Module 1: Nature of the Feasibility Study

Intended Learning Outcomes (ILO)

By the end of the module, the students are expected to: (SMART)

1. Discuss what is feasibility and different aspects needed in doing a feasibility study;
2. Distinguish the importance of the feasibility study prior to putting up a business; and
3. Differentiate the feasibility study and business plan.

Lecture Proper and Discussion

What is a Feasibility Study?

A feasibility study is the initial design stage to any project or plan. As the name implies, a
feasibility study is an analysis into the viability of an idea. Feasibility studies help answer the
essential question, “should we proceed with the proposed idea?” The objective study may be
completed in conjunction with a SWOT planning process, which looks at the strengths,
weaknesses, opportunities, and threats that may be present externally (the environment) or
internally (resources). Feasibility studies help determine:
a) Does the company possess the required resources or technologies; and
b) Does the proposal offer a reasonable return vs. risk from the investment.
Feasibility studies can be used in many ways but primarily focus on proposed business
ventures. Farmers and others with a business idea should conduct a feasibility study to
determine the viability of their idea before proceeding with the development of a business.
Determining early that a business idea will not work saves time, money and heartache later.
A feasible operating change or business restructure is one where the business will
generate adequate cash-flow and profits to withstand (a) the short-term risks it will encounter,
and (b) remain viable in the long-term to meet the goals of the owner/founders. The venture
might be an investment start-up or the purchase/expansion of an existing business, beyond its
present business footprint or enterprise.
Feasibility Study Outline is provided to give you guidance on how to proceed with the
study and what to include.
A feasibility study is only one step in the business idea assessment and business
development process. Reviewing this process and reading the information below will help put
the role of the feasibility study in perspective.

Contents of a Feasibility Study

The most-common feasibility study should include the following sections:
 An Executive Summary
 Description of Product or Service

 Technology Considerations

 Product or Service Marketplace

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  Identification of Specific Market

 Marketing Strategy

 Organization Structure

 Schedule

 Financial Projections

Companies should be careful to NOT blindly follow feasibility templates. A well-designed

feasibility study is one that is focused upon and centered on the business organization.

Types of Feasibility Studies

 Technical – hardware and software; existing or new; staffing skills
 Financial – initial and future stakeholder investors; ROI benchmarks

 Market- industry type; marketing characteristics; market growth; competition environment;

sales projections

 Organization- structure; legal; management team’s competency

Typical Steps to a Feasibility Study

1. Preliminary Analysis
To efficiently evaluate alternatives, a pre-feasibility study is often conducted after
discussing a series of business ideas or scenarios. This pre-feasibility study helps to “frame”
and “flesh-out” specific business scenarios, with only some studied more in-depth. It is not
unusual that during this preliminary analysis, the number of business alternatives under
consideration is reduced from the initial starting point.
During this first step to the feasibility process you may investigate a variety of ways to
organize the business and/or to position the product in the marketplace. It is like an exploratory
journey and you may take several paths before you reach your destination. Just because the
initial analysis is negative does not mean that the proposal does not have merit. Sometimes
limitations or flaws in the proposal can be corrected.
If the findings lead you to proceed with the feasibility study, your work may have resolved
some basic issues. A consultant may help you with the pre-feasibility study, but you should be
involved. This is an opportunity for you to understand the issues of business development.
2. Market Assessment
A market assessment may be conducted that will help determine the viability of a
proposed product or service in the marketplace. The market assessment will also help to identify
demand in the market, and at what price. If no opportunities are found, there may be no reason
to proceed further with the feasibility study. If opportunities are found, the market assessment
can give focus and direction in the construction of business scenarios to investigate in the
feasibility study. A market assessment will provide much of the information for the marketing
feasibility section of the feasibility study
3. Organizational Structures
This step in the feasibility analysis pertains to organization. Staffing requirements,

