Feasibility study and its importance in project management
What is a Feasibility Study?
A feasibility study evaluates the probability of a project’s successful completion by taking into account all relevant elements, including financial, technological, regulatory, and scheduling issues. Whether a project is having a reasonable chance of succeeding or not depends on a number of aspects, including the project’s cost and return on investment, or the revenue earned or profitability that the business generated from customers.
There are many more purposes for doing a feasibility study besides evaluating a project’s economic health. As a result, the definition of feasible varies from sector to sector and project to project. A feasibility study, for example, could assist a businessman in determining whether investment and assets are available for the expansion and construction of new business units.
If we talk about a hospital, a feasibility study could assist hospital management in determining whether donations and investment funds are available for the expansion and construction of a new cardiac center. A feasibility study can assist project managers in determining the risk and reward of taking a course of action, there are various steps and best practices to evaluate before proceeding.
- Feasibility studies evaluate the viability of a proposed plan or project.
- Financial, operational, administrative, and planning aspects are all properly considered in a feasibility study to see if a project can operate.
- Cost and return on investment, as well as income from users, are important factors in determining whether a project is feasible or not.
- Possibilities for new ventures or product lines might be investigated through feasibility studies by a corporation.
- To be prepared for the unpredictable results or if the original project is not possible, it is wise to have a backup plan.
There are different types of feasibility studies. In order to gain the trust of potential investors and lenders, a feasibility study must seem unbiased in its evaluation of the project’s viability. Feasibility studies can be broken down into five distinct categories, as outlined below.
1. Technical Feasibility
The emphasis of this evaluation is on the organization’s technological capabilities. An organization’s technical resources and technical team’s ability to turn concepts into working systems can be assessed using this tool. The analysis of the proposed system’s hardware, software, and other technical needs is also a part of technical feasibility.
2. Economic Feasibility
These assessments often include a cost/benefits overview of the project, which helps companies to identify whether or not a project is worthwhile before allocating capital. It also performs as an impartial performance evaluation and promotes project credibility—helping decision-makers to decide the strong economic benefits for the company that the proposed project will bring.
3. Legal Feasibility
This analysis looks at whether or not the project breaches any rules, such as zoning restrictions, data security legislation, or social media usage guidelines. Suppose a company has a certain site in mind for a new office complex. Feasibility studies may suggest that an excellent spot for a business may not have the appropriate zoning classification. By discovering that their project was not possible from the start, the company has just saved a significant amount of time and work.
4. Operational Feasibility
Research is conducted to establish if and how successfully the organization’s needs can be addressed through the project’s completion. Operational feasibility studies also look at how well a project plan is compatible with the requirements determined during the system development analysis phase.
5. Scheduling Feasibility
A project will fail if it isn’t finished on time, hence this inspection is critical to its success. Scheduling feasibility involves making an educated guess about how long it will take to accomplish a project.
Following a thorough examination of each of these elements, a feasibility study can help uncover any potential obstacles to the proposed project.
Feasibility Study’s importance
An organization’s aim to “get it right” prior to investing assets, attention, or money is the basis for the significance of a feasibility study. A project objective can be totally reimagined if fresh ideas are discovered during a feasibility study. It’s better to know these things in advance than to start a project only to discover that it’s a failure. You and other stakeholders would benefit from doing a feasibility study since it provides a clear picture of the planned project.
A Feasibility Study’s Advantages
There are numerous advantages of conducting feasibility studies before allocating major resources to a project. As a result of a feasibility study, the management team of a company may be better equipped to avoid engaging in a dangerous business initiative.
Additionally, feasibility studies aid firms with new company development, such as identifying how the business will work, potential hurdles, competition and market analysis, and the amount and source of capital necessary to grow the business. In order to persuade investors and banks that a certain project or firm is a worthwhile investment, feasibility studies look for marketing tactics.
Apart from the approaches to feasibility study listed above, some projects also require other constraints to be analyzed –
Internal Project Constraints:
Budget, resources, technology, etc.
Internal Corporate Constraints:
Monetary, Commercial, Trade, etc.
Logistics, the environment, laws, regulations, etc.
It is common for businesses to skip the “feasibility analysis” step and dive immediately into the implementation of a project. In the vast majority of the cases, this leads to the failure of the business. It’s vital to remember that if a decision is made to proceed without a full feasibility investigation, there is no way to avoid significant losses. A feasibility study and report for any project that involves risk and uncertainty is a smart business strategy.
After reading “Importance of Feasibility Study in Project Management,” we hope you have a better understanding of what a feasibility study is and why it’s so important.
The financial advising firm WBS Business Consultant is one of the best in Dubai when it comes to handling project feasibility. We have a team of experts who do thorough research on behalf of our clients and present them with the most effective solutions.