Feasibility Study

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What is a Feasibility Study? Meaning.

A Feasibility Study or feasibility analysis is a preliminary evaluation of an idea to determine if its worth pursuing. More precise it's a preliminary analysis of a proposed business idea, plan, project or strategy to provide an overview of the primary related issues and to determine whether it is viable strategically, financially and operationally. It may or may not also include an analysis of potential scenarios and a recommendation on the best solution to use.

It provides a lot of information necessary for a business plan. Because putting together a business plan is a significant investment of time and money, it makes sense to ensure first that there are no major roadblocks facing the business idea before that investment is made. Identifying roadblocks is the primary purpose of a feasibility study.

Concept Statement

A FS is often preceeded by a concept statement: A 1-page description of the business/idea.

• Given to people/advisors who provide feedback on the potential of the idea.
• The purpose of this feedback is:
  • Give a sense of the viability of the business idea.
  • make suggestions for how the idea can be strengthened or altered before proceeding.
• Normally prepared before conducting a full feasibility analysis.

Typical Chapters of a Feasibility Study. Areas.

Feasibility studies typically look into following areas:

• Product or Service Feasibility and Issues
  • Concept Test: gauge customer interest, desirability, purchase intentions
  • Usability Test: determine ease-of-use and users perceptions of using product
• Strategic / Market Feasibility and Issues
  • Industry Attractiveness
  • Market Timeliness
  • Identification of a Niche Market
• Organizational Feasibility and Issues
  • Management Prowess (ability, passion, expertise, experience)
  • Resource Sufficiency (focusing on the non-financial ones)
• Financial Feasibility and Issues
  • Capital Requirements
  • Financial Rate of Return
  • Overall Attractiveness of the Investment
• Optional: Technical Feasibility and Issues

They should not go in too much depth, but should contain a basic analysis only.

In general, if the idea is deemed feasable in all areas, the FS should be followed by a full business plan.

If the idea is deemed not feasable in at least one area, it should be either improved first or else dropped.

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Compare with: Cost-Benefit Analysis  |  SOSTAC  |  Business Incubator  |  Industry Attractiveness  |  Entrepreneurial Organization  |  Decision Tree  |  Opportunity Cost  |  Required Return  |  RAPID Approach  |  Marketing Mix  |  PEST Analysis  |  SWOT Analysis  |  Mind Mapping  |  Theory of Constraints  |  Total Cost of Ownership  |  Net Present Value  |  Discounted Cash Flow (DCF)  |  Free Cash Flow  |  Payback Period  |  Garbage Can Model

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