Let’s say you have an idea for a new product, service, or business strategy. The next thing you need to do is ask, “Is this feasible?” Do you have the people, tools, and the approach needed to make this succeed? Is this the right project to work on and the right time for it? If not, your boss likely isn’t going to be convinced to support your idea.
To answer these questions you should perform a feasibility study. This article will help you get started by explaining what that means and help you with the basic questions to get answers before deciding to green light your good idea.
A feasibility study is a structured assessment of the practicality of a new business idea, be it a proposed plan, new product or offering, or a new business strategy. The key purpose of a feasibility study is to determine whether or not you can deliver on the plan’s goal effectively and within a reasonable amount of time and money.
At the end of a feasibility study, you’ll create a report to present the findings to key stakeholders for review. If the findings are acceptable, i.e., the idea is feasible, the report will be added to a project plan and the next phase of the project can begin.
One note: We suggest completing the project scope statement prior to starting the feasibility study. You can learn about what a project scope statement is and how to write one here.
Now that you know what a feasibility study is, let’s get into how to conduct one.
Good ideas are great to have, but good and feasible ideas are the ones that will be successful. There’s no sense in sinking peoples’ time and the company’s money into a project that isn't likely to succeed and deliver the expected results for your business.
Follow these steps when conducting a feasibility study:
Start with the project’s scope document if you have one, or write out an outline of the plan. You need to clearly state what the idea is before you start finding out if it’s worth doing. Then, you’ll answer these questions below to perform your preliminary analysis:
Why is this plan 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 plan 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 plan 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?
Now that you know what you want to do, it’s time to do some 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.
So how do you do market research? Well, the good news is that you don’t have to hire some fancy consulting firm to perform the research (although if your plan is high risk this might be a good idea). Here are some common methods you can use to conduct market research:
Host focus groups
Post online surveys via social media or survey software
Conduct phone interviews with your customers and/or industry experts
Gather demographic info 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.
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. You can use the following questions as a guide:
What’s this plan's operational feasibility?
Will the project solve the problems you hope it will solve? Is the solution reliable and sustainable? Can the business afford it?
What’s the financial feasibility right now?
Essentially, don’t forget to make sure you can afford to execute the plan now.
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 absolutely 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 additional feasibility questions to be answered. And if you’re not sure, share the answers you have at this point with a key stakeholder and get their feedback.
Remember you can and should repeat steps one and two as needed to be able to fully answer the core feasibility questions.
Now you’ve got to figure out 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), 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?
Also, what are the ongoing operational costs to keep the plan going?
After completing the financial analysis you should return to the core feasibility questions in step two, and add or change the answers as needed.
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. So take a step back from all the info you’ve gathered up to this point. Take some time or a walk outside. Then 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.
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.
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.
We covered quite a bit of info in this article, but don’t want to leave you hanging if you’re ready for more. Check out these guides to help you in the market research part of your feasibility study and ongoing project management efforts.
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