A feasibility study checks if a proposed project can succeed by analyzing technical needs, economic viability, operations, market conditions, financial potential, and legal issues. It helps make better decisions by spotting risks early and confirming the project’s feasibility through systematic assessments.
This article explains what a project feasibility study is, why it matters, who conducts it, and its benefits. The TELOS framework covers different types of feasibility studies, such as technical, economic, operational, market, financial, legal, and scheduling.
The article includes practical examples, essential tools, feasibility reports, assessment steps, best practices, limitations, and decision-making.
What Is a Feasibility Study?
A feasibility study is a structured evaluation determining whether a project, idea, or initiative can succeed. It examines technical feasibility, financial resources, market demand, operational capacities, and legal requirements to assess overall project viability, as described by Liao Zhi-cong, in “On the significance of feasibility for project construction study”.
When assessing project feasibility, it’s crucial to ensure that the project’s objectives can be realistically met within the constraints of time, budget, technology, regulations, and operations.
According to N. Ji, this type of analysis considers whether the project goals align with the available resources and market conditions.
Moreover, a comprehensive feasibility study predicts the project’s potential success and identifies possible obstacles early, which is vital for effective risk management and strategic planning, as noted by Dwi Sihono Raharjo, in “How Feasibility Study Guides An Execution Of Project Development“.
Why Is a Feasibility Study Important?
A feasibility study is essential because it helps organizations validate project ideas before committing significant time, money, and resources. It identifies potential risks, assesses resource availability, examines financial viability, tests technical feasibility, and confirms market demand.
Projects are more likely to fail without a proper feasibility assessment due to unforeseen issues, misaligned goals, or unrealistic assumptions. Conducting a thorough feasibility analysis allows businesses to make smarter decisions, improve strategic planning, and optimize resource allocation, as noted by Ali Jaafari, in “Management know-how for project feasibility studies“.
When is Feasibility Analysis usually conducted?
A feasibility analysis is typically conducted during the early planning phase of a project, before any major investments, design work, or resource commitments are made. A feasibility study is essential for new projects immediately after the initial idea is formed, ensuring that only viable concepts move forward into detailed development.
For existing projects, feasibility assessments are often performed when expanding into new markets, launching new product lines, restructuring operations, or facing significant strategic shifts, as noted by Joe Ssegawa, in “Feasibility Assessment Framework (FAF): A Systematic and Objective Approach for Assessing the Viability of a Project”.
In the project lifecycle, a feasibility analysis happens during the initiation stage, just after idea generation but before full-scale project planning begins. It acts as a gatekeeper, deciding whether the project should proceed, be modified, or be abandoned based on objective analysis.
Who Conducts a Feasibility Study?
A project manager or an internal team typically conducts a feasibility study. The project manager oversees the study, ensuring all areas are thoroughly covered. If the company lacks the necessary expertise, external consultants are hired. This is common for complex projects in construction or technology industries, as Mukherjee & Roy noted. Feasibility studies, done by professional external consultants, usually cost between $5,000 and $50,000, depending on the project’s scope and industry. There are 8 factors that impact the cost of feasibility studies:
- Scope of the project
- Industry
- Location
- Duration
- Consultant expertise
- Data collection
- Regulatory and legal considerations
- Risk and uncertainty
Benefits of Feasibility Studies
Conducting a feasibility study offers several key benefits that enhance project evaluation and decision-making:
- Risk Identification: The study identifies potential risks and challenges early, enabling teams to develop effective mitigation strategies.
- Informed Decision-Making: It provides critical data that helps stakeholders make informed decisions about whether to move forward with a project.
- Resource Allocation: It ensures teams allocate resources (time, money, workforce) efficiently, avoiding unnecessary waste.
- Project Viability: The study evaluates the project’s technical, financial, and operational feasibility, confirming that it can be successfully executed.
- Investor Confidence: It strengthens investor or stakeholder confidence by providing a clear roadmap and highlighting potential returns.
- Improved Planning: It aids in more accurate project planning by defining key milestones and outlining necessary steps
What Is the Main Objective of a Feasibility Analysis?
