Project Feasibility Study: Starting From The Preliminary Study to The Detailed Feasibility
Any project that begins with an idea that comes to one’s mind to establish a specific commercial activity to produce a commodity or provide a specific service. But before embarking on the implementation of any business idea, we first need to know whether it is profitable? Is there a place for it in the market? A project feasibility study is what will answer these questions, as it is the only way to test the viability of any idea for investment.
Not doing a feasibility study for the project is one of the strongest reasons for the high rate of commercial failure in small businesses and projects! A number of those who jump directly to implement the idea after being personally convinced of it, believing that the small project does not need a study. Some try to study the feasibility of their ideas, but they are either superficial or incorrect.
The importance of a project feasibility study
We will explore the following key points that highlight the importance of a feasibility study before starting any business:
* Help determine the profitability of a business. Before starting a business, entrepreneurs and investors are supposed to know if this business is worth the investment of their time, effort, and resources. Many entrepreneurs give up on solid business ideas just because profitability cannot be ascertained when a full feasibility study is done on the business idea.
* Feasibility studies can also serve as a basis for developing the project’s business plan and marketing plan, both of which you’ll also need to carry out the project.
* They help determine the amount of capital required to start a business. It will also help you plan the budget, working capital and cash flow projections for the company.
* Estimate the financial, human and technological resources needed to ensure a successful business start-up. The feasibility study helps to reveal the number and skill level of workers to be employed and their salary scale.
* Helps identify business flaws and challenges, strengths and weaknesses, opportunities and threats, and unforeseen circumstances that may affect the success and sustainability of the business venture.
* Help in obtaining financing. For the project idea to gain the confidence of potential investors and financiers and succeed in obtaining financing, the feasibility study proves that the project is economically feasible.
Pre-feasibility study of the project
The initial feasibility study is based on a preliminary analysis of the project idea to check whether the idea is really worth doing a feasibility study. Through it, a decision is reached to either abandon the project or move to a detailed project feasibility study.
Evaluate potential customer demand
If you’re thinking of selling your cherry jam in your area, start your search by visiting grocery stores and scanning their shelves. Do they have a crummy offer with very few jam products? This may mean that there is no demand for your product.
After that, go to the Internet. Do a keyword research for your product if you plan to sell it online. If it seems like a lot of people are running a business selling cherry jam or a similar product, there is a good chance there is something you intend to sell.
Are there any restrictions, monopolies or other reasons that prevent the availability of a factor of production or its availability at a high cost?
Find out who you’re up against. Let’s say you want to sell your jam at your local farmer’s market. Stop by the market at least twice, once on the busiest day and once on the slowest day. Find out how many, if any, vendors sell jam, and sample their products.
You should be able to judge fairly easily if your product is distinct or unique from the one you will encounter. If you are planning to sell your product online, make sure there is a leading brand that is dominating the market and already has a loyal customer base, then test it out.
Detailed feasibility study
This stage is more detailed, accurate and comprehensive. It is like a detailed report that includes all aspects of the proposed project, on the basis of which a decision is made either to abandon the project completely or move to the implementation stage.
What are the components of a detailed feasibility study?! The integrated feasibility study covers six parts, starting from the project description, passing through the market feasibility, then technical and financial feasibility, up to the organizational and administrative feasibility, and finally the conclusions:
Description: Planning for the business, products and services that you provide in general, and how to reach the final form to present them to potential customers?!
Market viability: Description of the industry, current and future market potential, competition, estimates of sales and potential buyers.
Technical feasibility: This element includes details of how the company will deliver the goods or services, including transportation, business location, required technology, materials and labor.
Financial feasibility: This element includes the amount of financing or capital needed for the start-up, what sources of capital the company can use, and what is the return on investment.
Organizational and management feasibility: A definition of the corporate and legal structure of the company. This element may include information about the founders, their professional background, and the skills they possess to keep the company from succeeding or to keep it running.
Conclusions and final report.
How to carry out a project feasibility study on realistic scientific bases
First: Doing the feasibility study through another party and not participating in the development of the study is a big mistake. If you want to enter the world of commerce and really want success for your project, the feasibility study method is the most important thing that you must learn in order to be able to do the study yourself. You should strive to know the numbers and inputs that make up the feasibility study from the start. You also need to know customers, competitors, size and direction of the market. The feasibility study is a hypothetical model of what the real situation will be later. Understanding how to develop the study will make it easier for you to deal with your project when it is done.
Second: It is not possible to interpret a feasibility study in the absence of sufficient numbers and statistics from reliable sources. The feasibility study is based on statistics and numbers, and the inaccuracy of these numbers means the inaccuracy of the study. Unfortunately, we lack a lot of important studies and statistics that are not available from the official authorities. Be sure that these numbers are correct and remember that they are only hypotheses.
Third: Feasibility studies for new projects that introduce new products (goods or services) that are not available in the market, and are often incorrect. The lack of a similar product makes things more complicated when trying to make hypotheses about the amount of financial revenue. Predicting how much customers will want to buy a new product is not easy. In order to be able to approach the likelihood of demand for a new product, customer development methodologies must be applied, which aim to verify the presence of customers wishing to purchase the product before proceeding with product development.
Fourth: In order to make sure that your study includes all costs in all aspects and to avoid application surprises, you must build a Business Model. The business model must be inclusive of all aspects of the business.
Fifth: A project feasibility study is a study whose goal is the decision to start a business, but is the start all that you need? of course no. What is more important than starting the project is its continuity and success. Therefore, the feasibility study does not serve this interest. The conditions for the success and continuity of projects do not depend on numbers and assumptions only. Rather, it depends on plans and decisions. Therefore, before launching your project, you must make an integrated business plan that includes the strategies, tactics, and methodologies that will be used in the business process.
Sixth: Invest in yourself before you invest in anything else. Knowledge is the basis of success. No matter how comprehensive and positive the studies are, entering into a commercial project is entering a world that is difficult to predict, in which you will face many challenges and difficulties before the workflow system is stable and the wheel runs smoothly and easily. Therefore, only continuous learning enables you to overcome the pitfalls and take the right paths for a successful project that is able to continue with confidence and steadfastness.
Investment projects of all kinds go through several stages from the moment these projects are an idea in the mind of the investor until they end with the project, and it has become walking in the line drawn for it. The project feasibility study is the most important stage
The last thing you want is for the calculations in the feasibility study to be wrong or for big surprises to change your route to an unknown destination.
If you really want your project to succeed, the feasibility study method is the most important thing you must learn in order to be able to do the study yourself. You should strive to know the numbers and inputs that make up the feasibility study from the start. You also need to know customers, competitors, size and direction of the market. The feasibility study is a hypothetical model of what the real situation will be later. Understanding how to develop the study will make it easier for you to deal with your project when it is done.