Feasibility Study

Feasibility studies are preliminary investigations into the potential benefits associated with undertaking a specific activity or project. The main purpose of the feasibility study is to consider all factors associated with the project, and determine if the investment of time and other resources will yield a desirable result. While considered a preliminary study, it is not unusual for a feasibility study to be highly detailed.

When a business is considering a new operation or the launch of a new product, the feasibility study is a logical tool to employ before any resources are invested in the new project. One of the most important aspects of the study is to make sure that the total investment needed to successfully bring the project to completion is considered. Often, this will include addressing components such as cash reserves, labor, construction, production facilities, outsourcing, and the cost of raw materials. Only when the feasibility study has addressed the total cost of completing the project can the study progress to the next level.

As a second major component, the feasibility study will also address costs and other factors that are indirectly associated with the project. In the instance of creating a new product for sale, this second phase will look into the costs associated with reaching and cultivating a consumer base for the new product. The overall idea of these preliminary studies is to ensure that there is a reasonable understanding of what will be required to both create the new product and also successfully market the finished goods at a profit.

The utilization of a feasibility study has often assisted companies in understanding which projects to develop and which ones to abandon before investing resources in something that ultimately shows no promise of generating revenue. Taking the time to engage in a pilot or feasibility study does involve some usage of available resources, but these costs are much more readily absorbed than the larger amount that would be expended on a project that ultimately proved to be worthless.

For deeper knowledge on feasibility study, we highly recommend you to check out the book Feasibility Study Preparation and Analysis.