Feasibility Study – Definition

Cite this article as:"Feasibility Study – Definition," in The Business Professor, updated December 2, 2019, last accessed October 29, 2020, https://thebusinessprofessor.com/lesson/feasibility-study-definition/.


Feasibility Study Definition

A feasibility study refers to an analysis that takes every relevant factor of a project into account — legal, economic, technical, and scheduling considerations — to determine the possibility of completing the project successfully. Project managers utilize feasibility studies to know the benefits and disadvantages of embarking on a project before investing a lot of money and time. Feasibility studies are capable of providing a company’s management with vital information which could prevent the company from blind entry into dangerous businesses.

A Little More on What is a Feasibility Study

A feasibility study is an analysis of how practical a proposed project or plan is. As the name implies, these studies ask: “Is the project feasible? Do we have the tools, people, resources, and technology needed for the success of this project?” Also, “Would the project get us the return on investment (ROI) which we need and also expect?”

A feasibility study’s goal is to thoroughly understand every aspect of a project, plan, or concept; know about any problem that can occur while executing the project; and ascertain if, after considering all important factors, the project is possible — that is, worth carrying out.

The Importance of Feasibility Studies

Feasibility studies are significant to business development. They are capable of allowing a business to address how and where it would operate; spot potential obstacles which might affect its operations, and know the amount of funding needed to get the business functioning. Feasibility studies can result in marketing strategies that can help convince banks or investors that investing in a specific business or project is a wise choice.

Key Takeaways

A feasibility study examines the possibility of a proposed project or plan.

A company might conduct a feasibility study if it is considering adopting a new product line or launching a new business.

It is good to have a contingency plan in case of emergencies, or if the original project isn’t feasible.

Tools for Conducting a Feasibility Study

Suggested best practices

Feasibility studies show the unique goals and needs of a project, so each is different. Nevertheless, the tips below can apply widely to carrying out a feasibility study. You might, for instance, want to:

  • Get feedback concerning the new concept from the right stakeholders.
  • Examine and also asking questions about your data to ensure that it is solid.
  • Carry out a market research or market survey to improve data collection.
  • Write an operational, organizational, or business plan.
  • Prepare a projected income statement.
  • Prepare an opening day balance sheet.
  • Make the first “go” or “no-go” decision about forging ahead with the plan.
  • Suggested components

Once you’ve completed your basic due diligence, you may consider the elements below as a template of items to add in your study:

  • Executive summary —Narrative explaining information of the product, plan, project, service, or business.
  • Technological considerations—What would it take? Do we have it? If we don’t, can we get it? What would it cost?
  • Existing marketplace —Analyze the local, as well as, broader markets for the plan, service, product, or business.
  • Marketing strategy—Give a detailed description.
  • Required staffing, including organizational chart — For this project, what are the human capital needs?
  • Schedule, as well as, timeline, and major interim markers, for the completion date of the project. Project financials.
  • Findings, as well as, recommendations—Break down into sections of technology, organization, financials, and marketing.

(Important: When carrying out a feasibility study, it is good to have a contingency plan, that you also test to ensure it’s a possible alternative supposing the first plan fails.)

Example—Real-Life Feasibility Study

An elite college in a rich suburb of Boston had long wanted to expand its campus. It kept delaying the project, however, because the management had some reservations, including whether it could afford expansion. Furthermore, the college worried about the neighborhood’s public opinion —the college’s original home for over 100 years —as in the past, the community had refused similar development proposal types. Finally, the college wondered if certain political and legal issues may affect its plan.

All of these concerns are enough reasons to carry on with a feasibility study, which the college eventually undertook. Thus, the school now is going on with its plans of expansion without needing to leave its ancient home. Supposing it hadn’t taken the time, as well as, effort to carry out a feasibility study, the college would not have known whether its dreamed-of expansion could become an achievable feat.

References for “Feasibility Study”

https://www.investopedia.com › Investing › Financial Analysis


https://www.myaccountingcourse.com › Accounting Dictionary




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