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What is a 'Feasibility Study'

A feasibility study is an analysis used in measuring the ability and likelihood to    complete a project successfully including all relevant factors. It must account for factors that affect it such as economic, technological, legal and scheduling factors. Project managers use feasibility studies to determine potential positive and negative outcomes of a project before investing a considerable amount of time and money into it.

BREAKING DOWN 'Feasibility Study'

For example, a small school looking to expand its campus might perform a feasibility study to determine if it should follow through, considering material and labor costs, how disruptive the project would be to the students, the public opinion of the expansion, and laws that might affect the expansion.

A feasibility study tests the viability of an idea, a project or even a new business. The goal of a feasibility study is to emphasize potential problems that could occur if one pursues a project and determine if, after considering all significant factors, the project is a good idea. Feasibility studies also allow a business to address where and how it will operate, potential obstacles, competition and the funding needed to get the business up and running.

Importance of Feasibility Studies

Feasibility studies allow companies to determine and organize all the details to make a business work. A feasibility study helps identify logistical problems, and nearly all business-related problems and their solutions. Feasibility studies can also lead to the development of marketing strategies that convince investors or a bank that investing in the business is a wise choice.

Components of a Feasibility Study

There are several components of a feasibility study:

Description: A layout of the business, the products and services it will offer, and how it will deliver them.

Market feasibility: Description of the industry, the current and future market potential, competition, sales estimations and prospective buyers.

Technical feasibility: The details on how a company will deliver goods or services, including transportation, business location, technology needed, materials and labor.

Financial feasibility: A projection of the amount of funding or startup capital needed, what sources of capital a business can and will use, and what is the return on investment.

Organizational feasibility: A definition of the corporate and legal structure of the business. This may include information about the founders, their professional background and the skills they possess necessary to get the company off the ground and keep it operational.

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