How To Do a Feasibility Study in 6 Steps

Let’s say you have an idea for a new product, service, or business strategy. The next thing you need to do is ask yourself, “Is this feasible?” Do you have the people, tools, and approach needed to make this work? Is this the right project to work on and the right time to work on it?  If not, your boss likely isn’t going to be convinced to support your idea.

To answer these questions, a feasibility study can get you on the right track. Using insights from Gartner’s 2023 Early-Stage Project Evaluation Criteria [1], this article explains how you should tailor early-stage feasibility criteria to the type of project you’re proposing and its current stage of development.

A feasibility study analyzes how practical or realistic a business idea is. Whether your idea is a proposed plan, new product or offering, or a new business strategy, the key purpose of a feasibility study is to determine whether you can deliver on the plan’s goal effectively and within a reasonable amount of time and financial investment.

At the end of a feasibility study, you present the findings to key stakeholders for review. If the findings are acceptable, the idea is considered feasible and project planners add the report to a project plan so the next phase of the project can begin.

Before you start on a feasibility study, consider completing a project scope statement prior to starting a feasibility study.

Whenever you’re considering a new project, product, or business venture, conducting a feasibility study helps you:

• Test the viability of an idea. Determine if an idea is realistic before investing significant time and money into it. Identify potential issues beforehand so you can address them early on.

• Reduce risks and identify weaknesses. Thoroughly evaluate all aspects of a project at an early stage to discover any vulnerabilities or impracticalities.

• Make effective decisions. Justify going forward with your business idea with hard data and valid information.

• Identify resources. What equipment or tools might you need? How many staff members need to participate? What else have you potentially not thought of yet?  

• Reveal funding needs. How much funding do you need? When do you need it? Where will you allocate those funds?

A feasibility study is a prudent step that saves organizations from ideas that could prove not viable. Ideas that don’t pan out impact a business’s bottom line via wasted time, resources, and funds.

You can perform various types of feasibility studies to urge your company to approve a project. 

• Technical feasibility: Checks if the required technical resources and applications exist within the organization to support your proposed project. 

• Economic feasibility: Analyzes costs and benefits to inform decision-makers of potential economic impacts, including total expenses and possible unforeseen costs.

• Operational feasibility: Evaluates how your proposal fits with the existing business environment, if it’s something management would support, its perceived benefits, and whether the end product would be genuinely useful. 

• Legal feasibility: Reviews if all proposed project components comply with the laws and regulations in your location. 

• Scheduling feasibility: Estimates the timeline for teams to realistically complete the project so that planning meets stakeholders’ expectations.

These common feasibility studies help evaluate your project’s viability from several perspectives, without any overlap of reasoning or duplicating of source material.

It’s great to have good ideas—but good and feasible ideas are the successful ones. There’s no sense in sinking your time and the company’s money into a project that’s not likely to deliver the expected results for your business without knowing the implications first. Here’s how to get started:

1. Outline your plan and perform a preliminary analysis

Start with the project’s scope document—if you have one–or write an outline of the plan. You need to clearly state what the idea is before you can determine if it’s worth doing. Then, you’ll answer the questions below as your preliminary analysis:

• Why is this project important to the business? 

  • Is this the result of changes in the market or perhaps a passion project of a stakeholder? 

• What is the existing market landscape for this idea? 

  • Are there similar or alternative solutions already on the market?

• Has this project been done before? 

  • Remember to ask this question about not only your competitors, but also whether or not your company has previously tried it.

• What will you do differently to ensure that your project will work?

  • Can you produce the product/service at a higher quality and/or lower cost than competitors?

• Are there any risks to delivering this project? 

  • Also, what are the risks of not doing it?

2. Conduct a market survey or perform market analysis

Now that you know what you want to do, it’s time to do market research to make sure you understand the current market. This step helps you identify customer demographics, top competitors, the value of the market, and the potential share of the market you can expect to earn.

