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The importance of a feasibility study
You have a business idea and want to know if it is feasible. It doesn’t make any difference if it’s a product or service. A feasibility study will provide you with the discipline and insight to reassure yourself that your idea is worth pursuing. Furthermore, if you need to finance the business, lending institutions and investors, you will typically require a feasibility study.
The feasibility study evaluates the project’s potential for success. We prepare feasibility studies for business start-ups, as well as established companies seeking to introduce a new product or service.
The components of a feasibility study
Feasibility studies contain standard components. The exact appearance of each study varies. This depends on the industry studied, the critical factors for that project, the methods chosen to conduct the study – primary and secondary research, and the budget. Most studies have multiple potential uses, e.g. validate your assumptions, reassure investors and lenders that the proposed venture is economically viable, etc. so they must be designed to serve everyone’s needs.
There are usually three components to the feasibility study:
• Market Analysis
• Technical Analysis
• Financial Analysis
In addition to the market and technical analysis the financial assessment is a critical component of the feasibility study. Without the “financials” it will be impossible to determine how feasible the business idea is. Included in the financial assessment is revenue and income projections for the first year along with start-up costs to determine how much funding your business will need.
Key components of the financial assessment include:
• Capital Requirements
• Start-up Costs
• Revenue Projections
• Profit Margins
• Net Income
Armed with the information that has been compiled and analyzed for the feasibility study, a recommendation is provided so the client can make a GO / NO GO decision regarding the feasibility of launching the business venture.