WHAT IS A FEASIBILITY STUDY ?
A Business Feasibility Study can be defined as a controlled process for identifying problems and opportunities, determining objectives, describing situations, defining successful outcomes and assessing the range of costs and benefits associated with several alternatives for solving a problem. The Business Feasibility Study is used to support the decision-making process based on a cost benefit analysis of the actual business or project viability. The feasibility study is conducted during the deliberation phase of the business development cycle prior to commencement of a formal Business Plan. It is an analytical tool that includes recommendations and limitations, which are utilised to assist the decision-makers when determining if the Business Concept is viable.
Source: (Drucker 1985; Hoagland & Williamson 2000; Thompson2003c; Thompson 2003a).
WHAY IS IT IMPORTANT?
It is estimated that only one in fifty business ideas are actually commercially viable. Therefore a Business Feasibility Study is an effective way to safeguard against wastage of further investmentor resources . If a project is seen to be feasible from the results of the study, the next logical step is to proceed with the full Business Plan. The research and information uncovered in the feasibility study will support the business planning stage and reduce the research time, the cost of the Business Plan will also be reduced. A thorough viability analysis provides an abundance of information that is also necessary for the Business Plan. For example, a good market analysis is necessary in order to determine the business concept’s feasibility. This information provides the basis for the market section of the Business Plan.
Finally, a feasibility study should contain clear supporting evidence for its recommendations. The strength of the recommendations can be weighed against the study ability to demonstrate the continuity that exists between the research analysis and the proposed business model. Recommendations will be reliant on a mix of numerical data with qualitative, experience-based documentation. A Business Feasibility Study is heavily dependent on the market research and analysis. A feasibility study provides the stake holders with varying degrees of evidence that a Business Concept will in fact be viable.
Source: (Hoagland & Williamson 2000;Thompson 2003c; Thompson 2003a; Wickham 2004).
The feasibility study must provide answers for crucial question before a business plan is launched:
• Market Viability
• Technical Viability
• Business Model Viability
• Management Model Viability
• Economic and Financial Model Viability
• Exit Strategy Viability
Business and market analysis will contribute considerably to the Business Feasibility Study. Consideration should be given to using traditional business analysis techniques such as SWOT, Porters Five Forces and PEST. Although they may not provide information which is a perfect fit to the proposed business model, they will provide a strong starting point for future analysis.