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including management and labor alignment are studied. How many workers are needed for how
long? What other resources will be needed?
4. Financial Controls
It is important to formalize an opening day balance sheet. In this step, first efforts at
projected revenues and expenses are attempted.
5. Points of Vulnerability
Factors that are internal to the project and represent vulnerability to the project’s short-
term or long-term steps should be reviewed and analyzed. These points then can be controlled
or otherwise eliminated.
6. Results and Conclusions
The conclusions of the feasibility study should outline in-depth the various scenarios
examined. The project leaders need to carefully examine the feasibility study and challenge its
underlying assumptions. This is the time to be skeptical.
Don’t expect one alternative to "jump off the page" as being the best scenario. Feasibility
studies do not suddenly become positive or negative. As you accumulate information and
investigate alternatives, neither a positive nor negative outcome may emerge. The decision of
whether to proceed is often not clear cut. Major stumbling blocks may emerge that negate the
project. Sometimes these weaknesses can be overcome. Rarely does the analysis come out
overwhelmingly positive. The study will help you assess the trade-off between the risks and
rewards of moving forward with the business project.
Remember, it is not the purpose of the feasibility study or the role of the consultant to
decide whether or not to proceed with a business plan. It is the role of the project leaders to
make this decision, using information from the feasibility study and input from consultants.
7. Go/No-Go Decision
The go/no-go decision is one of the most critical in business development. It is the point
of no return. Once you have definitely decided to pursue a business scenario, there is usually no
turning back. The feasibility study will be a major information source in making this decision.
This indicates the importance of a properly developed feasibility study.

Feasibility Study vs. Business Plan

A feasibility study is not a business plan. The separate roles of the feasibility study and
the business plan are frequently misunderstood. The feasibility study provides an investigating
function. It addresses the question of "Is this a viable business venture?" The business plan
provides a planning function. The business plan outlines the actions needed to take the
proposal from "idea" to "reality." Writing a Business Plan, offers more discussion of the drafting
a business plan.
The feasibility study outlines and analyzes several alternatives or methods of achieving
business success. The feasibility study helps to narrow the scope of the project to identify the
best business scenario(s). The business plan deals with only one alternative or scenario. The
feasibility study helps to narrow the scope of the project to identify and define two or three
scenarios or alternatives. The person or business conducting the feasibility study may work with
the group to identify the "best" alternative for their situation. This becomes the basis for the
business plan.
The feasibility study is conducted before the business plan. A business plan is prepared
only after the business venture has been deemed to be feasible. If a proposed business venture
is considered to be feasible, a business plan is usually constructed next that provides a "road-
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map" of how the business will be created and developed. The business plan provides the
“blueprint” for project implementation. If the venture is deemed not to be feasible, efforts may be
made to correct its deficiencies, other alternatives may be explored, or the idea is dropped.

Reasons to Do or Not to Do a Feasibility Study

Project leaders may find themselves under pressure to skip the "feasibility analysis" step
and go directly to building a business. Individuals from within and outside of the project may
push to skip this step. Reasons given for not doing a feasibility analysis include:
 We know it’s feasible.  An existing business is already doing it.
 Why do another feasibility study when one was done just a few years ago?

 Feasibility studies are just a way for consultants to make money.

 The market analysis has already been done by the business that is going to sell us the
equipment.

 Why not just hire a general manager who can do the study?

 Feasibility studies are a waste of time.  We need to buy the building, tie up the site and
bid on the equipment.

The reasons given above should not dissuade you from conducting a meaningful and
accurate feasibility study. Once decisions have been made about proceeding with a proposed
business, they are often very difficult to change. You may need to live with these decisions for a
long time.
Conducting a feasibility study is a good business practice. If you examine successful
businesses, you will find that they did not go into a new business venture without first thoroughly
examining all of the issues and assessing the probability of business success.
Below are other reasons to conduct a feasibility study.
 Gives focus to the project and outline alternatives.
 Narrows business alternatives

 Identifies new opportunities through the investigative process.

 Identifies reasons not to proceed.

 Enhances the probability of success by addressing and mitigating factors early on that
could affect the project. 

 Provides quality information for decision making.

 Provides documentation that the business venture was thoroughly investigated.

 Helps in securing funding from lending institutions and other monetary sources.

 Helps to attract equity investment.

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Suggested Activities (SAs)

Pre-recorded video
Collaboration
Online assessment

Assessment Tasks / Output (ATOs)

1) Quiz through Google forms

2) Activity

Readings and Other References

www.extension.iastate.edu/agdm

https://www.projectmanager.com/training/how-to-conduct-a-feasibility-study

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