What is a feasibility study?

Feasibility Studies

In order to make wise investments in a marketplace experiencing increasing levels of risk, companies are turning to feasibility studies to determine if they should offer new products, services or undertake a new business endeavor. The purpose of a feasibility study is to determine if a business opportunity is possible, practical and viable. When faced with a business opportunity, many optimistic people tend to focus on just the positive aspects. A feasibility study enables a realistic view at both the positive and negative aspects of the opportunity. A feasibility study is an important tool for making the right decisions. A wrong decision often leads to business failure. For example, only 50% of start-ups are still in business after 18 months and only 20% are in business after 5 years.

Feasibility studies are useful when starting a new business or identifying a new opportunity for an existing business. Ideally, the feasibility study process involves making rational decisions about a number of enduring characteristics of a project, including:

• Definition of the project;
• Current market segmentation;
• Projected growth in each market segment;
• Current market offerings;
• Customer profile(s);
• Estimation of customers/revenues;
• Determination of competitive differentiation and advantage(s);
• Vision/mission statement;
• Definition of proposed operations/management structure and management methods; and
• Financing and projected cash flows.

First answer by Crystal. Last edit by Crystal. Contributor trust: 1454 [recommend contributor]. Question popularity: 95 [recommend question]