Products in the business world don’t emerge out of thin air. They are built out of ideas. For every product or service out there, someone first thought of an idea, and thereafter forged it into a successful business opportunity. In an ideal world, business ideas would not be subject to constraints. Everything would just work, and every company that originated in a garage would someday become a skyscraper. However, things work differently in the real world. Not every idea is a good idea, and there’s a fine line separating ambitious from far-fetched. So, how do enterprises determine which ideas are worth pursuing? In other words, how do businesses determine the feasibility of a solution? In layman terms, business executives bring together some really smart people (also known as analysts) and tell them to figure things out. This process of “figuring things” out is called a feasibility study.
How would an analyst define the feasibility study’s meaning?
A feasibility study is an analytical protocol that involves the evaluation of a proposed business idea. The study breaks down several variables and helps business owners decide whether they should or shouldn’t invest resources into a solution. A typical feasibility study would evaluate factors like finances, market conditions, return on investment, and possible roadblocks. Like most things in the business world, a feasibility study also has a succinctly defined structure that disintegrates the whole process into various stages.
A step-by-step breakdown of feasibility studies
Since we’ve established what the feasibility study meaning is, let’s discuss the various steps involved in the process.
Initial Analysis/Pre-Research Phase:-
Conducting a feasibility study requires considerable resources and manpower in itself. Thus, before going full swing with this analytical procedure, companies conduct a preliminary analysis of some prominent factors. The conclusion of this stage helps companies in determining if an idea even warrants the allocation of assets to a complete feasibility study. The pre-research to the actual market research involves asking some basic questions. They are:-
- Does the idea have the potential to become a viable solution to a pre-existing need in the market?
- If other solutions to the problem already exist, does the proposed solution offer any advantages?
- Is the problem big enough to warrant a new solution?
- Does any possible constraint make the solution highly improbable to succeed?
If the answers to the above-mentioned question present a need for further analysis, a feasibility study enters its next stage. Otherwise, the study comes to a curb and suggests that the proposed idea is not feasible.
Financial Projection Phase:-
If the preliminary analysis doesn’t debunk the idea into consideration, the financial concerns of the proposed project are turned into finite numbers. This stage of the study requires businesses to answer the following questions:-
- What will the resources necessary for the completion of the proposed project cost?
- Will will be the projected income for the company once the idea turns into a reality?
- How long will the project take to become profitable?
- How much revenue (within a set timeframe) must be generated to overcome the initial investment required for the project?
Each step of a feasibility study acts as an elimination round. If the financial viability of the idea doesn’t make sense, the later steps of the study are not executed.
Market Analysis Phase:-
Once a feasibility study reaches its third stage, the focus shifts from the inside of the company to the outside. In other words, the study analyses external variables that are likely to impact the project. It paints a clear picture of what market constraints need to be overcome to make the proposed project a success. Some questions that guide this step are as follows:-
- What are the cultural and geographical implications that the project will face?
- What is the success rate of similar solutions?
- How have competitors tackled finances when working on analogous ideas?
- What problems have the competitors failed to overcome, and is overcoming said problems viable without overspending resources?
- Does the proposed project have the potential for expansion in the future?
- How intensively should the project be advertised once it lands into the market?
This stage of a feasibility study will help you in lending a concrete shape to the financial goals formulated in the previous step. It will help businesses in determining whether the expected revenue targets are achievable or not.
Operational Analysis/Roadblock Determination Phase:-
Let’s say that we consult a feasibility study sample evaluating whether increasing budget allocation for customer services will skyrocket productivity or not. In this hypothetical situation, the following questions will shape out an operational analysis:-
- What other factors apart from a limited budget affect customer service?
- Can the mitigation of constraints apart from a limit budget render the intended outcome?
- Is the higher budget required for the purchase of new equipment, or for expanding the workforce?
- If the plan is to expand the workforce, are enough resources available to facilitate said expansion? If not, how can this paucity be accounted for?
- Can revamping the organizational structure solve the problem at hand. If yes, what will the new hierarchical structure be?
This stage of a feasibility study poses questions about how organizational structure impacts different aspects of an enterprise. The technical feasibility of the proposed solution is also taken into consideration. If all goes well until this point in the study, a feasibility study moves into its final stage.
At this point in the study, all data collected in the above-mentioned steps are viewed collectively. The following considerations are reevaluated:-
- Have the market conditions changed throughout the life cycle of the study?
- Does the projected income still add up after accounting for operational constraints and other roadblocks?
- What is the contingency protocol if the idea fails at the execution stage?
After the analysis of this data, the feasibility of the non-feasibility of an idea becomes crystal clear. However, if you don’t have significant experience in conducting feasibility studies, consulting a feasibility study sample is a good idea.
If the idea that sparked the feasibility test clears all the checks and balances implemented in the study, the business entity begins formulating a concrete strategy for the deployment of the idea. If all goes well, the turns turn into a profitable venture.