A business feasibility study helps a company to determine the technical, financial, and strategic viability of a new idea, project, or business. It is an essential process that must be conducted while charting future plans. The main purpose of a business feasibility study is to determine whether a certain plan of action is workable. Though the end result of the business feasibility study is to show the final outcome of a project, it also analyses the entire operation and associated processes. In addition, it reviews a company’s strengths and weaknesses, as well as its risk appetite. An exhaustive study can give stakeholders a complete overview, helping them take clear decisions.
A comprehensive business feasibility study evaluates aspects such as financial, technical, operational, legal, and economic viability of the project to help a business take informed decisions. It also helps in avoiding costly mistakes. A business feasibility study requires expertise, and it should be conducted by a team of well-versed professionals.
Some of the main benefits of a business feasibility study are:
- Identification of opportunities – The study helps a business to identify the correct opportunities that would align with its long-term objectives and prove to be smart and reliable investments.
- Information to take a go/no-go decision – A business feasibility study gives pertinent information, which allows a company to take a go/no-go decision based on various parameters. It identifies the right reasons for undertaking or rejecting a project. Lack of information on these aspects could lead to a company taking wrong investment decisions.
- Company’s focus – As a business feasibility study narrows down alternatives, the team can focus its attention on a viable prospect. Thus, it enhances the success rate of the new initiative.
- Optimal utilization of resources – With a business feasibility study, a company can ensure that its resources are invested in a project that will provide a profitable return on investment. It is particularly essential for small- and medium-sized enterprises that have limited resources.
- Short-term planning – A business feasibility study allows an organization to plan its short-term undertakings that are sustainable and aligned to its long-term objectives.
A feasibility report, which is prepared based on the business feasibility study, gives a complete picture of a certain proposal through its life cycle. It helps to determine potential cash flow, associated risks, and valid reasons to pursue or not pursue an idea.
If the proposed project is determined as feasible, the information gathered for the business feasibility study can be valuable during the final implementation. A business feasibility study can be used for performing simulations through financial modeling and understanding the returns to develop a strategic roadmap and translate a general idea into measurable goals.