The main objective of a feasibility analysis is to determine whether a project is viable upon doing the feasibility study and by assessing its ability to meet the defined goals and constraints, including resources, time, and costs.
What Are the Components (Types) of a Feasibility Study?
A feasibility study, aka feasibility matrix, consists of several key components, also known as the types or kinds of feasibility studies, such as technical, economic, operational, and market feasibility. The TELOS framework — Technical, Economic, Legal, Operational, and Scheduling feasibility — is widely used to evaluate a project’s overall feasibility. These components provide a comprehensive understanding of a project’s potential success.
Here are the 8 main types of feasibility studies:
- Pre-Feasibility Study: This involves a quick, initial evaluation to assess whether a project idea is worth further investigation. It examines basic factors like market demand, financial viability, and potential risks
- Technical Feasibility: This examines whether the project can be carried out with the available technology and resources.
- Economic Feasibility: This analyzes the project’s financial viability, including costs and expected returns.
- Operational Feasibility: This assesses whether existing systems and processes can support the project.
- Market Feasibility: This evaluates market demand and competitive conditions.
- Financial Feasibility: This focuses on the project’s financial sustainability and funding needs.
- Legal Feasibility: This reviews any legal or regulatory constraints that could impact the project.
- Scheduling Feasibility: This determines whether the project can be completed within the required time frame.
Pre-Feasibility Study (Preliminary Analysis)
A pre-feasibility study is an initial evaluation to assess the basic viability of a project. It focuses on high-level aspects like market demand, initial costs, and resource availability.
3 Steps for conducting a pre-feasibility study are:
- Conducting initial market research to understand demand and competition.
- Estimating preliminary costs and identifying necessary resources.
- Assessing the project’s financial outlook to gauge its potential return on investment.
Once this preliminary analysis is done, more detailed assessments follow to determine if the project should proceed or not.
Technical Feasibility
Technical feasibility analyzes whether the necessary technology for the project is available and if the project can be completed using existing resources or new technology.
Conducting a technical feasibility study takes next steps:
- Identifying the technologies required to complete the project.
- Evaluating the capabilities of current or potential technology.
- Assessing the technical skills of the project team to ensure they can handle the required technology.
Once the team identifies and assesses the necessary technologies and skills, they must analyze how these technologies integrate within the project’s scope. This involves ensuring the selected technologies are compatible and can work seamlessly to achieve the desired outcomes.
Economic Feasibility
Economic feasibility evaluates the project’s financial viability by focusing on costs, potential revenues, and long-term financial returns.
The 3 steps for performing an economic feasibility study are as follows:
- Estimating costs, including both initial and ongoing expenses.
- Projecting potential profits and revenue from the project.
- Analyzing financial risks and identifying potential funding sources.
Operational Feasibility
Operational feasibility examines whether the organization can support the project using its current operational capacity and systems.
The following steps must be taken in order to conduct operational feasibility:
- Reviewing existing operations and systems to identify capabilities and limitations.
- Identifying necessary adjustments or upgrades to support the project.
- Evaluating the potential impact of the project on day-to-day operations.
Market Feasibility
Market feasibility assesses whether there is sufficient demand for the product or service, focusing on market conditions, competition, and customer behavior.
The key steps involved in a market feasibility study are:
- Conducting market research to gauge customer demand.
- Analyzing competition and trends in the market.
- Identifying potential barriers to entry.
Financial Feasibility
Financial feasibility examines whether the project can be funded and maintained financially. This usually includes:
- Estimating the total costs, including both upfront and ongoing expenses.
- Projecting potential revenues and profitability.
- Identifying financial risks and securing funding.
What Is a Bankable Feasibility Study?
A bankable feasibility study evaluates whether a project is financially viable and capable of securing funding, particularly from financial institutions like banks. Conducted before seeking financing, especially for large-scale projects, it demonstrates the project’s potential return on investment.
The bankable feasibility study assesses the project’s costs, revenues, risks, and technical feasibility to assure investors of its viability. The goal is to ensure the project meets the requirements for attracting external funding.
Legal Feasibility
Legal feasibility examines whether a project complies with legal and regulatory requirements. This study assesses whether any legal barriers or constraints, such as zoning laws, environmental regulations, or contractual obligations, could impact the project’s success.
The necessary steps for an effective legal feasibility study include:
- Identifying relevant laws and regulations.
- Reviewing any required permits or approvals.
- Ensuring the project complies with local, national, and international laws.
Scheduling (Time) Feasibility
Scheduling feasibility evaluates whether the project can be completed within the required timeframe. This study assesses project deadlines and ensures the schedule is realistic and achievable.
Steps for conducting a scheduling feasibility study can include:
- Establishing project milestones and deadlines.
- Evaluating resource allocation and time management strategies.
- Analyzing potential delays and addressing them in the schedule.
Organizational Feasibility
Organizational feasibility assesses whether the organization has the necessary structure, resources, and capabilities to support the project. This study ensures that the project’s goals align with the organization’s capacity and strategic objectives.
An organizational feasibility study can be conducted by following these steps:
- Reviewing the current organizational structure.
- Assessing available resources, such as personnel and infrastructure.
- Ensuring alignment with the organization’s mission and goals.
Once the organizational feasibility study is complete, further analysis is needed to optimize the organizational structure for the project.
Management Feasibility
Management feasibility evaluates whether the project can be effectively managed with the available leadership, skills, and resources. This study ensures that the project team can oversee and execute the project efficiently.
Steps for conducting a management feasibility study include:
- Assessing the experience and qualifications of the project management team.
- Evaluating the team’s ability to handle project complexities.
- Identifying any leadership gaps that may affect the project’s success.
Once the management feasibility study is done, a detailed plan for project execution and leadership alignment should follow.
Examples of Feasibility Studies
Here are two examples that illustrate how feasibility studies are applied in different projects:
- Product Launch Feasibility Study
A product launch feasibility study assesses the potential success of introducing a new product, such as a consumer electronics item or a new fashion line. This study analyzes production costs, supply chain logistics, target market demographics, and the competitive landscape.
It also evaluates the legal requirements, intellectual property considerations, and potential supply and demand dynamics risks. The feasibility study helps determine whether the product can be successfully developed, marketed, and sold, ensuring that the project aligns with business goals and will likely generate a positive return on investment (ROI). This study guides decision-makers on whether to proceed with the product launch.
- Software Development Feasibility Study
A feasibility study evaluates whether the proposed software is technically feasible and financially viable in software development. It looks at technical requirements, development costs, market demand, and whether the organization has the necessary resources to support the project. This study ensures the software can be developed within the required time and budget, while meeting the market’s needs.
Essential Tools for Conducting Feasibility Studies
To conduct a comprehensive feasibility study, utilizing the right tools is critical. These tools help assess various aspects of the project, from financial viability to market demand. Here are some key tools that are often used in feasibility studies:
- Financial Modeling with Microsoft Excel
Microsoft Excel is widely used for financial projections, cost-benefit analysis, and ROI calculations. It’s essential for financial feasibility studies, helping project managers assess costs, forecast revenues, and analyze cash flows. - Survey Platforms for Market Research
These tools help gather insights directly from customers or potential users, providing valuable data for market feasibility studies. Businesses can assess demand, customer preferences, and competition by conducting surveys. - Project Management Tools
Project management software is crucial for tracking timelines, managing tasks, and allocating resources. These tools are particularly useful when assessing operational feasibility, ensuring the project stays on track and within the available resources. - Risk Assessment Software
Risk management tools identify and evaluate potential risks impacting the project’s success. Risk assessment software, such as SEER by Galorath, go beyond basic risk identification by offering robust predictive cost modeling, schedule estimation, and uncertainty analysis, making them especially valuable for complex technical or engineering projects. These solutions enhance technical and operational feasibility studies by allowing teams to simulate project outcomes, account for uncertainties, and develop data-driven risk mitigation strategies early in the planning process. - Geographic Information Systems (GIS) Software
GIS tools are used for spatial analysis and determining optimal project locations, especially in infrastructure projects. This helps assess environmental feasibility and select sites that meet geographic and environmental requirements. - Accounting and Financial Software
These tools help track budgets, expenses, and revenue projections for detailed financial analysis. They are essential for conducting financial feasibility studies, ensuring a detailed evaluation of the project’s financial viability. - Business Plan Software
After gathering all data for the feasibility study, business plan software helps organize the findings into a structured plan. This is useful for presenting feasibility study results in a clear, actionable format for stakeholders and investors. - Document Management Tools
Efficient document management systems ensure that all data, reports, and supporting documents are well-organized and easily accessible. This is crucial for keeping track of all feasibility study documents throughout the project’s evaluation.
What Is a Feasibility Report?
A feasibility report summarizes the results of a feasibility study and presents the findings from evaluating different aspects of a proposed project, such as market demand, technical capabilities, financial viability, and legal considerations. A feasibility report offers recommendations for decision-makers. It consolidates individual feasibility studies, such as market, technical, financial, operational, and legal feasibility, into one comprehensive document to help decide whether to proceed with the project.
Components of a Feasibility Report:
- Executive Summary
This section provides an overview of the entire report, summarizing key findings, conclusions, and recommendations for decision-makers. - Project Description
A detailed explanation of the project, including its objectives, scope, and goals, sets the foundation for the feasibility report. - Market Feasibility
Assesses the market demand for the proposed product or service, analyzing customer needs, competition, market trends, and potential revenue to determine if a viable market exists. - Technical Feasibility
Evaluates whether the necessary technology, infrastructure, and expertise are available to execute the project. This section may address equipment requirements, production capacity, and technology gaps. - Financial Feasibility
Assesses the financial aspects, including cost estimates, projected revenues, ROI, funding sources, and financial risks, to determine the project’s financial viability. - Operational Feasibility
Examines whether the organization has the resources, skills, and processes to complete the project, including staffing needs and logistical considerations. - Legal Feasibility
Reviews the legal and regulatory requirements the project must comply with, such as zoning laws, permits, intellectual property rights, and industry regulations. - Risk Assessment
Identifies potential risks, including financial, technical, market, and legal risks, and provides strategies for mitigating these risks. - Recommendations
Based on the findings, this section presents a clear course of action, recommending whether to proceed with, modify, or abandon the project. - Appendices
Includes supplementary information such as data tables, research reports, financial projections, and technical specifications that support the findings and recommendations.
The feasibility report plays a critical role in guiding decision-makers by clearly understanding the project’s viability before committing resources. It is built from various individual feasibility studies covering the project’s technical, financial, market, operational, and legal aspects.
How to Assess Project Feasibility?
Assessing project feasibility is crucial to determining whether a project will succeed. Here’s a breakdown of the 11 steps to take when conducting a feasibility study:
Step 1: Conduct a Preliminary Analysis
Begin by identifying immediate roadblocks like budget constraints or unrealistic timelines. A quick evaluation can save time and resources by eliminating unfeasible projects early, as highlighted in ProjectManager’s guide.
Step 2: Define the Project Scope and Objectives
Clearly define the scope and objectives. Outline deliverables, set goals, and address constraints. As noted by Indeed, a well-defined scope ensures a realistic study and consistent evaluation throughout the project.
Step 3: Evaluate Market Feasibility
Assess whether there is sufficient demand for the project’s offering. Conduct market research to understand customer needs, competition, and potential market size. Asana stresses the importance of assessing market fit to ensure success and return on investment.
Step 4: Assess Technical Feasibility
Evaluate whether your organization has the necessary technical resources and expertise to execute the project. Investopedia explains that this stage ensures you can either leverage existing resources or determine if new technologies are needed.
Step 5: Evaluate Financial Feasibility
Conduct a detailed cost-benefit analysis. Estimate costs, revenue, and return on investment (ROI). Simplilearn emphasizes the importance of financial analysis to assess if the project is economically viable, including identifying funding sources and potential risks.
Step 6: Consider Legal Feasibility
Ensure the project complies with relevant laws, including zoning, licensing, and other regulations. Wrike highlights that evaluating legal feasibility helps avoid complications that could delay or halt the project.
Step 7: Assess Operational Feasibility
Evaluate whether your organization has the necessary resources, staffing, and operational capacity to support the project. ActiveCollab emphasizes this step to ensure your operational setup can meet the project demands, or if adjustments are necessary.
Step 8: Analyze Scheduling Feasibility
Examine if the project can be completed within the required timeframe. Estimating time and ensuring milestones are achievable is key. TechnologyAdvice underscores the importance of aligning timelines with available resources to prevent delays.
Step 9: Conduct Risk Assessment
Identify and evaluate potential risks, such as financial, technical, or market-related issues. ASHA highlights that assessing risks and developing mitigation strategies prevents unforeseen challenges.
Step 10: Prepare Feasibility Study Report
Summarize all findings and analyses, including market, financial, technical, and operational feasibility. Offer clear recommendations on whether to proceed with the project. Simplilearn provides a detailed approach to structuring this report.
Step 11: Make a Go/No-Go Decision
Based on all gathered data, decide to move forward or abandon the project. As emphasized by Indeed, this decision is crucial and determines the project’s direction based on available resources and organizational goals.
Tips and Best Practices for Feasibility Study Success
A successful feasibility study can be called one which successfully determines the viability of a project. Adhering to the following best practices can enhance decision-making, reduce risks, and ensure the project’s success.
- Set Clear Objectives and Define Scope: Start by establishing precise goals and a defined scope for the study. This clarity avoids confusion and ensures that all critical factors are included, thus improving the focus and outcomes of the analysis.
- Engage Stakeholders Early and Often: Involve key stakeholders from the outset to gather diverse insights and secure early buy-in. This approach helps identify potential risks early and ensures alignment with business objectives, as highlighted by Laith Qendeel, in “Feasibility studies and their effects on the success or failure of investment projects. “Najaf governorate as a model”
- Leverage Accurate, Up-to-Date Data: Use current, reliable data for market trends, financial projections, and risk assessments. Quality data is essential to reducing errors in decision-making and ensuring the feasibility study’s reliability.
- Identify and Mitigate Risks: Pinpoint potential risks and develop mitigation strategies. By proactively addressing challenges, the feasibility study uncovers opportunities and sets the foundation for effective risk management, as noted by Dwi Sihono Raharjo in “How Feasibility Study Guides An Execution Of Project Development”.
- Conduct Thorough Financial Analysis: Analyze the project’s financial feasibility in detail. Include cost-benefit analysis, projected revenues, and ROI calculations to ensure that the project is financially viable and resources are allocated efficiently.
- Explore Multiple Scenarios: Use scenario analysis to simulate various conditions that could affect project outcomes, such as changes in funding or timelines. This allows for flexibility in planning and preparing for different contingencies.
- Ensure Legal and Regulatory Compliance: Review all relevant legal and regulatory requirements early in the process. Ensure that all necessary permits, licenses, or certifications are identified, as failing to meet these obligations can lead to costly delays.
- Assess Technological Readiness: Evaluate the technological needs for the project. Ensure the necessary tools, resources, and expertise are available to avoid potential roadblocks in the execution phase..
- Prepare a Detailed Feasibility Report: Finally, prepare a clear, concise feasibility report summarizing all findings, assessments, and recommendations. A well-structured report aids understanding and serves as a reference for future adjustments. A good report helps guide decision-making and project evaluation.
Limitations of a Feasibility Study
While a feasibility study is crucial for assessing the viability of a project, it has its limitations. Understanding these limitations helps manage expectations and ensures better decision-making.
- Relies on Assumptions
A feasibility study often depends on assumptions regarding market conditions, financial projections, and available resources. If these assumptions are incorrect, the study results may be misleading. - Time-Consuming
Conducting a comprehensive feasibility study requires significant time to gather data, analyze information, and prepare the report. This can delay decision-making, particularly when the project needs to move forward quickly. - High Costs
The cost of conducting a feasibility study can be substantial, especially for complex projects. It requires resources to hire experts, perform detailed market research, and conduct technical and financial assessments. - Potential Bias
Feasibility studies can be influenced by the biases of those conducting them, particularly when internal teams are involved. If stakeholders are vested in the project’s success, they may overlook risks or overestimate benefits. - Uncertainty of Long-Term Projections
Feasibility studies often make long-term projections regarding market trends, revenue, and costs, which can be speculative. As market conditions evolve, these projections may become outdated. - Limited Scope
A feasibility study typically focuses on the most critical aspects of the project, but may not capture every potential variable or scenario. For example, it might overlook less obvious risks or fail to account for future market changes. - Doesn’t Guarantee Success
Even if a project passes a feasibility study, success is not guaranteed. External factors, such as market changes, competitor actions, or regulatory shifts, can still affect the project’s outcome.
Using and Evaluating Feasibility Study Results
Once the feasibility study is complete and the report is compiled, stakeholders must carefully evaluate the findings and conclude. The results provide critical insights into whether the project is worth pursuing, but the decision-making process doesn’t end with the report.
Here’s how stakeholders should approach evaluating the results:
- Review All Collected Data: The first step in evaluating the feasibility study is to carefully review all the data gathered. This includes market research, technical analysis, financial projections, and legal assessments. Reviewing the data in detail helps stakeholders understand the depth of the study and ensures that all factors, such as risks, costs, and benefits, have been thoroughly considered. This thorough evaluation helps uncover potential gaps and validate the project’s assumptions before proceeding.
- Identify Key Insights: Stakeholders should look for key insights directly impacting the project’s success. These insights often revolve around market demand, financial viability, technical requirements, and potential risks. Identifying these insights helps prioritize the most critical decision factors for the project. Uncovering these insights early can significantly guide the decision-making process and avoid overlooking critical risks.
- Weigh the Risks and Rewards: After reviewing the data, stakeholders must weigh the potential risks against the rewards. Understanding the balance between the expected benefits and the potential challenges helps stakeholders make informed decisions, avoiding rash judgments that could lead to costly mistakes. Patel & RazaviAlavi, in “Decision factors for the feasibility study of developing a prefabrication plant“ argue that carefully weighing risks and rewards is key to making well-rounded decisions that safeguard long-term project success.
- Consider External Influences: While the study provides valuable insights, stakeholders should also consider external factors, such as changing market conditions, regulatory shifts, or new technological advancements that may impact the project’s future viability.
- Make Informed Adjustments: If the feasibility study reveals areas of concern or improvement, stakeholders can use the findings to adjust the project plan. Identifying gaps in the feasibility study allows for making adjustments that could enhance the project’s chances of success before committing significant resources. Using these findings to inform adjustments can optimize project outcomes and improve overall feasibility.
Go or No-Go Decision
After thoroughly evaluating the feasibility study and analyzing the report, stakeholders must make the Go or No-Go decision. This is the crucial moment when stakeholders decide whether to proceed with the project or abandon it. This decision is based on a comprehensive review of the study’s findings, considering market demand, financial feasibility, and technical capabilities. According to Yun & Caldas, in “Analysing decision variables that influence preliminary feasibility studies using data mining techniques“ if the study indicates that the project is not viable or that the risks outweigh the rewards, it may be decided that the project should not proceed. On the other hand, if the feasibility study shows promise, the project will move forward into the planning and execution stages.
FAQs:
1. Does Every Project Need a Feasibility Study?
Not all projects need a feasibility study. Small, low-risk projects may skip it, but large or complex projects benefit from one to evaluate risks and rewards before investing resources.
2. How Much Does a Feasibility Study Cost?
Costs range from $5,000 to $15,000 for small projects. Larger projects can cost $20,000 to $100,000 or more, depending on the project’s scope and complexity.
3. How Long Does It Take to Do a Feasibility Study?
Feasibility studies typically take a few weeks for simple projects and 3 to 6 months for complex ones that require detailed research and analysis.
4. What Is the Most Important Part of the Feasibility Study?
Market research is crucial, as it determines demand, evaluates competitors, and helps predict the project’s potential success.
5. Are Feasibility Study Costs Deductible?
Feasibility study costs are generally not deductible but may be capitalized if they lead to a new asset. Consult a tax professional for specific guidance.