Before launching a new business or introducing a new product, it behooves entrepreneurs to determine the likelihood of success. Knowing the answers to the question, “What is a feasibility study, and why is it important?” could mean the difference between success and failure.
Definition of a Feasibility Study
An analysis of all the technical, financial, legal, and scheduling needs for any project reveals whether the project is worth pursuing or if it will be too difficult, expensive, or limited in scope to succeed. It’s a practical look at whether the available resources, expertise, and technology can combine to provide a return on investment that makes undertaking the project worthwhile.
Why Is a Feasibility Study Important?
Feasibility studies require businesses to examine an idea thoroughly to determine its viability. They must gather and analyze data about the potential market and customers for a product or service, as well as the competitive landscape. Feasibility studies help businesses to refine their goals and develop plans to achieve them. In a feasibility study, businesses must hammer out the details of how they intend to produce and deliver a product or service; what the potential barriers, obstacles, and risks may be; and whether they have the money and the team that can make it happen.
Feasibility studies help businesses consider alternative solutions to whatever problem they are trying to solve or need they are trying to address. They are a form of “dry run” that allows a business to hone and revise their plans and determine the likelihood, or lack thereof, of success before committing significant resources to a project.
What Kinds of Businesses Benefit From Feasibility Studies?
Every business, from a small start-up to a large, multinational corporation, can benefit from conducting feasibility studies. Industries as varied as consumer goods producers, medical device developers, automakers, and technology companies conduct feasibility studies to avoid wasting time and money on an idea that won’t sell, would be too expensive to produce, or has too narrow a market.
Feasibility studies are important because they can solidify teams around a project or idea. They require the project team to concentrate on details, consider alternatives, and spell out the pros and cons of moving forward. In the process, project teams may discover a completely new or different solution that will provide better, faster, or more profitable results.
Feasibility studies aren’t the same as business plans. They’re investigative tools that help entrepreneurs make go or no-go decisions. They can serve as the foundation of a business plan, demonstrating that the business idea has gone through thorough vetting. The business plan maps out how the business will execute the idea and put it into action. The feasibility study process can save a company from going down a potentially disastrous road or shine a beacon on a path to success.