A Feasibility Study is a formal project document that shows results of the analysis, research and evaluation of a proposed project and determines if this project is technically feasible, cost-effective and profitable. The primary goal of feasibility study is to assess and prove the economic and technical viability of the business idea. A project feasibility study allows exploring and analysing business opportunities and making a strategic decision on the necessity to initiate the project. For each project passing through the Initiation Phase, a feasibility study should be developed in order for investors to ensure that their project is technically feasible, cost-effective and profitable. A thorough feasibility study can give you the right answer before you spend money, time and resources on an idea that is not viable. It must therefore be conducted with an objective, unbiased approach to provide information upon which decisions can be based.
If you are planning on conducting a feasibility study, you will need to include the following important elements:
1. The Project Scope which is used to define the business problem and/or opportunity to be addressed. The old adage, “The problem well stated is half solved,” is very apropos. The scope should be definitive and to the point; rambling narrative serves no purpose and can actually confuse project participants. It is also necessary to define the parts of the business affected either directly or indirectly, including project participants and end-user areas affected by the project.
2. The Current Analysis is used to define and understand the current method of implementation, such as a system, a product, etc. From this analysis, it is not uncommon to discover there is actually nothing wrong with the current system or product other than some misunderstandings regarding it or perhaps it needs some simple modifications as opposed to a major overhaul. Also, the strengths and weaknesses of the current approach are identified (pros and cons). In addition, there may very well be elements of the current system or product that may be used in its successor thus saving time and money later on. Without such analysis, this may never be discovered.
3. The requirements: This component represents two groups of requirements, including technical requirements and organizational requirements. If there is a potential market and demand for the product or service then you need to identify what technical and resource requirements are needed for the new venture. You will need to define your requirements depending on the objective of your project. Project managers that understate the physical and fiscal resources required for a new product or service often end up with failed projects or unfulfilled promises.
4. The Approach represents the recommended solution or course of action to satisfy the requirements. Here, various alternatives are considered along with an explanation as to why the preferred solution was selected. In terms of design related projects, it is here where whole rough designs (e.g., “renderings”) are developed in order to determine viability. It is also at this point where the use of existing structures and commercial alternatives are considered.
5. Evaluation: Examines the cost effectiveness of the selected approach and the estimated total cost of the project. Other alternatives will also be estimated for comparison purposes. After the total cost of the project has been calculated, an evaluation and cost summary will be prepared to include a return on investment, cost/benefit analysis etc.
6. Review:Finally, all the above elements will be assembled into a feasibility study and a formal review will be conducted. The review will be used verify the accuracy of the feasibility study and to make a project decision. At this stage, you can approve, reject or even revise the study for making a decision. If the feasibility study is approved, make sure that all the involved parties sign the document.
It should be remembered that a Feasibility Study is more of a way of thinking as opposed to a bureaucratic process. For example, what I have just described is essentially the same process we all follow when purchasing an car or a home. As the scope of the project grows, it becomes more important to document the Feasibility Study particularly if large amounts of money are involved and/or the criticality of delivery. Not only should the Feasibility Study contain sufficient detail to carry on to the next succeeding phase in the project, but it should also be used for comparative analysis when preparing the final Project Audit which analyses what was delivered versus what was proposed in the Feasibility Study.