Feasibility studies can help you determine the viability of a proposed project and identify potential risks and opportunities. It is for this reason that most investments supported by new market tax credits or USDA loans, as well as certain types of USDA grants, require a feasibility study.
But what are the typical components of a feasibility study and why should you hire an expert?
We’ll cover the five most common components of feasibility studies and explain why professional help is crucial to conducting one that complies with government requirements and gives your project the highest chance of success.
The five key components of a feasibility study include economic, marketing, technical, financial, and management feasibility. Each type of study considers different aspects of the project, so it’s essential to consider all five when deciding which route to take moving forward. With research and data-driven insights, these studies provide decision-makers with valuable insight into their options for success in any endeavor.
1. Economic Feasibility
Economic feasibility is a cost-benefit analysis that examines whether all the required inputs and contracts are in place for the business to be operational, and whether the resulting benefits and impacts are significant.
Factors that August Brown analyzes in Economic Feasibility:
- The minimum amount of inputs (labor, infrastructure, utilities, renewable resources, feedstocks) to operate successfully.
- Contracts in place and contracts to be negotiated, including terms and renewals.
- Environmental risks.
- Cost of the project relative to the increase in revenues or benefits provided.
- The overall economic impact of the project, including new markets created and economic development in the sector.
2. Market Feasibility
Market feasibility is an essential concept for any business or organization to consider. It focuses on the current and future market potential of a project as well as the business’ target customers and competition.
Factors that August Brown analyzes in Market Feasibility:
- Competition
- End user analysis, captive versus competitive
- Marketing plan
- By-product revenue streams
- Industry risk (scalability, supply chain issues, and more)
3. Technical Feasibility
Technical feasibility analyzes the reliability of the technology to be used and the analysis of the delivery of goods or services, including transportation, business location, and the need for technology, materials, and labor.
Factors that August Brown analyzes in Technical Feasibility:
- Assessments of commercial availability
- Product and process success record and duplication of results
- Experience of the service providers
- Roads, rail, airport infrastructure
- Water, electricity, and other utilities
- Use, age, and reliability of technology
- Construction risk
4. Financial Feasibility
Financial feasibility analysis identifies the elements needed to achieve a project’s financial sustainability and meet all debt obligations through sufficient income, credit, and cashflow over the long term.
Factors that August Brown analyzes in Financial Feasibility:
- Financial projections over 5-years
- Revenue & expenses assumptions
- Sensitivity analysis
- Accounting policies & cost accounting system
- Equity contribution and source of repayment
- Use of funds
- Availability of short-term credit
- Peer industry comparison
5. Management Feasibility
Management feasibility analysis examines the ownership, board, history, and qualifications of the business or organization, as well as the skill or experience required to implement the project.
Factors that August Brown analyzes in Management Feasibility:
- History of the business or organization
- Key staff review (professional, experience and skills)
- Key staff assessment (qualifications and character of management team)
Why Should You Hire an Expert to Conduct a Feasibility study?
An expert firm can provide a wealth of knowledge and experience to help your business succeed. With extensive industry expertise, firms such as August Brown can provide comprehensive market analysis, financial projections, and operational assessments tailored to your business’s unique needs. In summary, here are three crucial reasons that support hiring an expert:
- Objectivity: With objectivity and impartiality, an expert can provide a realistic and unbiased assessment of a project’s viability without bias or preconceived notions.
- Expertise: As experts, they have the necessary knowledge to conduct a thorough feasibility study and provide accurate assessments and recommendations.
- Time and cost savings: Hiring an expert to conduct a feasibility study can save time and money in the long run.
August Brown has been conducting feasibility studies for over a decade. Many businesses have successfully received funding for their dream projects after working with us to produce a thorough, high-quality feasibility study. With our expertise, experience, and understanding of the particular requirements, we’re an expert firm that can maximize your project’s chances of success and increase your chances of securing financing.
FAQ’s:
Q. What is economic feasibility in a feasibility study?
Ans. Economic feasibility refers to the analysis of whether the inputs, contracts, and benefits of a business project are significant and cost-effective. It considers factors such as labor, infrastructure, contracts, environmental risks, and the overall economic impact of the project.
Q. What factors are analyzed in economic feasibility?
Ans. Factors analyzed in economic feasibility include the minimum amount of inputs required for successful operation, the status of contracts and negotiations, environmental risks, project costs relative to revenues or benefits, and the overall economic impact, including market creation and sector development.
Q. What is financial feasibility and why is it important?
Ans. Financial feasibility determines the financial sustainability of a project and whether it can meet its debt obligations. It assesses factors such as financial projections, revenue and expense assumptions, funding sources, short-term credit availability, and compares financial performance to industry peers.
Q. What factors are considered in financial feasibility?
Ans. Factors considered in financial feasibility include 5-year financial projections, revenue and expense assumptions, sensitivity analysis, accounting policies, equity contribution, source of repayment, use of funds, availability of short-term credit, and peer industry comparison.
Q. What is management feasibility and why does it matter?
Ans. Management feasibility assesses the ownership, board, history, and qualifications of the business or organization, as well as the required skill and experience to implement the project. It ensures that the management team is capable of effectively executing the project.
Q. How can an expert help with objectivity in a feasibility study?
Ans. Experts bring objectivity and impartiality to the feasibility study process. They assess the project’s viability without bias or preconceived notions, providing a realistic and unbiased evaluation of its feasibility.
