What Is the Feasibility Analysis in Business?

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Nature and Objectives of the Feasibility Analysis
Fields of Feasibility Analysis
Rules for Structuring Feasibility Analysis
Conclusion
References

Preliminary forecasting and research are an integral part of any competent business strategy. One of the most multipurpose types of provisional study that covers all layers of the upcoming business project activities is a feasibility analysis. According to Spacey (2017), “feasibility analysis is the process of confirming that a strategy, plan or design is possible and makes sense” (para. 1). Novice entrepreneurs and experienced business people begin the practical implementation of their business ideas, primarily with this specific assessment technique. This paper will examine the concept and basis of feasibility analysis, the business areas it surveys, and the method of its proper implementation.

Nature and Objectives of the Feasibility Analysis

First of all, the feasibility analysis is a method of evaluative research. Studying various aspects of the future business project from the financial to the legal component, the specialist determines the degree of the feasibility of the practical implementation of an entrepreneurial idea. Simplilearn (2020) notes that “a feasibility analysis evaluates the project’s potential for success; therefore, perceived objectivity is an essential factor in the credibility of the study for the potential investors and leading institutions” (para. 3). The word “success” means not only the return on investment and possible income but also various risks and unexpected costs.

Properly compiled feasibility study allows entrepreneurs to obtain the necessary financial investments from banks and sponsors. However, along with the essence of the feasibility analysis, it is essential to understand the points on which the assessment is carried out.

Fields of Feasibility Analysis

The convenience of feasibility analysis lies in the fact that it allows the entrepreneur to study all the fundamental fields of business activity as a whole and separately. According to Kenton (2019), feasibility assessment asks questions like, “do we have the people, tools, technology, and recourses necessary for this project to succeed?” (para. 3). Feasibility analysis is divided into four major and two minor segments: technical, economic, which also includes market and financial parts, legal, and organizational assessments.

Technical Field of Feasibility Assessment

The study of technical enforceability of a project involves an analysis of the organization’s software and hardware, as well as the number and quality of available equipment. In particular, the assessment implies analytics of the conformity of the equipment to the tasks of the project (Vafadar, Tolouei-Rad, Hayward, & Abhary, 2016). The segment also includes an evaluation of the technological awareness of the responsible staff and its ability to practically realize an entrepreneurial idea.

Economic Field of Feasibility Assessment

Evaluating a project from an economic perspective represents a fundamental part of the feasibility analysis. First of all, the assessment of this segment implies the calculation of future profits in accordance with the upcoming expected and unexpected costs, revealing the profitability of the business idea (Muharrami, 2019). The economic part of the feasibility study also takes into account such indicators as the company’s economic growth, currency exchange rate, the current and possible future financial situation globally, and in a particular country.

Market Aspect of Economic Feasibility

The assessment of market sentiment gives an idea of possible consumer demand and the acceptable scale of a business project. In addition, a feasibility survey includes a description of the geographical and political location of the market, as well as the capabilities and influence of the potential competitors (Kampira, 2018). Market feasibility analysis directly affects the limits of future sales and profits and investor interest in the idea or project of an entrepreneur.

Financial Aspect of Economic Feasibility

The current financial status of the company and additional sources of financing predetermine not only the scope of the future project but even the very possibility of its realization. A competent feasibility analysis helps to correctly allocate monetary resources throughout all stages of the practical part of the new enterprise and makes it possible to convince investors to sponsor in the project (Wolfe, 2019). Assessment of financial feasibility also allows the entrepreneur to identify and keep the necessary funds for the payment of a return on investment and a percentage of income to sponsors.

Legal Field of Feasibility Assessment

Violation and ignoring state laws and standards can entail not only fines and sanctions but also a ban on the project and business activity. Research of local public interests and norms and compliance with environmental conservation rules are also included in the feasibility analysis of the legal side of the business (Sotiriadis, 2018). Assessment of the legislative framework is aimed at preserving monetary and time resources when choosing the location and criteria for implementing an entrepreneurial idea.

Organizational Field of Feasibility Assessment

The famous phrase “time is money” fully expresses one of the pillars of entrepreneurship in particular and business in general. Determining and evaluating the acceptable time frame, drawing up an appropriate schedule helps the entrepreneur to expertly complete the project while saving money, time, and labor resources (Mukherjee & Roy, 2017). Also, meeting deadlines increase the reputational status of the company in the eyes of investors, consumers, and competitors.

Rules for Structuring Feasibility Analysis

Initially, an entrepreneur determines the needs of the consumer community and identifies a comfortable market and possible obstacles. Further, a report on future costs and desired income is composed. It includes all potential cases of emergency additional financial investment and expenses. The following market research adjusts expectations with the real business situation using data on the local public, economic, and location features and basic concepts of the legislature (Bridges, 2019).

The next step is to systematize the organization and functioning principles of the business enterprise. It is also necessary to prepare a detailed financial report for each item of monetary sources and costs of construction, equipment, goods, labor, and promotion. The last stage is a full review of the made strategy and approval of the feasibility of the entrepreneurial idea.

Conclusion

This paper discusses such concepts as feasibility analysis, its related segments, and the approach to compiling feasibility research. This type of survey is a technique of evaluating the possibility of realizing a business idea and serves as an answer to the question of whether the entrepreneur venture will bring financial success or not. Feasibility analysis consists of technical, legal, organizational, and economic major components.

Economic feasibility assessment also involves researching the market and financing minor aspects. When conducting a feasibility study, first of all, it is necessary to do a superficial overview of the demanded types of goods and market areas as well as to determine the desired result. Next, there are the establishment and adaptation of the business model and its tasks following the data obtained from market research. A thorough review of each feasibility analysis point determines the decision to implement an entrepreneurial project.

References

Bridges, J. (2019). How to conduct a feasibility study. Web.

Kampira, A. (2018). Feasibility studies: New product development and launch. Pretoria, South Africa: Abisha Kampira.

Kenton, W. (2019). Feasibility study. Web.

Muharrami, S. (2019). Economic feasibility study: Preparation and analysis. Muscat, Oman: Sultan Qaboos University Printing Press.

Mukherjee, M., & Roy, S. (2017). Feasibility studies and important aspect of project management. International Journal of Advanced Engineering and Management, 2(4), 98-100.

Simplilearn. (2020). What is feasibility study and its importance in project management. Web.

Sotiriadis, M. (Eds.). (2018). The Emerald handbook of entrepreneurship in tourism, travel, and hospitality: Skills for successful ventures. Pretoria, South Africa: Emerald Group Publishing.

Spacey, J. (2017). 7 types of feasibility analysis. Web.

Vafadar, A., Tolouei-Rad, M., Hayward, K., & Abhary, K. (2016). Technical feasibility analysis of utilizing special purpose machine tools. Journal of Manufacturing Systems, 39, 53-62. Web.

Wolfe, L. (2019). How to write a financial feasibility study. Web.

Click Here To Order Now!