Guide to Conducting a Feasibility Study
So you’re thinking of a launching a new venture? Entering a new market? Launching a new product? It’s estimated that only one in fifty business ideas are actually commercially viable and so you’ll want to understand the viability of any proposed project before you invest your time, energy and money into it. That’s why you need a feasibility study.
Why do you need a Feasibility Study?
With such a low success rate of new business ventures a business feasibility study is the best way to learn whether you have an idea that could work and guard against wastage of further investment. If the results are positive, then the outcome of the feasibility study can be used as the basis for a full business plan allowing your to proceed with a clearer view of the risks involved and move forward quicker. If it’s negative then you’ve skilfully avoided wasting time and money on a venture that wouldn’t have worded out.
What is a feasibility study?
A feasibility study aims to make a recommendation as to the likely success of a venture. At the heart of any feasibility study is a hypothesis or question that you want to answer. Examples include “is there a demand for a X new product or product feature”, “should we enter Y market” and “should we launch Z new venture”.
How to conduct a feasibility study?
Once you’ve got a clear hypothesis or question that you want to answer, you need to look at five areas that will impact the feasibility of your idea. Let’s look at each of these in turn:
Is the market in question attractive? Are there high barrier to entry? Is it of a size that will support our ambitions? Is it growing? Are there any regulatory or legislative requirements to enter or participate in the market?
What technical skills/ability/knowledge/equipment is required? Do you have or could you source the technical expertise required? Do you fully understand the technical requirements underpinning your hypothesis? Could you manufacture / develop the product or service with the resources you have available?
Business Model Feasibility
How will the idea make money? How will you attract users? What costs will you have to pay? Have you modelled the financials? Do you have access to the funding needed? What legal entity structure would you need?
Management Model Feasibility
Who will lead the venture? Do you have the skills and expertise required to manage and operate the venture/product/market? Does the team have the time needed to deliver the venture? If not, can they be recruited or are their skills hard to find?
Do you have a plan to exit the venture and do you need one?
When competing a feasibility study each of the above areas should have a recommendation as to whether it’s feasible or not from that specific perspective factoring in the resources you have available. This should conclude with a recommendation based on the analysis as to if the venture is or isn’t feasible and the key data points that underpin that recommendation.
Remember that a great feasibility study should not just give you a go / no-go decision. It should provide either a spring board to move forward, highlighting the key areas to focus on to achieve success or a useful analysis highlighting the key obstacles that make the venture unfeasible and should be considered for any future ideas. Even if the answer is no, it’s not a wasted effort, the analysis will leave you better informed for future decisions.
A feasibility study is an essential tool for anyone looking at a new venture. It’s very easy to get excited by a new idea of proposition and steam ahead spending time and money without having a clear view as to whether it’s viable or not. A feasibility study should be your first stop to maximise the returns on your time, energy and investment.
Best of luck with your feasibility studies!
Chris Purcell @ Prussel & Co