A feasibility study is a very important and integral part of the preparation of most business processes. It doesn’t matter if it is a product, service, performance of any work, this document will help to implement the plan. The scope of this method is very wide. It is used in business planning, in applications for credit for business, as well as in project management. Any project will require the development of a feasibility study, and its absence will turn the work into a waste of time.
So what is this?
A feasibility study is a reflection on paper of how potentially effective and appropriate the implementation of the project will be. Very often a feasibility study is used for a feasibility study. So, it includes calculations, analysis, various estimates of the return on investment, own funds, various expert methods of estimates and forecasting, depending on the project, can be applied. The feasibility study can be applied both in the development of new products and in the improvement or modernization of old ones. The same applies to the construction or organization of production, a feasibility study can help make a choice when acquiring or creating certain production capacities, if any.
Feasibility study and business plan: so what are the differences?
Since there are so many variations and structures for a feasibility study and several popular structures and examples for business plans, depending on the purpose and specific product, the main difference should be highlighted.
The feasibility study is still just the calculations and forecasts, it does not have a detailed description of the product, there are optimal and accurate estimates, formulas and explanations are used for them. For example: the company expressed the idea to buy equipment - in this case, a feasibility study is being developed. If it was decided to open an enterprise, a business plan is developed.
Feasibility Study Example
As a rule, the feasibility study of the project consists of many components. Elements may be similar to a business plan, but still different. Here is a structural example of a feasibility study:
- Project summary (purpose, essence, organizers, performers, sources of funds).
- Description of the organization and field of activity (general information, financial statements, personnel data, management structure, partners, prospects).
- The key idea of the project (relevance, essence, future potential).
- Description of the project result (products; works; services, including their purpose, characteristics, competitiveness data).
- Technology and engineering design (administrative, production, human resources, including schemes for their interaction, as well as various estimates, including one-time fixed and variable costs, indication of production technology, project implementation schedule, description of the necessary work).
- Production program (production volume, prices, markets).
- Financing scheme (full description of all sources of funds).
- Commercial feasibility (preparation costs and various periods of the project, estimated revenue, income, profit indicators).
- Performance indicators (various indicators related to payback and costs, estimated profit, project sustainability).
Remember, this example is just a recommendation and an approximate feasibility study. Most of the above methods are expert and require the implementation of qualified specialists in a particular area, also some projects may include other indicators or not include some of the above components.
When do you need a feasibility study for a project?
Situations are different, as is the degree of importance of a given task. In fact, the feasibility study is the calculation of potential or desired changes associated with the cost of the implementation of a project. This is an excellent tool for answering questions related to the decision regarding whether it makes sense to implement the project or not. The feasibility study answers the following questions:
- Will the project be profitable?
- How risky is the project?
- What is the project payback period?
- What solutions are required for the implementation of the project?
Registration
As for design, there is no single answer to this question. The design will depend on two specific factors, namely, the case and requirements agreed upon with the structure for which the feasibility study is being prepared. A case is understood as a specific project, for example, for a small service or product there will be one design conditions, and for the implementation of a megaproject, completely different, more serious and large-scale calculations and analyzes will be required. As for the requirements, then everything will depend on who the project is coordinated with. For example, if you are doing a feasibility study for potential investors or lenders, then you will need to pay more attention to the cost-effectiveness of the project and calculation, and if the development is related to the release of new products that are carried out at your own expense, the emphasis will be on marketing research and product quality .
Feasibility study in project management
The development of a feasibility study for a project is the key to starting any project. Without it, the project will not go beyond the concept stage and, accordingly, will not be implemented. Moreover, a well-executed feasibility study of the project will help in implementation, will become a supporting document at all stages, will help protect the organization implementing the project from various force majeure circumstances associated with incorrect calculations or a sudden lack of funds.
