When you conduct a feasibility study, what you’re essentially asking is, “will this project work? And does it make good business sense?” In other words, you’re analyzing a project or product’s practicality and achievability.
A feasibility study will help you determine the specific factors that will affect your project before you commit resources, time, or budget. So while it’s tempting to brush it aside as another exercise delaying getting to work, remember that it’s easier to address issues before you jump in, rather than after.
Say, for example, you’re launching a new app. You’ll want to know if you physically have the resources and technology needed to produce it, as well as whether or not it’ll give you an acceptable return on investment (ROI). If you proceed without conducting a full analysis, you’re opening yourself up to unnecessary risk. A feasibility study mitigates that risk.
What are the benefits of a feasibility study?
- It’s flexible and scalable, which means it can be applied to any kind of project – whether that’s a software development project, a new product launch, or a new team process. Although the bigger the project, the more important it becomes because the investment stakes are that much higher.
- It helps you avoid project failure through logical assessment.
- It gives stakeholders a clearer picture of the project, which, in turn, helps improve focus and commitment.
- Comparing and analyzing the different options helps you narrow business alternatives while helping simplify the decision-making process.
- It outlines a valid reason for your project to exist.
- Evaluating multiple options enhances your project’s success rate.
What are the different types of feasibility studies?
There are five different types of feasibility studies. These can exist as separate tasks or tied together as one big study. Not every project will require you to examine each of these areas. For example, if your project is a small, internal-facing one, you probably don’t need to worry about the legal side of things.
The five focus areas of a feasibility study are:
- Economic feasibility (this includes a cost-benefit analysis)
- Technical feasibility (which includes a risk assessment)
- Operational feasibility (including how the project or process will be implemented and work within the current system)
- Schedule feasibility (including timeline estimations and resource optimization)
- Legal feasibility (covering zoning laws, data protection acts, and social media laws).
What’s the difference between a feasibility plan vs. a business plan?
Feasibility studies are for evaluating an initial idea. They’re a way to flesh out the possibilities of that lightbulb moment before anything else takes place. A business plan is much broader and outlines a company’s goals, strategies, and financial forecasts.
In a nutshell, a feasibility plan tells you if something will work. A business plan tells you how.
How to conduct a feasibility study
Every project is different, but there are six key stages to consider before any project kick-off:
1. The current analysis
Before you start a project, it’s a good idea to assess your existing processes or products. Start by creating a SWOT diagram to identify the strengths and weaknesses of your current system and document your findings. You may discover there’s nothing fundamentally wrong with the current situation. But if you find issues that require modifications, then you can make those changes prior to kick-off.
2. The project scope
This is when you define the business problem or opportunity – aka, the reason your project exists. Ask yourself:
- Who is this for?
- Is there a need for it?
- What’s the marketing or integration strategy?
- What are our competitors doing? (if necessary)
- What are the internal, corporate, and external constraints (such as budget, technology, marketing, logistics, laws, and regulations)?
The project scope should be thorough and clear because everyone involved will use it as their blueprint. Think of it as your project’s boundaries: if you don’t have clearly defined limits, you could end up producing or providing more than is needed or agreed upon, which is a waste of your time and resources.
3. Requirements
This is where you detail your existing and needed resources. Questions to ask yourself include:
- Do you need additional staffing?
- Will you need to invest in new software?
- Can your existing processes be improved with technology?
4. Approach
This is where you detail how your project or product will answer your business question, as well as your proposed course of action. You should also examine your alternatives here, and explain why your proposed route is the best option. The two questions to ask yourself here are:
- Does this approach answer the requirements?
- Is it practical and achievable?
5. Evaluation
Next, you need to analyze the cost and projected income of the project, taking into account things like labor fees, income streams, and the project schedule. After the total cost has been calculated, you need to evaluate it with a cost-benefit analysis.
6. Review
Formally set out all your findings and review your feasibility study with all interested parties. Reviewing your study with the wider team and stakeholders helps ensure accuracy (it’s easy to miss something if you’re working alone) and formalizes the decision-making process.
From here, your study will either be approved, rejected, or amended. If approved, it’s crucial everyone involved signs off on the document. This saves backtracking further down the line and ensures commitment from start to finish.