Feasibility Study

Posted on by user

Feasibility Study: Definition, Purpose, and How to Conduct One

A feasibility study is a structured analysis that evaluates whether a proposed project, business, product, or investment is practical and likely to succeed. It measures costs, benefits, risks, required resources, and potential returns to support an informed go/no‑go decision.

Why perform a feasibility study?

  • Assess viability before committing significant time and capital.
  • Identify risks, technical gaps, and regulatory or community obstacles.
  • Provide management, investors, or lenders with evidence that the project is sound.
  • Reveal alternatives and contingency options if the primary plan is infeasible.

What a feasibility study examines

  • Technical feasibility: availability of necessary technology, equipment, and technical skills.
  • Financial feasibility: project costs, funding sources, cash flow projections, and expected return on investment (ROI).
  • Market feasibility: demand, target market, competition, pricing, and sales forecasts.
  • Organizational feasibility: required staffing, management structure, and operational capacity.
  • Risk assessment: potential issues and whether expected returns justify the risks.

Key Components of a Feasibility Study

A typical study contains the following sections:

  • Executive summary: concise overview, conclusion, and recommendation.
  • Project description: scope, objectives, and deliverables.
  • Technological considerations: systems, hardware, software, and technical skills required.
  • Market analysis: target customers, competitors, demand forecasts, and market size.
  • Marketing strategy: positioning, sales channels, promotion, and pricing.
  • Organizational needs: staffing, roles, and an organizational chart.
  • Schedule and timeline: milestones, interim markers, and completion date.
  • Financial analysis: start‑up costs, projected income statement, opening balance sheet, cash‑flow projections, break‑even analysis.
  • Funding plan: sources of capital, funding vs. financing, and repayment considerations.
  • Risk analysis and mitigation: likely obstacles and contingency plans.
  • Findings and recommendations: consolidated conclusions and a clear go/no‑go decision.

Step-by-Step Guide to Conducting a Feasibility Study

  1. Preliminary analysis
  2. Define the project and objectives.
  3. Gather initial stakeholder feedback and perform a high‑level market scan.

  4. Conduct a quick viability screen to determine whether to proceed.

  5. Detailed research and data collection

  6. Perform market research and stakeholder interviews.
  7. Inventory technical requirements and assess availability or procurement needs.

  8. Identify regulatory, zoning, or community considerations.

  9. Financial modeling

  10. Prepare projected income statements, cash‑flow analyses, and an opening balance sheet.
  11. Estimate capital requirements and operating costs.

  12. Evaluate ROI, payback period, and sensitivity to key assumptions.

  13. Operational and organizational planning

  14. Specify staffing and management needs.

  15. Draft operational processes and a project timeline with milestones.

  16. Risk assessment and contingency planning

  17. Identify vulnerabilities and develop mitigation strategies.

  18. Prepare credible alternatives if the primary option is infeasible.

  19. Synthesis and decision

  20. Compile findings into an executive summary with clear recommendations.
  21. Make a documented go/no‑go decision or propose a staged approach.

Tip: Always prepare at least one contingency plan to test as a viable alternative if the main plan proves infeasible.

Types of Feasibility

Feasibility studies commonly address four core areas:
– Technical feasibility — equipment, systems, and technical skills.
– Financial feasibility — costs, revenue forecasts, funding sources, and returns.
– Market feasibility — demand, competition, and growth projections.
– Organizational feasibility — structure, management, and human capital.

Examples (Summarized)

  • University science building: A university studied options to modernize and expand an aging facility. The feasibility study assessed zoning, technology needs, student benefits, and financial options (bonds, endowment). Projections showed increased enrollment and tuition revenue, supporting a go decision.
  • Regional high‑speed rail: A multi‑jurisdictional feasibility study examined governance, public engagement, technical and environmental issues, and funding strategies. Estimated costs ranged widely ($24–42 billion), with funding staged across public grants and private financing. The report identified regional economic benefits, enhanced connectivity, and potential funding pathways.

Who conducts feasibility studies?

  • Internal teams: senior managers, project managers, finance and technical staff.
  • External consultants: used when specialized expertise or impartial analysis is required.

Main objective

To determine whether a proposed project or investment is likely to succeed by quantifying costs, benefits, risks, and resource needs—and to provide a reliable basis for a go/no‑go decision.

Conclusion

A well‑executed feasibility study reduces uncertainty, clarifies resource needs, identifies risks and mitigation strategies, and produces the financial and operational evidence decision‑makers need. It is an essential step before major investments or strategic changes.