Businesses undertake feasibility studies to determine if a proposed strategic action makes sense operationally and will produce the desired results. For example, you might write a feasibility study to determine whether a new business will succeed, whether relocating is an option or whether you should launch a new product line. If you're considering a new startup or a major initiative for your existing company, a well-constructed feasibility study can help you judge its chances of success.
TL;DR (Too Long; Didn't Read)
A feasibility study helps decision makers decide if they should press ahead with a course of action. It needs to show whether the project will work and whether it makes sense financially.
Assess Your Chances of Success
The overall objective of the feasibility study is to determine how successful your proposed action will be. For example, you might study whether a new product innovation will work as anticipated and generate the projected revenue or anticipated cost savings. Under that overarching umbrella are smaller objectives that will vary slightly depending upon the reason for the study, but generally they will revolve around customer needs, your company's strengths and financial viability.
Figure Out Customer Needs
One objective of a feasibility study is to learn more about customers' current and future needs, particularly as they relate to the action you are studying. For example, if you are opening a new business, an objective is to gauge interest in the product or service you hope to offer. If you are launching a new product line, an objective is to determine whether your primary customers will need the new product or service and how much they can and will pay. If you are seeking to manufacture at a lower cost, an objective is to determine if the product will be satisfactory. Social media can be useful at this stage, as a means to gauge customer interest in the solution you hope to bring to market.
Analyze Your Competitive Strengths
A feasibility study also will examine your company's strengths, weaknesses and position in the marketplace. For example, are you currently viewed as the high-quality provider among your competitors? If so, how will using a lower-cost manufacturing process change your position? If you are opening a new business, will you be able to compete effectively against other competitors? Do your competitors have deep enough pockets to cut their prices in response, and wait until you run out of money?
Examine Your Financials
For an action to make business sense, it must help your bottom line. Another primary objective of the feasibility study, then, is to determine the financial benefits of the action vs its costs. For example, will enough customers buy your new product at a price sufficiently high so that you can make a profit? Or will you really save by buying a new machine or will training and additional electricity costs cancel out the benefits of higher production? Could the business achieve the same benefits through cheaper means?
Randi Hicks Rowe is a former journalist, public relations professional and executive in a Fortune 500 company, and currently a formation minister in the Episcopal Church. She has been published in Security Management, American Indian Report and Tech Republic.She has a bachelor's in communications, a master of arts in Christian education and a master of business administration.