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What is a Feasibility Study?

A major aspect of a feasibility study in business is ascertaining the total cost of a proposed project.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 August 2014
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Feasibility studies are preliminary investigations into the potential benefits associated with undertaking a specific activity or project. The main purpose of such a study is to consider all factors associated with the project, and determine if the investment of time and other resources will yield a desirable result. While considered a preliminary study, it is not unusual for it to be highly detailed.

When a business is considering a new operation or the launch of a new product, the feasibility study is a logical tool to employ before any resources are invested in the new project. One of the most important aspects of the study is to make sure that the total investment needed to successfully bring the project to completion is considered. Often, this will include addressing components such as cash reserves, labor, construction, production facilities, outsourcing, and the cost of raw materials. Only when the study has addressed the total cost of completing the project can the study progress to the next level.

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As a second major component, the feasibility study will also address costs and other factors that are indirectly associated with the project. In the instance of creating a new product for sale, this second phase will look into the costs associated with reaching and cultivating a consumer base for the new product. The overall idea of these preliminary studies is to ensure that there is a reasonable understanding of what will be required to both create the new product and also successfully market the finished goods at a profit.

These studies have often assisted companies in understanding which projects to develop and which ones to abandon before investing resources in something that ultimately shows no promise of generating revenue. Taking the time to engage in a pilot study does involve some usage of available resources, but these costs are much more readily absorbed than the larger amount that would be expended on a project that ultimately proved to be worthless.

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Discuss this Article

pastanaga
Post 12

@Fa5t3r - It can be difficult, but the important thing to remember is that it is just a study. If there was a guarantee that a product would sell, there would be no failed products (and there have been a lot of failed products).

Any kind of project feasibility study is going to be somewhat made up of guesswork. But you can find out a lot of information, particularly if you go into it with your eyes open and willing to take in information even if it's not what you were expecting.

I read about one recently where someone did research for a pasta sauce company and discovered that something like 30% of people really like chunky pasta sauces and there were hardly any available for them. It wasn't what the company was expecting to hear, but you can bet when they did hear it, they put that information to work.

So yeah, if you do get unexpected results in a study, you have to use that. Don't just ignore it, because it won't go away.

Fa5t3r
Post 11

@browncoat - I think companies often do bring in consultants, because they don't have to go through the feasibility study process very often. It would only be big companies, or companies that deliberately change their product all the time that would need someone on staff just for this kind of work.

I always thought it would be quite tough to do a feasibility study for a new company actually. When you've got nothing to go on, it must be hard to generalize how much people will buy something because there are so many variables.

browncoat
Post 10

@anon70769 - It depends on who you are doing it for. Anyone can really do one. There are plenty of guides you can find online or in the library or local bookstore that will tell you how to conduct a feasibility study for all kinds of purposes.

But if you want to be doing them professionally, I guess you would have to work in the marketing department of a company, so I would take a business course with a focus on marketing. I don't think you'd be working on this kind of study all the time though, unless you were a consultant who specialized in them.

Carolyn25
Post 9

I have seen some groups spend so much time/money on feasibility studies that it would have been cheaper/easier to complete the target project itself.

anon149639
Post 6

brief but direct. it's good.

anon108365
Post 5

thanks to who provided that useful definition for needy people like us. It was easy to understand and easy to learn. Once again, thanks dude.

anon95618
Post 4

thanks for the info.

anon70769
Post 3

actually. I have a question rather than a comment, which is: What qualifications should one should have to do a feasibility study?

anon53618
Post 2

very useful information.

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