A Feasibility Study is an in-depth analysis that examines all the crucial elements of a planned project in order to evaluate the probability of its success.
The success of a business can be measured primarily in terms of the return on investment which is the notion that the venture will produce enough profits enough to justifies the expenditure. However, other significant aspects can be assessed in the positive or negative side, including the reaction of the community and environmental impact.
Even though feasibility studies may assist project managers to determine the potential risk and benefits of taking actions, a number of steps must be taken into consideration prior to taking the next step.
Understanding a Feasibility Study
An feasibility report is a study of the viability of a planned program or idea. A feasibility study examines the feasibility of a venture to determine if the plan will be successful. The study also aims to determine the potential problems and challenges that could be encountered when pursuing the venture.
In the course of the analysis of feasibility, the project manager need to be able to determine if they have the right combination of the right personnel in place, financial resources, and technological resources. The study also needs to determine the ROI of investment and whether it is measured as a profit for the project or as a social benefit for instance, for an organization that is not for profit.
The feasibility study could include the cash flow analysis that measures the amount of cash that is generated by revenue and what the venture’s operating expenses. The risk evaluation should also be conducted to determine if the potential return is sufficient to offset the risk involved in pursuing the project.
Benefits of a Feasibility Study
There are many benefits to feasibility studies, such as helping project managers understand the advantages and disadvantages of implementing an initiative prior to investing significant amounts of capital and time into it.
Studies on feasibility can be a great way to provide the management team with vital data that will keep them from engaging in an unwise business venture.
These studies aid companies in determining the best way to grow. They will be able to know the way they conduct business, what the possible challenges are, who their rivals are and what the marketplace is.
Feasibility studies can also convince banks and investors that investing in a certain project or company is the best option.
How to Conduct a Feasibility Study
The format and structure of a feasibility report will depend on the kind of business that needs it. However, the same variables are considered regardless of the weighting they are assigned.
Preliminary Analysis
While every project may have its own goals and requirements but there are some recommended methods to conduct the feasibility studies:
Conduct a preliminary study that includes getting feedback on the new idea from the relevant stakeholders
Ask questions and analyze the information gathered in the beginning of the research to make sure it’s reliable
Conduct an market survey or market study to discover the demand in the market and the opportunities to pursue the project or business
Create an organizational, operational or business plan which includes identifying the amount work required, and at what price, and for how long
Create a projected income statement that includes operating costs, revenue and profits
Make an opening balance sheet.
Recognize obstacles and potential security risks, and the best way to address these
Create an initial “go” or “no-go” option for moving forward in the direction you have chosen.
Suggested Components
After all due diligence is completed, the actual work can begin. The components that typically appear in a feasibility report include the following:
Executive summary: Create an outline of the details of the project or product service, plan or business.
Technology-related considerations: Ask yourself what you need to do. Are you using it? If not, are you able to purchase it? What is the cost?
Markets in place: Study the market in your area and beyond for the item or service, or business.
Marketing strategy: Explain the strategy in detail.
Staffing requirements What is the requirements for human capital in this undertaking? Create the organizational charts.
Plan and timeline include significant milestones to mark the date of completion.
Project financials.
Conclusions and suggestions Divide into parts of marketing, technology finance, organization, and.
Examples of a Feasibility Study
Here is a couple of examples from feasibility study. The first is a plan for expansion for the university. The second one is a real-world case carried out by Washington State Department of Transportation using private donations from Microsoft Inc.
A University Science Building
University officials were concerned that the science building built in the 1970s was outdated. With the technological and scientific developments of the past twenty years, the university sought to investigate the costs and benefits of modernizing and expanding the structure. The feasibility research was carried out.
The preliminary analysis revealed that school officials considered a variety of alternatives, and weighed the advantages and cost of expanding and upgrading Science building. Certain school officials were concerned about the proposed project in relation to the costs and potential opposition from the community. The science building proposed for the new building would be considerably larger as well as the board of community members has previously denied similar proposals. The feasibility study must to address these issues and any possible legal or zoning concerns.
It also analyzed the technological requirements for the science center, its advantages to students, and the future sustainability of the school. A modernized science facility could increase the school’s scientific research capabilities, enhance its education program, and attract new students.
