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The different types of feasibility study

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Introduction

This page describes how the different types of feasibility study have been and are currently used to suit different circumstances right across the globe.

What is a business development feasibility study?

A business development feasibility study is an analytical tool that is used to determine if a particular business concept is viable and is heavily weighted towards market research and analysis. It must provide clear evidence to the stakeholders that a concept is viable.

Only 1 or 2% of new business ideas are actually viable - that's why we are not all millionaires! So the business development feasibility study is a very useful tool that must be used to avoid the waste of valuable resources.

If the results of the study show that the project is feasible then it can be developed into a full scale business plan.

The business development feasibility study would include sections dealing with:

  1. Introduction
  2. Details of the product or service
  3. Identification of any technical issues
  4. The existing market and the competition
  5. The business structure
  6. Marketing and sales strategy
  7. Operational parameters
  8. Staffing levels
  9. Patents, trademarks etc
  10. Regulatory issues
  11. Environmental issues
  12. Risk analysis
  13. Profit and loss and balance sheet forecasts
  14. Cash flow and capital requirements
  15. Recommendations and conclusions

What is the difference between pre-feasibility studies, business development feasibility studies and project development feasibility studies?

They are all similar but because the final product is different there is a different emphasis on the various elements of each study.

For instance if a firm is planning to establish a new business making shoes in one of four countries somewhere in Europe the pre-feasibility study might include:

  1. Introduction to the basic social and business infrastructure of each country
  2. The skills of the local workforces
  3. The availability of local raw materials and their cost and quality
  4. The capex and opex of the manufacturing facility
  5. The social, political and economic risks
  6. The incentives available
  7. The planning and regulatory regime
  8. Recommendations of the country of choice and terms of reference for a feasibility study

Or;

If an established international shoe-maker is planning to establish a new business making shoes in Italy The business feasibility study might include the following elements:

  1. Introduction
  2. Details of the range of shoes
  3. The machinery to be used
  4. The market for the shoes and the competition
  5. The business structure of the foreign entity
  6. Marketing and sales strategy
  7. Operational parameters
  8. Staffing levels
  9. Patents, trademarks etc
  10. Regulatory issues
  11. Environmental issues
  12. Risk analysis
  13. Profit and loss and balance sheet forecasts
  14. Cash flow and capital requirements
  15. Recommendations and conclusions

Or;

If an established international shoe-maker is planning to build a factory extension alongside its existing operation The project development feasibility study might include

  1. Introduction
  2. Details of the new range of shoes
  3. Examination of new manufacturing techniques and the machinery required
  4. How the new range will compete in the existing market and the competition
  5. The additional managers required
  6. Staffing levels
  7. Planning and local issues
  8. Risk analysis
  9. Profit and loss and balance sheet forecasts
  10. Cash flow and capital requirements
  11. Recommendations and conclusions

What is the difference between a feasibility study and a business plan?

A feasibility study is not a business plan. The separate roles of the feasibility study and the business plan are frequently misunderstood. The feasibility study provides an investigating function that should answer the question of “Is this a viable business venture?”

The business plan provides a planning function that outlines the actions needed to take the proposal from “idea” to “reality.”

The feasibility study outlines and analyzes several alternatives or methods of achieving business success. So the feasibility study helps to narrow the scope of the project to identify the best business model. The business plan deals with only one alternative or model. The feasibility study must narrow the scope of the project to identify and define two or three scenarios or alternatives. The consultant conducting the feasibility study may work with the group to identify the “best” alternative for their situation. This becomes the basis of the business plan.

The feasibility study is conducted before the business plan. A business plan is prepared only after the business venture has been deemed to be feasible. If a proposed business venture is considered to be feasible, then a business plan constructed that provides a “roadmap” of how the business will be created and developed. The business plan provides the “blueprint” for project implementation. If the venture is deemed not to be feasible, efforts may be made to correct its deficiencies, other alternatives may be explored, or the idea is dropped.

 

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