WHAT IS FEASIBILITY STUDY? |MEANING | DEFINITION | CHARACTERISTICS AND PROCESS
What is a feasibility study might sound like a simple question but when faced with the reality of carrying out a feasibility study, one quickly realise how demanding and complex it is to conduct a feasibility study. Feasibility study is probably one of the most used phrases in businesses and business schools. Yet not very many people really understand what a feasibility study is. This article written to concisely discuss what the phrase is and also to give a step by step simple approach that can be followed when the situation at hand required that an insight is sought into a proposed project(s).
MEANING | DEFINITION | EXPLANATION OF FEASIBILITY STUDIES
Except for those that love failures, no one embarks on a business journey without taking out time to appraise the business idea in the light of other investment opportunities that abound. However you look at it, all the process and activities that you got yourself involved in during this planning time is what is commonly referred to as ‘feasibility studies’.
The only difference-which makes all the difference-, is that feasibility study is a systematic activity. Good managers understands that it is better to invest little extra time on the drawing board than waste the whole year trying to reverse a costly mistake.
For the purpose of this article, feasibility study is defined as those clearly articulated moves that are made by management of an enterprise in the bid to; gather information, analyse the information, interpret the information, then make a decision based on the outcome of the process.
TEN (10) TYPES OR FORMS OF FEASIBILITY STUDIES
Since the main objective of a feasibility study is to reasonably uncover strength, weaknesses, opportunities and threats, its focus and aim will be on virtually all aspects of a business- call it SWOT analysis if you want. However, below are listed the most common studies that are being carried out by both firms and individuals.
- Economic feasibility
- Legal feasibility
- Implementation feasibility
- Technological feasibility
- Logical feasibility
- Market feasibility
- Financial (profitability)
- Ethical | Moral feasibility
- Time horizon feasibility
- Environmental feasibility
FEATURES AND CHARACTERISTICS OF FEASIBILITY STUDIES
The two most important aspects of a feasibility study are the cost of carrying out operations and the value that will be gained from the operation. Hence, any worthwhile study will have both the ability to reduce cost and increase or add value to an existing or potential business. Thus the following are features and characteristics of feasibility study:
- Very Articulate
- Highly Systematic
- Focused
- Strategic in nature
- Cost effective
- Value adding
- Organised
- Flexible
HOW TO CONDUCT A MEANINGFUL AND SENSIBLE FEASIBILITY STUDIES
In this section if this article, we will be looking at the steps involved in performing a result oriented feasibility study. Note that the order of the steps can be altered depending on your unique business need. Seat back, grab a cup of coffee while we explore this interesting simple steps of doing a feasibility studies.
TWELVE (12) SIMPLE STEPS NEEDED TO START AND FINISH A FEASIBILITY STUDY
- ESTABLISH THE AIM AND OBJECTIVE OF A STUDY
- DRAW UP A STRATEGIC MAP TO FOLLOW
- CARRYOUT ECONOMIC OR COMMERCIAL VIABILITY ANALYSIS
- INTRICACIES ANALYSIS (TECHNICAL AND FUNDAMENTAL ANALYSIS)
- HUMAN RESOURCE ANALYSIS
- ANALYSE COMPETITION
- EVALUATE THE POTENTIAL LOCATION
- FINANCIAL EVALUATION
- WHAT IF ANALYSIS (SENSITIVITY ANALYSIS)
- EVALUATE AND ANALYSE MARKETING AND SALES STRATEGIES
- QUERY YOUR OPERATIONAL CAPABILITY
- LEGAL AND ENVIRONMENTAL ANALYSIS
SECTIONS OR COMPONENTS OF A FEASIBILITY STUDIES REPORT
Just like a business plan, a good feasibility report must have structure and components. Below are bulleted components of an FS.
- Executive summary
- Historical background or background information
- Proposed activities or operations (including financial projections)
- Comparison of prevailing system and the proposed system
- Timetable for the project
- Final recommendation and conclusion
PITFALLS OF FEASIBILITY STUDIES TO AVOID
In as much as the process of feasibility study revolves around reaction of value and avoidance of costs, certain caveat has to be observed else, the whole system will crumble. Some of the things that we must look out for are:
- Signs of overinvestment of resources
- Reliability of the service provider i.e. the reputation of the researcher
- Avoid releasing too much information to third party
- Avoid staying too long on a study
- Watch the action of your competition
Remember that the importance of ethics in this process of conducting a feasibility study and writing a report afterwards cannot be overemphasised. The process has to be transparent and realistic for it to make any sense to both investors and lenders.
