Business feasibility studies look at the viability of a set of ideas with a direct emphasis on identifying the key problem areas. The key question that an effective Feasibility Study needs to address is: Will the idea work and should you proceed with it? A feasible study addresses the positioning in the market space of a product, its main clientele, pricing models, and where and how the business will operate. It some instances feasibility studies also has a technical component built into them, requiring an understanding of how a specific technology will work based on a specific business model. It provides in-depth analysis on the business and develops ways in which it can succeed at optimal levels. It can also become a very powerful tool for raising private as well as bank-based capital. Feasibility studies can be used in many ways but primarily focus on proposed new business ventures. Tech firms and others with a business idea should undertake a feasibility study to determine the viability of their idea before proceeding with the development of a business. Determining early that a business idea will not work saves time, money, and heartache later. A feasible business venture is one where the business will generate adequate cash flow and profits, withstand the risks it will encounter, remain viable in the long-term, and meet the goals of the founders. The venture can be either a start-up business, the purchase of an existing business, an expansion of current business operations, or a new enterprise for an existing business.
Feasibility Studies can provide your organization with valuable data before entering a new market both domestically and internationally. They allow you to analyze the expenditures and create a set of cash flow requirements, and exit strategies before your organization is too committed to a project. It provides an organization with the ability to shift courses before major infrastructure investments are committed. Good feasibility studies look at the relationship between the costs associated with entering a business venture and the value that is produced. HafeziCapital feasibility studies have included business development, new market entry both domestically and internationally, real estate development and re-development ventures, and technology investments. Hafezi Capital’s Feasibility Studies have been used by nonprofits, corporations, governments, and NGO’s as a means to understand new project cost, and to obtain bank financing. Many times the underwriting department of banks have hired us to help them in their decision making process. Thus, our analysis is relied upon to determine the validity of project, and its type of financing.
The feasibility study outlines and analyzes several alternatives or methods for achieving business success. The feasibility study helps to narrow the scope of the project to identify the best business scenario(s). The business plan deals with only one alternative or scenario. The feasibility study helps to narrow the scope of the project to identify and define two or three scenarios or alternatives. The person or business conducting the feasibility study may work with the group to identify the “best” alternative for their situation. This becomes the basis for the business plan. The feasibility study is conducted before the business plan. A business plan is prepared only after the business venture has been deemed to be feasible. If a proposed business venture is considered to be feasible, a business plan is usually constructed next that provides a “roadmap” of how the business will be created and developed. The business plan provides the “blueprint” for project implementation. If the venture is deemed not to be feasible, efforts may be made to correct its deficiencies, other alternatives may be explored, or the idea is dropped.
The data within a feasibility study will help with:
- Key ingredients to business success
- Identify logistical, technical requirements and other business-related problems and solutions
- Develop market positioning strategies
- Develop Correct Pricing model for survivability
- Present a comprehensive plan to investor(s) for raising capital; and
- Serve as a key foundation pillar for developing a viable and realistic business plan
Well-developed Feasibility studies contain a comprehensive, and detailed plan about your business structure, your products and services, the market, delivery logistics, the financial resources needed to implement it correctly, and ways to run the business efficiently.
Five Key Areas
A good feasibility study will be broken down into five key areas, namely:
- Technical Feasibility – this component of the study reviews the technical resources required or available to the organization to implement the business model. Technical feasibility ensures that the organization has the resources, environment, human capital, and raw resources to implement the business model in a financially lucrative way. Technical feasibility will align technical requirements with business requirements to ensure that the cash flows are sustainable.
- Economic Feasibility – helping organizations assess the project’s viability, cost, and benefits associated with the project before financial resources are allocated. It helps decision-makers determine the positive economic benefits to the organization that the proposed new business endeavor will provide, and helps quantify them. If this is undertaken in an emerging market, the various economic barriers need to be analyzed to ensure project success.
- Legal Feasibility – investigates if the proposed system conflicts with legal requirements and laws associated with the country in which you are engaging in business and the home country of the organization.
- Operational Feasibility – reviews the organizational structure, human capital, and financial demand, reliability, maintainability, supportability, usability, dispensability, sustainability, affordability, and implementability of the project. It brings together the entirety of the companies capabilities and provides the outline to senior managers. The aim is to analyze and determine if your business needs can be fulfilled by using the proposed solution. It also measures how well the proposed system solves problems and takes advantage of the opportunities identified during scope definition.
- Scheduling Feasibility is the modeling of the project’s implementation timeline. Projects that go over and are too expensive require more money. Thus, ensuring the correct timeline with the resources offered is key to project success. Scheduling requires an estimation of how much time the system will take to complete, and with our technical skills.
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