessment related to whether the project is possible under the given resource constraints and what are the tangible and non-tangible benefits of the project.

It also analyzes the development and operational cost of a project.

✔ 3. Legal Feasibility

A legal feasibility study helps in determining whether the proposed project is conflicting with the law and is enacted by the government. All the legal issues are examined that directly or indirectly affect the project.

Detailed legal due diligence should be done to protect the project from all foreseeable legal requirements.

While analyzing the legal feasibility of the project business examine the environmental law, taxation law, pollution law, Land acquisition law, and labor welfare law.

✔ 4. Financial Feasibility

Financial feasibility analyzes whether a project is financially viable.

It is mainly focused on the ROI (Return On Investment), Cash inflow or outflow, and expenses and revenue incurred from the proposed project.

It identifies the both cost of the project financial benefits of the project.

✔ 5. Operational Feasibility

Operational feasibility focuses on the degree to which the proposed project matches the business’s existing environment and objectives with regard to the development schedule, delivery date, and business process.

Operational feasibility study measure how well the proposed solution to problems or a specific solution will work in the organization.

✔ 6. Scheduling Feasibility

Scheduling feasibility examines how long time will take to complete the project. It is a measure of how reasonable the project timetable is.

If a project takes a long time to complete the project then there is a higher chance that the project will fail.

Also Read : Rational Decision Making

► Content of Feasibility Report

A feasibility report comprises of  following sections

  • Executive summary
  • Description of product or service or project
  • Project evaluation and consideration
  • Technical Evaluation
  • Legal Evaluation
  • Economical Evaluation
  • Social and environmental Evaluation
  • Financial Evaluation
  • Scheduling
  • Evaluation of alternatives
  • Conclusion
  • Finding and Recommendation

► Steps of conducting the Feasibility Study

  1. Conduct a preliminary analysis
  2. Prepare the project scope outline
  3. Conduct your market research
  4. Calculate your financial cost
  5. Review and analyze all data
  6. Make a go or no-go decision

► Importance of Feasibility Study

  • To determine the outcome of the proposed business idea or project
  • Help in identifying a valid reason as to whether the project is needed or not
  •  It helps in enhancing the success rate of the project.
  • It helps in determining the amount of investment required and future cash flow
  • Identify the different alternatives.
  • The feasibility study helps in persuade the investor.
  • It helps in avoiding future risks.
  • Help in assessing Resources, demand, and Market growth.
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