The Concept of Feasibility Study in Project Planning
Feasibility study is one of the basic concepts of successful project planning. It is used to determine whether a given project is appropriate for further development and delivery. In other words, project feasibility studies enable you to assess whether or not the ideas and findings behind your product or service can be shaped to be relevant, cost-effective and sustainable.
Such assessment may identify not only what — if anything — in the project management process needs modification, but also how changes might occur. For instance, the feasibility analysis in a software development project may be conducted when the team wants to compare different frameworks and programming languages and figure out what tech stack would best fit the product at any stage of the development process.
For a typical project passing through the planning phase, feasibility study is a decision making tool that helps the stakeholders identify, explore and analyze business opportunities and threats and make a strategic decision on the necessity to initiate the project. Simply said, it is the right way to answer the question: “Is the concept of my project economically reasonable and technically feasible?“
What is a Project Feasibility Study?
In project planning, a feasibility study (aka “feasibility analysis”) defines a systematic process that identifies opportunities and threats surrounding the project, describes possible situations when the project can succeed and fail, and analyzes the range of costs and benefits associated with alternatives for solving a given problem within the project. The goal of this process is to assess and prove the viability of a business idea from different angles — economic, technical, operational, time/schedule, contractual/legal. The outcome of the feasibility study process determines whether or not it is reasonable to initiate the project and proceed with its implementation.
The project feasibility study process helps stakeholders and business decision-makers identify all the opportunities they can gain upon successful completion of the project. If the process did not prove the viability of the business idea, the proposed initiative should not be pursued.
Why Assess Project Feasibility at the Planning Stage
Feasibility studies allow avoiding irrational spending of effort, time and money, so it is a highly effective tool of project planning and assessment. It forces stakeholders to put their ideas on paper to conduct an in-depth analysis and then find out whether the ideas are worth investing or not.
Before initiating a project, it is important to perform a feasibility analysis that helps in planning the project scope efficiently under the desired benefits. The importance of assessing project feasibility consists in the next major benefits that the performing organization will gain:
- Analysis. A detailed template of feasibility study contains all the analytical information being used for investigating the project requirements and the business need completely.
- Risks Mitigation. The feasibility study helps in identifying risk factors that affect project planning and delivery.
- Training. It helps in identifying staff training needs and developing training programs.
- Reporting. The study is a kind of initial project reports that give the senior management information required for making well-grounded decisions on cost estimation and project funding.
To walk through the reasons for assessing project feasibility at the planning stage, it is usually supposed that there are six project planning functions addressed by feasibility studies. Let’s summarize each in the following list:
- Acceptability. This function looks at how the stakeholders — both targeted individuals/organizations and those involved in the implementation process — react to and accept the project.
- Demand. We gather data on estimated or actual demand for the deliverables that the project will produce, and then figure out if it is reasonable to perform this project.
- Implementation. We evaluate the extent, likelihood, and manner in which the project can be fully delivered as planned.
The Business Case and Project Feasibility
The primary component to be included in feasibility study of a project concerns determining potential market opportunities for the sponsor. Determination of market opportunities is about examining current level of demand for a product to be produced upon project completion and exploring ways for differentiating the product in the market.
This means that a need for the project will be established if an adequate level of demand exists for the product. Market opportunities determination is also about analyzing the competitive environment and defining key players on the market who will be major competitors to the proposed venture.
This component represents two groups of requirements, including technical requirements and organizational requirements. The first group covers requirements for equipment & technology to produce the product; costs involved in purchasing and installation; operational costs of running the equipment, and others.
The second groups identifies the following:
- Qualifications are required for managing operations
- Sources of supply
- Key staff positions to be filled
- Type of experience the management should have
Feasibility study of a project allows focusing on the investigation of the overall financial situation around the project. Protecting your financial situations are important, US Money Reserve is just one program that can help with your assets. Based on cost estimates, this document includes financial information essential for initiating the project. The study may include the following information:
- Total start-up costs required for beginning the project
- Operating costs, including wages, rent, and interest payments on outstanding debts
- Financial credit standing of the company to determine possible sources of funding
- Revenue expectations
- Possible sources of project financing
- Expected project profit
If the cost estimates presented in the feasibility study prove that the project choice is economically viable, then the sponsor can proceed with developing the business plan.