What is a feasibility study?

A feasibility study is a formal study that you conduct during the planning phase of a project. Creating a feasibility study is supposed to help evaluate and analyze the project in terms of its potential, strengths and weaknesses. It also determines the type of possible risks associated with the project, as well as the chances of success (or failure) of the entire project. We also use the study when we want to assess the profitability of a project and justify the need for its implementation.

A feasibility study should be based on objective and rational premises. Its preparation is not a simple task. There is no single, pre-imposed template. The feasibility study is tailored to specific situations and the type of project. “Feasibility” may concern various issues. That is why it is necessary to perform various types of analyses – technical, economic, system, time, law, operational and even cultural.

Feasibility study stages

A feasibility study consists of several parts. These may vary slightly depending on the type of project.

1. Diagnostic part. The diagnostic part examines the current status of the planned project and analyzes the problems and opportunities for their solution. During this stage you should take the opinions of other project stakeholders into account.
2. Conceptual part. The conceptual part of the feasibility study includes an analysis of the objectives and expected results of the project.
3. Analytical part. The analytical part is a feasibility assessment that considers potential problems and analyzes different situational options.
4. Planning part.  The planning part is the preparation for carrying out the project. Of course, according to the best solutions for the project, which you have analyzed in the previous parts of the analysis.

Good practices for feasibility studies

It is very important to take care of appropriate organization of work while preparing the feasibility study. One of the solutions recommended by specialists is to separate the editorial work from the substantive part. The substantive part includes research, conceptual, analytical and planning activities. In this case, it will be necessary to appoint people who will be responsible for performing the activities needed to achieve the goal. The manager’s responsibilities will include controlling the budget and monitoring the project schedule and looking after the substantive part. The person in charge of the preparation of the study may have specialized knowledge in a particular field. It is also his/her job to supervise the work of other people with specialized knowledge in finance, economics, environment, legal issues or technical aspects, etc.

In the case of large projects, the team should consist of more specialists. One person from the team should act as an editor. His/her task will be to provide support in organizational matters, contact with stakeholders and editing of the document (correctness of content, style, etc.).

Finally, it is worth noting again that the process of preparing a feasibility study depends on a particular project – its specificity and assumed objectives.

When has the feasibility study been properly prepared?

When done correctly, analysis can answer key questions that arise in the early stages of a project. The answers to the following questions are often presented to the board of directors or investors. Therefore, the answers presented should be based on facts and not on hunches or other people’s opinions.

• Is the project feasible?
• Are there any limitations to the feasibility of the project? If so, which ones?
• Will the project be of a long-term nature?
• Will the costs of the project be covered by the income of the activity?
• Does the project have a reasonable financial and social justification?

Advantages and disadvantages of a feasibility study

Disadvantages of this study include:

• Time-consumption,
• Complexity,
• For large projects – the need to involve many specialists (with expertise in different scientific fields).

The advantages of a feasibility study can include:

• Comprehensiveness,
• Reducing the likelihood of overlooking important aspects of the project,
• Ability to review project implementation alternatives and select the best solution,
• Reducing the risk of incurring large financial outlays with minimal chances of project success,
• Evaluation of the project in terms of its alignment with business trends.