Feasibility Study: Your Key to Unlocking Project Success

Discover the importance of feasibility studies in project management. Understand how these assessments help determine if a project is viable, profitable, and achievable.

Before launching a product for sale, it is important to conduct a feasibility study. It helps to know if your idea will be successful and meet the needs of your target customers or if you need to make certain modifications. A feasibility study is the most used research to determine the viability of any activity, brand or product. In this blog, we will cover the feasibility study of projects in detail.

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Content

• What is the Feasibility Analysis of a Project?
• Objectives of Feasibility Study
• How to Conduct Feasibility Analysis of a Project?
• Types of Feasibility Analysis
• When is a Project Feasibility Study Done? Who Does It?
• Benefits of Project Feasibility Study

What is the Feasibility Analysis of a Project?

Feasibility analysis of a project is a method to predict the eventual success or failure. It involves the analysis of various factors, such as technical, economic, legal, operational, and scheduling, to determine whether the project is feasible and worth pursuing.

Feasibility studies are conducted in both the governmental and corporate spheres to assess the viability of proposed projects. It’s a sound practice before the beginning of a work or the launch of a new product. Thus, minimize the margin of error.

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Objectives of Feasibility Study 

The feasibility study of projects aims to acheieve the following –

• Full and unequivocal determination of the project through the market study, the definition of the size, the location of the facilities and the technology selection.
• Design the appropriate administrative model for each stage of the project.
• Estimation of the operating costs and their chronology.
• Full identification of funding sources.
• Definition of contracting terms and bidding documents.
• Submission of the project, if necessary, to the respective planning and environmental authorities.
• Applying financial, economic, social and environmental evaluation criteria for gathering arguments for the decision to carry out the project.

How to Conduct Feasibility Analysis of a Project?

For the feasibility study of a project to be effective, it must have at least the following six parts:

• Scope of the project: Defines the project’s limits and avoids deviations that lead away from the expected results.
• Situation analysis: Helps identify the current approach’s strengths and weaknesses.
• Definition of requirements: This stage depends on the object of attention of the project. It requires the joint participation of project members at different levels.
• Determination of the approach: Represents the recommended solution or optimal course of action.
• Project Feasibility Assessment: ​​Examines the profitability of the selected approach.
• Project Feasibility Study Review: All the above elements assemble to form a feasibility study that must undergo a formal review involving all parties involved.  

Types of Feasibility Analysis 

There are various types of feasibility studies of a project, and the choice of analysis depends on the overall goals. 

Technical Feasibility

A technical feasibility study assesses whether the project development is possible using the available technology and resources. It examines the technical requirements, potential challenges, and the feasibility of implementing the necessary technology. 

Example – If a company plans to develop a new software product, a technical feasibility study would evaluate whether it should invest in or acquire the required infrastructure, programming languages, and development tools.

Economic Feasibility

Economic feasibility evaluates the financial viability of a project. It examines the estimated costs, potential revenue, and profitability indicators. The study includes assessing the return on investment (ROI), net present value (NPV), payback period, and other financial metrics. 

Example – A real estate developer is considering constructing a new commercial building. If he conducts an economic feasibility study, he can efficiently analyze the construction costs, projected rental income, and market demand to determine the project’s financial viability.

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Legal Feasibility

Legal feasibility investigates the project’s compliance with laws, regulations, and legal requirements. It examines any legal constraints, permits, licenses, or approvals necessary for the project’s implementation. 

Example – If a pharmaceutical company intends to launch a new drug, a legal feasibility study will assess the product’s compliance with health regulations, patent requirements, and intellectual property laws.

Operational Feasibility

Operational feasibility assesses the project’s compatibility with the organization’s existing systems, processes, and human resources. It examines whether the company can efficiently integrate the project into the current operations without causing disruption or requiring excessive modifications. 

Example – If a manufacturing company plans to adopt a new production technology, an operational feasibility study will analyze its compatibility with the existing manufacturing processes, employee skills, and available infrastructure.

Schedule Feasibility

Schedule feasibility evaluates the project’s timeline and determines if the project can be completed within the specified time frame. It considers factors such as resource availability, dependencies, and potential risks that could impact the project’s schedule. 

Example – An IT company is developing a software application with a strict deadline. A schedule feasibility study would assess whether it can realistically complete the project tasks within time constraints.

When is a Project Feasibility Study Done? Who Does It?

A feasibility study is carried out when you want to start a new project to achieve a corporate objective or to solve a pain point. A feasibility study can be carried out by:

Management Team

Stakeholders, including executives, managers, and representatives from relevant departments, are often involved in the feasibility study. Their input and perspectives are valuable in assessing the project’s feasibility from different angles and ensuring alignment with organizational goals.

External consultant

Companies often hire an external consultant with considerable experience in projects of this type. These consultants bring specialized knowledge and experience and can objectively assess the project’s feasibility.

For example, a facilities company wants to implement ERP software. In this case, the company can hire an outside consultant who has experience with ERP software implementations.  

Project Managers

The project manager oversees the entire project, including the feasibility study. They ensure the study is conducted effectively and aligned with the project’s goals.

Financial Experts

Financial experts, such as financial analysts or accountants, are involved in assessing the project’s economic feasibility. They analyze financial data, estimate costs, evaluate revenue projections, and conduct financial modeling to determine the project’s viability. 

Benefits of Project Feasibility Study

Carrying out a project feasibility study is a good business practice. Organizations with lower levels of project failure have in common that they have spent the necessary time and resources to fully examine all issues and assess their probability of success before starting the next project. 

Here are some reasons why project feasibility study is crucial for businesses planning to start new projects – 

• Identify potential risks and challenges associated with the project.  
• Estimate the financial resources required for implementation and determine if the project is financially viable.  
• Optimize resource allocation by assessing the availability and suitability of resources required for the project.  
• Assess the potential benefits, drawbacks, and trade-offs associated with the project.  
• Align stakeholders’ expectations and objectives by gathering, analyzing, and addressing their concerns, requirements, and preferences.
• Create a roadmap for the project, outlining the necessary steps, timelines, and milestones.  

Conclusion

Project feasibility study plays a crucial role in minimizing risks, optimizing resource allocation, and ensuring the successful implementation of projects, whether in the public or private sector. The analysis provides valuable insights into the project’s strengths, weaknesses, risks, and opportunities, enabling decision-makers and management teams to make informed choices.