To answer the question of what is feasibility study, I would simply say that a feasibility study is the way of critical evaluation of a particular opportunity whether it is favorable or not. It is also known as the project feasibility study or feasibility analysis. A project must have a particular objective, specific time, limited resources. This can be broad or short. The scope of feasibility analysis should determine by taking the level of importance and availability of information.
Before taking a single project, a cost-benefit analysis must be done and for multiple options, there must have a comparative study. All these studies will consider as a feasibility study. After the analysis, it will be clear to us whether the project is feasible or not.
Knowing the destination and work towards it is much better than walking in the dark. Because there is less possibility of losing the path of destination. Any sort of study to acquire in-depth knowledge of a probable outcome is the way of conducting feasibility study. The main focus of conducting the feasibility analysis is to minimize the risk. Day by day the fundraising feasibility study is getting more popularity because of its importance. I would suggest every individuals to do a proper cost benefit analysis before making any investment decision. If you can do it yourself then it will works as a plus point for you, if you don’t then take the help of other parties.
So we can say that a feasibility study is a systematic way of evaluating the project cost-benefit from different dimensions based on the logically preset assumptions.
Features of Feasibility Study
- A comprehensive study of all the factors related to project
- It is the preliminary phase of any successful project
- It is for a particular objective which is shaped by the scope
- A feasibility study is conducted based on logically set assumptions
- It is the media of evaluating a project viability
Example of Feasibility Study
Suppose you want to establish a Robot Manufacturing factory, before that you are critically evaluating and analyzing the investment requirement, financing, direct and indirect cost, revenue stream, risk factors, and the target market. After the evaluation, you have identified that this project of making Robot is worthy for investment. Whatever you had done to evaluate the project is considered as a project feasibility analysis.
Types of Project Feasibility Study
- Environmental and
Why is Feasibility Study is Important?
Every monetary decision is cost worthy. Decision-maker needs to be careful while taking a decision. A good decision will bring positive outcome whereas a bad decision will incur a loss. If the amount of money is significant then precautions and detail analysis must be done. And for insignificant/minor amount, you can make a decision from general understanding. It is a solution to the questions of
- Which project is viable for you?
- How much investment will be required?
- What will be the cost?
- How much benefit will we receive?
- What will be the payback period?
- What is the risk associated with the project and how much risk the project is?
Is it necessary to do feasibility analysis only for business? The answer is no, this can be applicable for all type of project from the economic, social, environmental perspective taken by a private organization/corporate, government, and personal. The reason we should do analysis before investment because of the followings:
- The ultimate objective is to make the right decision which will ensure the best positive result.
- Minimize future losses by taking the most beneficial projects.
- Maximize the return of future outcome.
- Cost-benefit analysis/ Cost, volume and profit analysis.
- Critical evaluation of the project scenario.
- Minimization of unsystematic risk.
- Identify the most beneficial means of finance and capital structure.
- Analyze the industry, market, environment, and economy.
- Identify future opportunities.