A feasibility study will provide you with the discipline and insight to confirm if you’re new business idea is worthwhile pursuing. Furthermore, if you need to finance the business, lending institutions and investors, typically require a feasibility study. The feasibility study evaluates the project’s potential for success.
Feasibility studies contain standard components. The exact appearance of each study varies. This depends on the industry studied, the critical factors for that project, the methods chosen to conduct the study – primary and secondary research, and the budget. Most studies have multiple potential uses, e.g. validate your assumptions, reassure investors and lenders that the proposed venture is economically viable, etc. so they must be designed to serve everyone’s needs.
There are usually three components to the feasibility study:
• Market Analysis
• Technical Analysis
• Financial Analysis
The market analysis should be conducted first because it is critical to the success of the business to understand the environment in which you will compete. There must be adequate demand for your product or service. If not, your business idea may not be feasible and there is no need to go any further. Market analysis results in compiling information about the market potential. Its basic components include:
• Estimate of market size
• Projected market share
• Analysis of competition.
Knowing which way to turn requires an in-depth understanding of the marketplace.
In addition to the market analysis, the financial assessment is a critical component of the feasibility study. Without the “financials” it will be impossible to determine how feasible the business idea is. Included in the financial assessment is revenue and income projections for the first year along with start-up costs to determine how much funding your business will need. Key components of the financial assessment include:
• Capital Requirements
• Start-up Costs
• Revenue Projections
• Gross Profit Margins (GPM)
• Net Income
Armed with the information that has been compiled and analyzed for the feasibility study, a recommendation by PD is provided so the client can make a GO / NO GO decision regarding the feasibility of launching the business venture.