A
feasibility study is simply an assessment of the practicality of a proposed
project plan or method. This is done by analyzing technical, economic, legal, operational and
time feasibility factors. Just as the name implies, you’re asking, “Is this
feasible?” For example, do you have or can you create the technology to do what
you propose? Do you have the people, tools and the
resources necessary? And, will the project get you the ROI you expect?
When
should project managers do a feasibility study? It should be done
during that point in the project management life cycle after the business
case has been completed.
So, that’s
the “what” and the “when” but how about the “why?” Meaning, why do you need a
feasibility study? Well, it determines the factors that affect project
feasibility, making it pretty important.
What Is Included in a Feasibility Study Report?
The findings
of your project feasibility study are compiled in a feasibility report that
usually includes the following elements.
1.
Executive summary
2.
Description of product/service
3.
Technology considerations
4.
Product/service marketplace
5.
Marketing strategy
6.
Organization/staffing
7.
Schedule
8.
Financial projections
9.
Findings and recommendations
Types of Feasibility Study
·
Technical Feasibility: Consists in determining if your
organization has the technical resources and expertise to meet the project
requirements.
·
Economic Feasibility: You’ll need to do an assessment of
the economic factors of your project to determine its financial viability. You
can use a cost-benefit analysis to compare its financial costs
against its projected benefits.
·
Legal Feasibility: Your project must meet legal
requirements. That includes laws and regulations that apply to all activities
and deliverables in your project scope.
·
Operational Feasibility: Operational feasibility refers
to how well your project matches your organization’s capacity planning,
resources, strategic goals and business objectives.
·
Time Feasibility: Estimate the time that will take to
execute the project and set deadlines. Then think how your project timeline
fits with your current operations, such as your demand planning, production
schedule, among many other things.
7 Steps To Do a Feasibility Study
1. Conduct a Preliminary
Analysis
Begin by
outlining your project plan. You should focus on an unserved need, a
market where the demand is greater than the supply, and whether the product or
service has a distinct advantage. Then you need to determine if the feasibility
factors are too high to clear (i.e. too expensive, unable to effectively
market, etc.).
2. Prepare a Projected
Income Statement
This step
requires you to work backward. Start with what you expect the income from the
project to be and then what project funding is needed to achieve that goal.
This is the foundation of an income statement. Things to take into account here
include what services are required and how much they’ll cost, any adjustments
to revenues, such as reimbursements, etc.
3. Conduct a Market
Survey, or Perform Market Research
This step is
key to the success of your feasibility study, so make your market analysis as
thorough as possible. It’s so important that if your organization doesn’t have
the resources to do a proper one, then it is advantageous to hire an outside
firm to do so.
The market
research is going to give you the clearest picture of the revenues and return
on investment you can realistically expect from the project. Some things to
consider are the geographic influence on the market, demographics, analyzing
competitors, the value of the market and what your share will be and if the
market is open to expansion (that is, response to your offer).
4. Plan Business
Organization and Operations
Once the
groundwork of the previous steps has been laid, it’s time to set up the
organization and operations of the planned project to meet its technical,
operational, economic and legal feasibility factors. This is not a superficial,
broad-stroke endeavor. It should be thorough and include start-up costs, fixed
investments and operating costs.
These costs
address things such as equipment, merchandising methods, real estate,
personnel, supply availability, overhead, etc.
5. Prepare an Opening
Day Balance Sheet
This
includes an estimate of the assets and liabilities, one that should be as
accurate as possible. To do this, create a list that includes items, sources,
costs and available financing. Liabilities to consider are such things as
leasing or purchasing of land, buildings and equipment, financing for assets
and accounts receivables.
6. Review and Analyze
All Data
All these
steps are important, but the review and analysis are especially important to make
sure that everything is as it should be and nothing requires changing or
tweaking. So, take a moment to look over your work one last time.
Reexamine
your previous steps, such as the income statement, and compare it with your
expenses and liabilities. Is it still realistic? This is also the time to think
about risk, analyzing and managing, and come up with any contingency
plans.
7. Make a Go/No-Go
Decision
You’re now
at the point to make a decision about whether the project is feasible or not.
That sounds simple, but all the previous steps lead to this decision-making
moment. A couple of other things to consider before making that binary choice
is whether the commitment is worth the time, effort and money and is it aligned
with the organization’s strategic goals and long-term aspirations.
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