A feasibility study is an analysis used in measuring the ability and likelihood to complete a project successfully including all relevant factors. It accounts for factors that affect it such as economic, technological, legal, and scheduling factors.
Project managers use feasibility studies to determine potential positive and negative outcomes of a project before investing a considerable amount of time and money into it.
The Concept of Feasibility Analysis
Feasibility analysis is a comprehensive research study required by the entrepreneur or his agent to determine the practicability, profitability and viability of the business idea.
Before jumping into a startup business, expanding an existing one, or even acquiring an existing one, it is very necessary to analyze the feasibility of that business.
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For whatever purpose, the main task of feasibility analysis is to express the model of the business and its marketability; check its prospect for financial profitability and success, and convey the managing group’s capability to implement and accomplish the business objectives
Feasibility analysis is therefore an overview of the business and a preliminary appraisal of the business idea to consider if it merits pursuing.
It reasonably reveals without prejudice the strengths and weaknesses of the business, its opportunities, and threats through the background, and the assets required to carry through as well as the eventual diagnosis for achievement.
A feasibility analysis provides the entrepreneur the opportunity to flesh up the initial business plan, and consider the missing and available features needed to be put in position for the business to succeed.
It is an opportunity to consider if it is visibly feasible and viable; despite the challenges, one is likely to experience and how to solve those challenges. The main concern and tools of feasibility analysis are the necessary expenditure and the profit to be accomplished. This means it is all about finance.
A new startup business requires some financial funding which comes in several unique categories of financing options.
Some universal and reliable funding sources easily available to most entrepreneurs are through the entrepreneur’s savings and personal bank soft loans, and financial support from friends and family which may or may not involve interests.
These are typically the first stage of financing whereby the entrepreneur invests his funds and raise funds from friends and family. For more ambitious businesses, the next stage source is usually funding from angel investors
These are private investors who use their capital to finance businesses. After this is the next stage of financing from institutional investors like venture capitalists companies who are specialists in funding new businesses for profitable gains.
Such venture capitalists also sometimes provide any observable potential weakness in the business. These include legal, marketing, or operational deficiencies that may be threatening the survival of the business.
Sometimes angel investors and Venture capital companies bargain cash exchanges for an equity stake in startup businesses struggling to start operating.
Reasons for Feasibility Analysis
Feasibility analysis is all about questioning your concept, ascertaining which components are in place to make it realistic to easily execute, and recognizing the biggest obstacles you’re likely to face.
Feasibility analysis mainly assists to:
1) Appraise the business marketplace for the new business idea;
2) Assess if the Managing team has the personality generally known as successful business persons. It is advisable to have a self-assessment first. One must have that personality suited, skilled, and knowledgeable to run a business and lead a group to success.
3) Identify the challenges of startups and how one can overcome those challenges,
Consider the financial feasibility of the business viz-a-viz its expected sales incomes, fixed and variable costs as well as break-even calculations;
4) Decide to continue with the business plan due to its viability and other attractions or not. Sometimes it takes asking oneself some bitter but pertinent questions about whether to scrap the idea if it is no longer as originally envisaged or needs to be amended, redirected, or altered immensely.
In this wise, an ingenious suitable feasibility analysis will supply the historical setting of the business, describe the products and services, the account/financial profile/data, information on its operations as well as management, marketing research, and strategy, including legal necessities.
In fact, for such serious research, all strata of the business are subjected to feasibility analysis, depending on the type.
In conclusion, before going into a venture or business, do your feasibility study. This will give you an idea of what you are likely to meet in the market.