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As the name implies, a feasibility study helps determine the feasibility of a concept. That is, check the legal, technical, and financial feasibility of the project. Notify if the project is worth it. In certain situations, you may not be able to complete the project. There are various reasons for this. For example, too many resources can not only prevent from performing other tasks but can also cost more than the company recovers by undertaking a less profitable project.
Research that is well-structured includes product or service descriptions, balance sheets, operational and management details, market research and policies, financial data, legal requirements and tax obligations, and the historical background of a company or project. You need to include the information. Such research usually precedes technological development and project implementation.
What is a Feasibility Study in Project Management?
The board of the company will want to see a feasibility study before approving a project that can cost thousands or millions of dollars in a project. So what exactly is a proof of concept for project management? Determine if the project will be successful. This usually happens before the first step in the project. The plan will be implemented. This is one of the most important considerations when deciding whether to proceed with a project, highlighting the project’s main goals, identifying potential obstacles, and providing alternative solutions. And consider your time, budget, legal and human requirements. The project manager is not a feasibility assessor but can provide valuable advice as the project progresses.
Types of Feasibility Studies
In project management, feasibility studies evaluate the following areas:
- Technical Feasibility: Does your organization have the technical resources needed to complete the project?
- Budget: Does the organization have the financial means to carry out the project and does cost-benefit analysis justify progress?
- Legality: What are the legal requirements for a project and can the company meet them?
- What are the risks associated with implementing this project? Is the risk worth the company’s time and money, based on the expected profits?
- Operational feasibility: To the extent intended, does the project meet the needs of the organization by solving problems and seizing opportunities?
- Time Feasibility: Can the project be completed in a realistic time frame?
Benefits of Feasibility Studies
- Feasibility studies offer many benefits, including helping project managers determine the strengths and weaknesses of completing a project before investing a lot of time and money in the project.
- Feasibility studies can also provide important information to a company’s management and discourage them from embarking on a risky business venture.
- Feasibility studies can also help you set up a new company. In determining how they work, possible obstacles, competition, market analysis, and the amount and source of capital needed for expansion.
- Feasibility studies are used to develop marketing strategies that can convince investors and banks that investing in a particular project or company is a good idea.
7 Steps to Doing a Feasibility Study
1. Conduct a Preliminary Analysis
Begin by outlining your project’s strategy. You should concentrate on an unmet need, a market where demand exceeds supply, and a product or service with a distinct edge. Then you have to figure out which characteristics are perhaps too important to specify (i.e. too expensive, unable to market effectively, etc.).
2. Create a Hypothetical Income Statement
Working backward is required for this stage. Begin by determining what you estimate the project’s income to be, and then determine how much project money is required to reach that goal. The revenue statement is built on this foundation. Consider what services are necessary and how much they will cost, as well as any revenue modifications, such as refunds, etc.
3. Market Research
Make your market analysis as precise as possible because this phase is crucial to the success of your investigation into whether it is doable. It is critical that if your corporation lacks the resources to do the right thing, it is cost-effective to employ an outside firm to do so.
Market research can provide you with a clear image of the income and return on investment that a project may generate. The local market effect, demography, competition analysis, market value and what your share will be, and if the market is open to expanding are all issues to examine (i.e., feedback on your offer).
4. Create a Business and Performance Management Organization
After the preceding phases have been completed, it is time to form an organization and undertake a project that meets the technical, operational, economic, and legal requirements. This is not, in general, an attempt to pick up. It must be comprehensive, encompassing start-up, regular investment, and ongoing operational expenditures.
These expenses include things like tools, sales strategies, real estate, personnel, provider availability, and so forth.
5. Create a Balance Sheet for the First Time.
This involves calculating the value of assets and obligations, which should be as precise as feasible. To do so, make a list of goods, resources, expenses, and accessible assistance. Factors to consider include property leases or purchases, property and equipment, asset finance, and accounts receivable.
6. Go over all of the Data and Analyze it.
All of these procedures are critical, but evaluation and analysis are crucial for ensuring that everything is in order and that nothing has to be altered or rectified. Take one last glance at your work before you go.
Review and compare your previous stages, such as your income statement, to your spending and invoices. Is this still the case? This is also a good opportunity to consider the risk, assess and manage it, and make any necessary emergency preparations.
7. Decide Whether to Go or Not
You are now in a position to determine whether or not the project is feasible. That may appear straightforward, yet all of the preceding procedures have led up to this point. Another item to think about before making that binary decision is if the commitment is worth the time, effort, and money, and whether it is in line with the organization’s strategic goals and long-term aspirations.
Feasibility Study Best Practices
- Management software will help you work more efficiently and effectively.
- When it comes to data and technology, think outside the box.
- Engage the right people in the process for feedback.
- Market research is a good way to get additional information.
- You can ensure the reliability of your data by conducting research and asking questions.
Feasibility studies help project managers or organizations understand project characteristics, business goals, and risk concerns. It comes in handy for the desired growth and easing the workflow of all the concerned projects. You should employ these practices and see the company grow in no time.