feasibility study

Mandeep Singh

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Definition of Feasibility Studies:

• As the name implies, a feasibility study is an analysis of the viability of an idea. The feasibility study focuses on helping answer the essential question of “should we proceed with the proposed project idea?” All activities of the study are directed toward helping answer this question.

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Definition…

• Before you begin writing your business plan you need to identify how, where, and to whom you intend to sell a service or product. You also need to assess your competition and figure out how much money you need to start your business and keep it running until it is established.

• Feasibility studies address things like where and how the business will operate. They provide in-depth details about the business to determine if and how it can succeed, and serve as a valuable tool for developing a winning business plan.

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Important of Feasibility Studies

• List in detail all the things you need to make the business work;

• Identify logistical and other business-related problems and solutions;

• Develop marketing strategies to convince a bank or investor that your business is worth considering as an investment; and

• Serve as a solid foundation for developing your business plan.

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Importance ….

• Even if you have a great business idea you still have to find a cost-effective way to market and sell your products and services. This is especially important for store-front retail businesses where location could make or break your business.

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Importance….

• For example, most commercial space leases place restrictions on businesses that can have a dramatic impact on income. A lease may limit business hours/days, parking spaces, restrict the product or service you can offer, and in some cases, even limit the number of customers a business can receive each day.

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Importance….

• If the results show that the project is not a sound business idea, then the project should not be pursued. Although it is difficult to accept a feasibility study that shows these results, it is much better to find this out sooner rather than later, when more time and money would have been invested and lost.

What is feasibility study?• Feasibility study – determines if the proposed solution is feasible and

achievable from a financial, technical, and organizational standpoint

Different types of feasibility studies– Economic feasibility study

• whether expected cost savings, increased revenue, increased profits, reductions in required investment, and other types of benefits will exceed the costs of developing and operating a proposed system

– Operational feasibility study• how well a proposed system supports the strategic business

priorities of the organization– Technical feasibility study

• determine if reliable hardware and software capable of meeting the needs of a proposed system can be acquired or developed by the business in the required time

Technical feasibility

Given that suitable technology does exist, the study must establish if the organisation already has the necessary resources. If not, the study must make clear what new resources the organisation would have to acquire. This will also involve determining whether the hardware and software recommended will operate effectively under the proposed workload and in the proposed environmental conditions

Further issues might include• the training of personnel to use the new system• consideration of service contracts• warranty conditions • the establishing of help desk facilities for inexperienced users

Economic feasibility This deals with the cost implications involved. Management will want to know • how much each option will cost• what is affordable within the company's budget • what they get for their moneyA cost-benefit-analysis is part of the budgetary feasibility study If the project is not cost-effective then there is no point proceeding

In the long term management will also want to know the 'break-even point' when the new system stops costing money and starts to make money

Operational feasibility

This has to do with any conflicts that might arise between the proposed system and legal requirements

• how would the new system affect contracts and liability•are health and safety issues in place • would the system be legal under such local laws as the UK Data Protection Act•What are the software licensing implications for the new system?

1. What is a tangible cost/benefit?2. What is an intangible cost/benefit?

• Tangible – costs or benefits that can be quantified

• Intangible – costs or benefits that can not be quantified

Cost/Benefit Analysis