But, what does market research entail? Here are some common methods you can use to conduct market research: 

• Host focus groups

• Post online surveys via social media

• Conduct phone interviews with your customers and/or industry experts

• Gather demographic data from public domains

You can mix and match the above methods or come up with your own. It’s also possible that you’ll need to perform one of the above surveys again to be able to fully answer the core feasibility questions covered in the next step.

3. Answer the core feasibility questions

Now that you know exactly what you want to do and understand the current market, it’s time to vet the feasibility of the plan.  According to Gartner [1], it's important to tailor feasibility criteria to the type of project you’re proposing and its current developmental stage. Project management software can help put all of this into perspective.

Gartner's research found that strategic fit, sales and revenue potential, alignment to customer needs, technical feasibility, and capability fit are some of the criteria most commonly used to evaluate projects. You can use the following questions as a guide when you start to review your project's feasibility:

• What’s this plan's operational feasibility?

  • Will the project solve the problems you hope it will solve? Is the solution reliable and sustainable? Sustainability software programs can help you set and track your goals to ensure you’re on the right track.

• What’s the financial feasibility?

  •  Essentially, can the business afford the expense related to the project? 

• What’s the economic feasibility?

  • Does the plan justify its own cost? You should consider aspects such as the total cost of completion and the projected profitability. 

• What’s the technical feasibility?

  • Do you have the technical capability and resources to execute the plan on time and within budget?

• Is this plan legal?

  • While you likely have a general idea that the idea is legal (hopefully), it’s crucial to review any laws and/or regulations thoroughly before assuming so.

Answering these five questions will suffice for this part of the study, but don’t overlook any aspects specific to your industry, business size, or any other factor that could require answering additional feasibility questions. And if you’re not sure, share the answers you have at this point with a key stakeholder and get their feedback.

4. Calculate the costs

Now it is time to calculate the fiscal risks, potential revenue, and costs for your plan. Your calculation should be as thorough as possible, and include the project completion cost, fixed cost investments (e.g., hardware, new office space, etc.), and ongoing operational costs.

Here are some of the basic questions to ask as you’re performing these calculations:

• Where will the project’s budget come from? 

  • Is the business paying for it all outright? Will outside investors be required? 

• Can we afford to fail?

  • What is the threshold for how much we’re willing to lose?

• What are all of the variable costs we need to account for?

  • Also, what about fixed costs?

• How much do we need to make in order to profit?

  • How long will it take to be profitable?

• How much money will you need to complete the entire project?

  • What are the ongoing operational costs to keep the plan going?

If your project is considered high-risk, but has the potential to lead to significant transformation, then the traditional revenue-driven approach may not be suitable. Instead, Gartner suggests that companies should incorporate criteria such as transferable lessons and disruption potential. [1] These criteria can help R&D leaders account for the inherent unpredictability of these types of projects.

Financial reporting software can help you calculate the costs of your project. After completing the financial analysis you should return to the core feasibility questions in step two, and add or change the answers as needed.

Step 5. Polish and review your feasibility report

Conducting a feasibility study is tough work, and the findings are crucial for making an informed decision. It’s also possible that your professional reputation is on the line to help steer the business in the right direction. This is a good time to take a step back from your report and come back to it.

With fresh eyes, go over the document’s formatting. Are your findings clear? Are the answers reasonable? Are you providing the right amount of info? Are there any typos? Don’t underestimate the importance of a professional and clean report document.

Step 6. Present your findings

It’s now time to present your feasibility analysis and the results to leadership or whomever is responsible for approving or declining the plan. Be transparent and open about your findings.

Your presentation should include the following components:

• Executive summary

• Description of your proposed product or service

• Technological considerations

• The market for this product or service

• The audience for this product or service

• An outline or overview of your marketing strategy with suggested campaigns

• Organizational structure required for follow-through

• Schedule of production, design, etc. required to bring product or service to fruition

You’ve done a lot of work here so be proud to show it—even if the response isn’t what you’d hoped for. Business intelligence presentation programs with reporting and analytics help you prepare and present your findings logically and with the figures to back up your claims.

Here are a few real-world examples to help illustrate how a feasibility study can be executed in different industries: