Feasibility study refers to the assessment of how practical a proposed method or plan is. It requires a lot of research and investigation to determine, and it looks into both the pros and the cons of the proposed venture or the existing business. The simplest way to look at the feasibility study would be to measure the cost that will be required against the value that would be reaped. The project’s success rates need to be properly calculated in order to attract potential investors.
A good feasibility study is conducted before the plan is put into action, and it consists of a complete historical background of the project or the business, accounting statements, details of how the management and the operations would be carried out, the financial data, the details of market research and its policies, and tax obligations and legal requirements.
There are five areas in which the feasibility study is divided into, which is also known as TELOS, these are:
These five study areas are affected by certain feasibility factors, as such as:
- Technology and system feasibility: In order to determine whether the company has the technical skills to handle the project, the outline design of the system’s requirements submitted by the company is thoroughly assessed. At this point, the main focus is on whether the proposal can be possible both legally and technically, assuming that the costs would be moderate.
- Market and real estate feasibility: The market is studied at first to find the best affordable location, as market feasibility requires finding the perfect location for the real estate project. It also researches the business’s importance in that particular area, and the project will only get approval after the market feasibility studies have been completed.
- Resource Feasibility: This stage deals with all the operational questions, such as how long it will take to build the structure, when the building can begin, the amount of resources that are available and the quality, whether the construction will interfere with daily business work, etc.
- Cultural feasibility: One cannot just erect a public building in a plot and not expect it to have an impact on the people around it, and that is why the project is evaluated at this stage to ensure that the clash between the general culture and the company’s culture isn’t too great.
- Financial feasibility study: Proper calculations of the project’s estimated cost, the financing of the project in terms of its debt equality ratio, capital structure and the total cost of the promoter’s share. Calculations are also made to determine the potential of the project’s funding and the terms of repayment.
Aside from these factors, market research is also a crucial, as a failed market research could mean the total cancellation of the project.
Once the feasibility study is completed, everything is compiled into the feasibility study report, which consists of everything, from the criteria of evaluation in detail, to the findings of the study, and to the recommendations.