What is a Feasibility Study?
A feasibility study is a comprehensive evaluation of a proposed project
that evaluates all factors critical to its success in order to assess its
likelihood of success.
A feasibility study evaluates a project's or system's practicality. As part
of a feasibility study, the objective and rational analysis of a potential
business or venture is conducted to determine its strengths and
weaknesses, potential opportunities and threats, resources required to
carry out, and ultimate success prospects. Two criteria should be
considered when judging feasibility: the required cost and expected
value.
In a feasibility study, a proposed plan or project is evaluated for its
practicality. As part of a feasibility study, a project or venture is
evaluated for its viability in order to determine whether it will be
successful.
As the name implies, a feasibility analysis is used to determine the
viability of an idea, such as ensuring a project is legally and technically
feasible as well as economically justifiable. It tells us whether a project
is worth the investment—in some cases, a project may not be doable.
There can be many reasons for this, including requiring too many
resources, which not only prevents those resources from performing
other tasks but also may cost more than an organization would earn
back by taking on a project that isn’t profitable.
A well-designed study should offer a historical background of the
business or project, such as a description of the product or service,
accounting statements, details of operations and management, marketing
research and policies, financial data, legal requirements, and tax obligations.
Generally, such studies precede technical development and project
implementation.
Understanding A Feasibility Study
Project management is the process of planning, organizing, and
managing resources to bring about the successful completion of specific
project goals and objectives. A feasibility study is a preliminary exploration of
a proposed project or undertaking to determine its merits and viability. A
feasibility study aims to provide an independent assessment that examines
all aspects of a proposed project, including technical, economic, financial,
legal, and environmental considerations. This information then helps
decision-makers determine whether or not to proceed with the project.
The feasibility study results can also be used to create a realistic project plan
and budget. Without a feasibility study, it cannot be easy to know whether or
not a proposed project is worth pursuing.
Types of Feasibility Study
A feasibility analysis evaluates the project’s potential for success;
therefore, perceived objectivity is an essential factor in the credibility of the
study for potential investors and lending institutions. There are five types of
feasibility study—separate areas that a feasibility study examines, described
below.
1. Technical Feasibility
This assessment focuses on the technical resources available to the
organization. It helps organizations determine whether the technical
resources meet capacity and whether the technical team is capable of
converting the ideas into working systems. Technical feasibility also involves
the evaluation of the hardware, software, and other technical requirements
of the proposed system.
2. Economic Feasibility
This assessment typically involves a cost/ benefits analysis of the
project, helping organizations determine the viability, cost, and benefits
associated with a project before financial resources are allocated. It also
serves as an independent project assessment and enhances project
credibility helping decision-makers determine the positive economic benefits
to the organization that the proposed project will provide.
3. Legal Feasibility
This assessment investigates whether any aspect of the proposed
project conflicts with legal requirements like zoning laws, data
protection acts or social media laws. Let’s say an organization wants to
construct a new office building in a specific location. A feasibility study might
reveal the organization’s ideal location isn’t zoned for that type of business.
That organization has just saved considerable time and effort by learning
that their project was not feasible right from the beginning.
4. Operational Feasibility
This assessment involves undertaking a study to analyze and
determine whether and how well the organization’s needs can be met by
completing the project. Operational feasibility studies also examine how
a project plan satisfies the requirements identified in the requirements
analysis phase of system development.
5. Scheduling Feasibility
This assessment is the most important for project success; after all, a
project will fail if not completed on time. In scheduling feasibility, an
organization estimates how much time the project will take to complete.
When these areas have all been examined, the feasibility analysis helps
identify any constraints the proposed project may face, including:
Internal Project Constraints: Technical, Technology, Budget,
Resource, etc.
Internal Corporate Constraints: Financial, Marketing, Export, etc.
External Constraints: Logistics, Environment, Laws, and Regulations,
etc.
Importance of Feasibility Study
The importance of a feasibility study is based on organizational desire
to “get it right” before committing resources, time, or budget. A feasibility
study might uncover new ideas that could completely change a project’s
scope. It’s best to make these determinations in advance, rather than to
jump in and to learn that the project won’t work. Conducting a feasibility
study is always beneficial to the project as it gives you and
other stakeholders a clear picture of the proposed project.
Below are some key benefits of conducting a feasibility study:
Improves project teams’ focus
Identifies new opportunities
Provides valuable information for a “go/no-go” decision
Narrows the business alternatives
Identifies a valid reason to undertake the project
Enhances the success rate by evaluating multiple parameters
Aids decision-making on the project
Identifies reasons not to proceed
