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Conducting a Feasibility Study for Best Results

Dec 19th, 2007 by admin

Below is a response I posted to a question on WikiAnswers (www.wiki.answers.com) about feasibility studies:

In order to make wise investments in a marketplace experiencing increasing levels of risk, companies are turning to feasibility studies to determine if they should offer new products, services or undertake a new business endeavor. The purpose of a feasibility study is to determine if a business opportunity is possible, practical and viable. When faced with a business opportunity, many optimistic people tend to focus on just the positive aspects. A feasibility study enables an entrepreneur to look realistically at both the positive and negative aspects of the opportunity. A feasibility study is an important tool for making the right decisions. A wrong decision often leads to business failure. For example, only 50 percent of start-ups are still in business after 18 months and only 20 percent are in business after 5 years.

Feasibility studies are useful when starting a new business or identifying a new opportunity for an existing business. Ideally, the feasibility study process involves making rational decisions about a number of enduring characteristics of a project, including:

Definition of the project;
Current market segmentation;
Projected growth in each market segment;
Current market offerings;
Customer profile(s);
Estimation of customers/revenues;
Determination of competitive differentiation and advantage(s);
Vision/mission statement;
Definition of proposed operations/management structure and management methods; and
Financing and projected cash flows.