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Conducting a feasibility study is the first step after the project concept is visualized. This process starts before creating a business case and signing the project charter.
The project business case document establishes the validity of the benefits of the project and builds the case for project authorization. Feasibility studies enhance your success rate by evaluating many parameters, identifying reasons to proceed or not with a project.
The project charter authorizes the project’s existence.
In today’s blog post, we will discuss how to conduct a feasibility study for a project.
Feasibility is about validating an idea. It shows how realistic a venture can be. We call it a venture because a level of risk or uncertainty is involved.
Definition of a Feasibility Study
According to the Merriam-Webster dictionary, a feasibility study is an investigation to show that the venture is doable.
From a business perspective, a feasibility study shows if a venture is worth the investment. The feasibility study is based on objective data.
In this study, you find the answer to the following questions:
Can it be done?
Is it realizable considering the various constraints?
Will it provide the desired result?
Is it aligned with the organizational goal?
How to Conduct a Feasibility Study
The feasibility study has many aspects, such as market feasibility (demand and supply forces), technical feasibility (do we have the technical know-how or do we outsource, train, retrain, etc.), and financial/economic feasibility (do we have the capital strength for this investment, or do we secure a loan? What are the financing options available?).
We will adopt MTELOS Model for conducting a feasibility study that looks at the following six aspects:
Market Analysis
Technical
Economic
Legal
Operational
Schedule
Market Analysis
Market analysis is applied to new products or improvements of existing ones.
Evaluate the market for your product’s demand against the supply dynamics. You can use a survey for this purpose. The survey must have objective questions.
Here you find the answer to the following questions:
Who are my competitors?
What is driving the demand?
How is the supply chain for the intended product?
A quick SWOT analysis can help you find answers to the following questions:
What are my strengths? e.g., a good brand name, skilled personnel, a large workforce, proprietary technology, a large capital base, strategic location, etc.
What are my weaknesses? e.g., administrative bureaucracy, resource limitation, etc.
What are the opportunities of this venture? e.g., large market share, market penetration, few competitors, packaging, promotions, etc.?
What are the threats? e.g., government regulations and policies, price fluctuations, a competitive market?
Other aspects of market analysis are pricing and distribution channels. For example:
How do you set the price for your products?
What pricing model would you adopt?
Is the model a flexible or rigid one?
What are the effects of the exchange rate, inflation, demography, population rise, urban-rural migration on price forecast?
Is the price dependent on an international benchmark like crude oil?
What is the market history?
What is the market forecasting?
Answers to these questions must be analyzed before reaching a decision. The feasibility study must be objective, as the investment decision will be based on its outcome.
You will analyze the supply chain. Here you will try to find answers to the following questions:
When will the customer receive the product after production starts? Good products with poor distribution often result in a loss in revenue.
What strategy would you adopt to get orders from customers as quickly as possible?
Launch plans are equally important. Here, you can find answers to the following questions:
What is your rollout plan?
Do you intend to have a promotion?
How will you penetrate the market?
How do you want to beat your competitors?
A business analyst will be helpful in answering these questions.
1. Technical Feasibility Study
While conducting the technical feasibility study, you see if you are technically capable of completing the project or not.
The following table will show us the parameters and questions for conducting the technical feasibility study.
S/N |
Technical feasibility heading |
Desired level or prompt questions |
Outcome / To-do |
Recommendation |
1 |
Plant layout -This is related to the construction of buildings, equipment requirements, and production operations. |
Do we have adequate space for the facility? |
Indicate whether Yes or No |
|
2 |
Production input -This is related to the resources required to produce goods or services. |
What about human resources? |
Establish the availability of personnel (skilled, semi-skilled, or unskilled) for the project. |
|
3 |
Technology -This is related to the techniques and processes required for completing the project. |
What technology is required? |
Scan your in-house technology and match it with the intended job. |
|
4. |
Spare parts and maintenance |
Are the spare parts available or sourced? |
Find a source for spare parts for the selected technology. |
|
5 |
Supply contracts |
Are contracts identified for material supply? |
Complete thorough in-house research in collaboration with the Supply chain or procurement department. |
|
6 |
Utilities -Common utilities are electricity, water, steam, compressed air, etc. |
What utilities are required, and do we have them? |
Prepare a list of the required utilities and their practical sources. |
|
7 |
Environment |
How will the project impact the environment? |
Conduct an EIA (Environmental Impact Assessment) to answer most of these questions. |
|
8 |
Design approach -This is a design methodology that provides a solution-based approach to solving problems. |
What design codes and standards will be involved? |
Review and select design codes and standards. |
|
2. Economic Feasibility Study
In the economic feasibility study, you review if you are economically capable of doing the project. It is the basis for preparing the business case after the feasibility study.
S/N
|
Economic feasibility heading |
Desired level or prompt questions |
Outcome / To-do |
Recommendation |
1 |
Project costing – This deals with the costs associated with the venture. |
What is the cost of the proposed project? |
Review commercial databases to estimate standard costs for skills, human resources, and materials. |
IfC/B <1The project is economically feasible.Where C =CostB = Benefit |
3. Operational Feasibility Study
The operational feasibility study examines the suitability of a solution. A solution that is not operational or impracticable is not worth pursuing.
S/N
|
Operational feasibility heading |
Desired level or prompt questions |
Outcome / To-do |
Recommendation |
1 |
Maintainability -This shows how easily the product or process can be restored in case of failure. |
How maintainable is the process? |
Analyze the lifecycle maintenance demands of the initiative. |
Integrate these parameters early enough – at the design stage for ease. |
2 |
Supportability -This shows how easily the existing system can integrate the initiative. |
Do we have software or applications that can support this program? |
Match the operational demands with existing facilities and identify the gap. |
|
3 |
Reliability -This examines the availability of this initiative/technology when needed. It also means consistency. |
How reliable is the equipment/approach? |
Evaluate reliability using correlation tests. |
|
4 |
Disposability -This considers the ease of disposal within acceptable standards. |
At the product life cycle, how easily can it be disposed of? |
Design of experimental and pilot-scale studies. |
|
4. Legal Feasibility Study
Legal feasibility study shows whether or not the project is violating any government guidelines.
S/N |
Legal feasibility heading |
Desired level or prompt questions |
Outcome / To-do |
Recommendation |
1 |
Regulations -These are guidelines or restrictions imposed by the government. |
Does the project follow the laws? For example, a food industry along the right of way of overhead high-tension wire. |
Review the legal requirement of the project/approach. |
Compliance |
2 |
Intellectual property -These are creations of human intellect that are protected but can be used with permission. |
Are there copyrights, patents, trademarks, licenses, etc.? |
Review the legal requirement of the project/approach. |
Compliance |
Government regulations are mandatory dependency or hard logic. It can result in project termination and must be properly researched to avoid the potential waste of resources.
5. Schedule Feasibility Study
Schedule feasibility study shows if the project can be completed within the required duration.
Define and sequence activities, then estimate the duration and develop the schedule using diagramming techniques such as the critical path method or PERT.
You can also use the Gantt chart.
S/N |
Schedule feasibility heading |
Desired level or prompt questions |
Outcome / To-do |
Recommendation |
1 |
Timeliness -The completion of the task/project within the allotted time. |
What is the project duration? |
You could introduce schedule compression tools such as fast-tracking and crashing. |
|
Conclusion
Conducting a feasibility study ensures the project is worth pursuing and pursuable. It is done after the conceptual stage of a project. Project sponsors conduct this study themselves or they can take help from a third-party consultancy, project managers have no role here. This study is the first step toward a project creation.