What is Feasibility Study and its Steps?
Feasibility study steps
Before making a decision about starting a project, you need to analyze whether this decision is practical and guarantees profits. Here comes the role of feasibility studies that help you make better decisions for your project and get better results. In this article, we will discuss the nature and steps of a feasibility study, and how you can conduct it yourself.
What is a feasibility study?
A feasibility study is a study conducted by organizations to determine whether or not a particular procedure is reasonable from an economic and operational point of view. This study also helps to understand the risks involved in some procedures and how to prepare for them.
A feasibility study is different from a business plan. A feasibility study helps existing projects formulate a plan to strengthen their operations or expand into new areas, while the latter outlines the steps needed to turn projects from idea to reality.
When do you use a feasibility study?
Companies usually conduct feasibility studies right before making a major strategic decision to ensure its correctness and effectiveness. Common cases in which companies use a feasibility study are:
- Launching a new product or service
- Change of business location
- Acquisition of another company
- Recruitment of new employees
- Make a big buying decision
What are the steps of a feasibility study?
To conduct a feasibility study, you need to follow the following five steps:
1- Perform the initial analysis
In the first step of the feasibility study, you have to do the initial analysis, i.e. think about the practical application of the procedure and what it entails. Some of the questions you must answer during this stage include:
- What is the aim of this project?
- What are the benefits of achieving this procedure?
- Is this procedure performed elsewhere?
- What are some risks of this procedure?
- What will you do to ensure the success of this project?
A proper feasibility study takes adequate time and resources. The purpose of conducting a preliminary analysis is to determine if a full feasibility study is worthwhile. If you decide that the action you want to take deserves further consideration, you can then proceed with the next feasibility study steps.
2- Create a study plan
You must now create an outline to outline each element in your feasibility study. The purpose is to identify the central elements of your studies and to establish a framework that you can refer to in the future. To create your outline, you should consider answering the following questions:
- Do I have the appropriate organizational structure to take this action?
- Do I have enough money to take this step?
- Do I have the appropriate technology needed to complete this project?
- Can I complete this project in a reasonable amount of time?
- What is the benefit of this procedure for the company?
- Have our competitors taken similar measures? If so, how did it go?
- What laws do I need to be aware of when taking this action?
Create a comprehensive outline that focuses on and answers each one of these questions in detail.
3- Conducting market research
Competition and market analysis is a productive way to determine whether a proposed action is feasible. This will allow you to know the advantages and risks of this procedure in the event that it was taken by a competing company before you.
Some common methods of conducting market research include:
- Send surveys
- Customer interview
- Expert interview
- Competition analysis
- Study social media trends
- Use of publicly available data, such as search trends
Sunshine Toys, for example, wants to launch a new children’s game. By conducting customer interviews and sending out surveys, they discovered the high interest of customers in the proposed game. They also discovered by analyzing the competition that there are no similar products yet, which makes it an open market.
4- Conducting organizational research
The next step of the feasibility study is to determine if your company can achieve it. One of the crucial elements to be examined is the financial aspect of the required procedure. During this stage, you should calculate how much you have to pay initially, what kind of long-term investments you need to make and any other additional costs. Consider things like material purchases, real estate investments, and personal changes.
Also check whether your current team can effectively implement the proposed action. They may need more training or additional staff to help.
Finally, determine if you have the right tools. Your process may require specific equipment or specialized techniques. You should also calculate the cost of this equipment and measure your team’s ability to use it effectively.
Once you complete this step, you should have a thorough understanding of whether you have the necessities to take action. This step will also reveal the changes that you need to consider before you can proceed with the procedure.
5- Analyze your results
The final step is to analyze the results, i.e. whether your company can handle the procedure or whether there is a market for it. Carefully reviewing and checking each part of the report allows you to see if the analyzed results are reliable and accurate and will best serve your project.
This is the step where you will decide if following this plan is feasible and what kind of risks are involved. If the results indicate that a suggested action is appropriate, you can now use your results to help you plan your next steps, such as creating a product outline or starting the recruitment process.
What prevents some ideas from moving to the operational stage is the complexity of this matter. Those that reach operational status within the first six months usually fail.
A feasibility study will help you prevent such an incident by helping you determine if the benefits of investing in the idea outweigh the risks. Here are the feasibility study steps you need to follow:
Idea generation
The first step of the feasibility study is to formulate a project idea, which you can get through market research or brainstorming. After narrowing down the number of ideas and keeping the most realistic ones, you will have to visualize the final product for your project, a process that entails analyzing the product’s target market, size, quality, color, and weight.
Data collection
You need to gather information about the quality of your product and the quantity your target market can buy, as well as the price. The search for information should also include gathering data about the workplace, social conditions, and laws relating to the product. Conducting a market survey is an effective method of gathering information through methods such as questionnaires, observation or interviews. You can also rely on records, publications, and library research.
technical stage
The third stage of the feasibility study steps enables you to determine whether your service or product can be produced from a technical perspective. According to startup expert Donncha Hughes, the successful implementation of the technical feasibility phase takes place in-house. He also urges the necessity of strict monitoring in cases where this stage takes place from some external source.
Submit the report
After confirming the effectiveness of the idea, submit the project report to the appropriate authorities, such as the board of directors or the CEO. Your report should contain clear recommendations regarding operational strategies for your business idea. Ensure that the report is data driven and provides a plan that will ensure the successful implementation of the project idea.