The financial projections revealed the costs and size of the project as well as how the school would get the money needed by the issue of an investment bond and drawing from the endowment fund of the school. The projections also highlighted how the expansion would enable more students to participate in science-related programs which would increase revenues from fees and tuition.
The feasibility study proved that the idea was feasible which opened the way to taking action on the expansion and modernization plans for the building for science.
If they hadn’t conducted a feasibility study the school’s administrators wouldn’t have been able to determine if the expansion plans they had in mind were viable.
A High-Speed Rail Project
The Washington State Department of Transportation has decided to undertake a feasibility study of an idea to build an ultra-fast rail system that would bring together Vancouver, British Colombia, Seattle, Washington, and Portland, Oregon. The aim was to develop an environmentally sustainable transportation system that would enhance the future competitiveness and economic growth in Pacific Northwest. Pacific Northwest.
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The initial analysis provided the governance framework that will guide future decisions. The study focused on identifying the most efficient governance model by interviewing experts and other stakeholders, examining the governance structure, and taking lessons from the existing high-speed rail projects across North America. In the end, the governing and coordination entities were designed to oversee and oversee the project when they were approved by the legislature of the State.
The strategic engagement plan incorporated an equal approach to the public elected officials, federal agencies as well as advocates, business leaders and indigenous communities. The engagement plan was developed to be flexible, taking into consideration the scale and extent of the project, as well as the many cities and towns will be involved. A team of Executive Committee members formed . They discussed strategies, the lessons gained from previous projects, and consulted with experts to design an outreach plan.
The financial aspect of the feasibility study laid out the method of securing project’s financing, and included the possibility of securing funds from the federal, state and private investors. The cost of the project was estimated to be between $24 billion and $42 billion. The earnings generated by the high-speed rail network was estimated to be between $160 million to $250 million.
The report split the funding sources, separating financing from funding. The term “funding” refers to grantsand appropriations made by the state or local government, as well as revenue. Financing refers to bond issued by government and loans from financial institutions as well as equity investments that are basically credit against future revenue which must be repaid with interest.
The sources of capital required were likely to change as the project progressed. In the beginning the majority of funding came from the government. Later, as the project progressed financing was sourced from private contributions and financing strategies. Private contributors include Microsoft Inc., which contributed more than $570,000 to the project.
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The benefits highlighted in the feasibility report indicate that the region will experience increased interconnectivity, which would allow to better manage the population , and boosting regional development by the sum of $355 billion. The new transportation system will give people access to higher-quality jobs as well as more affordable housing. High-speed rail would help to alleviate congestion in areas that are prone to the traffic of automobiles.
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The timetable for the study began in 2016 , when an agreement was signed by British Columbia and British Columbia to work together on an innovative technology corridor that included high-speed rail transport. This feasibility analysis was sent before Washington State’s Washington State land Legislature in December of 2020.
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What Is the Main Objective of a Feasibility Study?
The feasibility studies are created to assist decision makers in determining the likelihood that a proposed investment or project will be successful. It will reveal both the existing cost and expected benefits.
In the world of business, “successful” means that the financial gain is greater than the expense. For nonprofits it is possible to measure success in different ways. The benefits a project brings to the community it serves could be worth the expense.
What Are the Steps in a Feasibility Study?
A feasibility study begins by conducting a preliminary analysis. The stakeholder is interviewed and market research done, and a business plan is created. All this data is then analyzed to determine the first “go” or “no-go” decision.
If all goes well then the actual research will begin. This involves identifying the technological aspects, looking at the market, describing the marketing strategy, as well as describing the required people capital, project plan and financing needs.
Who Conducts a Feasibility Study?
A feasibility study can be carried out by a group of senior management from the company. If they do not have the knowledge or time to complete the task internally, it can be contracted out to an expert.
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What Are the 4 Types of Feasibility?
The study evaluates the feasibility of four elements of a proposal:
Technical Information about the equipment and software required as well as the expert labor needed to get them working.
Financial: A rough estimate of the total cost of the entire project as well as the expected yield.
Market: A study on the marketplace for the item or service and the industry, as well as competition as well as consumer demand, sales forecasts, growth forecasts and forecasts.
Organizational: A description of the structure of the business along with the managerial team to be required.
