What Does "Feasibility Study" Mean?
A feasibility study is a rigorous evaluation conducted by an entrepreneur or business owner before launching a new project. Its primary purpose is to assess the viability and chances of success of the proposed idea. A robust feasibility study clarifies the required investments, expected returns, and external factors affecting the project, such as state laws, market competition, and technical evolution.
The Relationship Between Feasibility Studies and Strategic Planning
While a feasibility study focuses on assessing a specific new project, strategic planning is broader. Strategic planning dictates the best fields and industries an organization should engage with in the coming years and how to compete effectively within them.
Despite this difference, they share significant similarities. Both require an in-depth analysis of the market, competitors, customers, and external factors. Both also assess available capabilities and culminate in projecting the expected financial returns.
Consulting Agencies vs. Pre-made Studies
When preparing a feasibility study, you have several options. You can hire specialized consulting firms, or utilize pre-made studies for typical projects. Hiring a consultant incurs a direct cost but provides a tailored and unique analysis for your project. On the other hand, relying on generic, pre-made studies often restricts you to traditional projects, limiting innovation and competitive differentiation.
Beyond Economic Feasibility: Analyzing Different Dimensions
It's a common misconception that feasibility is solely about economics. For information systems and modern business models, varying types of feasibility studies are necessary:
1. Organizational Feasibility
This focuses on how the proposed system or project supports the overall business strategy and priorities. It evaluates the extent of change the project will impose on the organization and its culture.
2. Technical Feasibility
This is required to ensure that the project’s technical needs can be met. It assesses the ability to acquire necessary equipment, develop software, and deliver technical solutions within the designated timeframe.
3. Economic Feasibility
This is the core analysis of costs versus benefits. It involves minimizing expected costs while maximizing revenues, profits, and intangible benefits. To evaluate investment opportunities, analysts weigh tangible costs against both tangible and intangible long-term benefits.
Conclusion
A feasibility study answers a single critical question: "Is this project worth pursuing?" By analyzing the idea from an organizational, technical, and economic standpoint, you minimize risk and chart a clear path to profitability. Don't skip this foundational step—it is the bedrock of successful entrepreneurship.
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