How to Write a Feasibility Study for a Business
When the management of a business becomes interested in a new venture -- such as marketing a significant new product -- it should conduct a feasibility study of the idea to evaluate its viability. The feasibility study should determine whether the business idea might generate an adequate level of cash flow and profitability and remain viable in the marketplace over the long term.
Begin with the executive summary. The executive summary should provide a clear overview of the study's main points. It should enable the company's senior management, and any important outsiders such as bankers or investors, to understand the study and its conclusions without having to read the entire document. It should be written last but placed first in the finished report.
Provide relevant information about the proposed product. Give the intended benefits for the customer. Describe the new product in detail. Include images, technical details and other information, such as test results, that contribute to an understanding of the product. Tell how it is different from other products that the company is offering. Name the proposed manufacturer and supplier. Provide information about distribution of the product. Discuss patents and related information.
Discuss the potential market for the product. Give the product's potential market size in terms of numbers of customers and revenue. Describe the target market for the new product and the company's estimated share in terms of customers and revenue. Discuss the growth potential for the product. Include all relevant factors affecting demand for the product. Give the demographic characteristics of the potential customers. Discuss, in detail, existing competition in the marketplace.
Give the key financial information about the new product. Tell how the product should be priced and provide all relevant calculations that back up the pricing. Discuss the costs of introducing the product to the market as well as the expected revenues. If applicable, include information about the need for outside financing in connection with marketing the new product. Show the expected profitability of the product.
A feasibility study is not the same as a business plan. A feasibility study is a tool for determining whether a business idea is viable. A business plan is for planning the actions needed to bring the business idea to reality. The feasibility study does, however, provide information for the business plan.