What is a feasibility study? And why would I ever need it? Let's start from the back a little… Due to the poor economic conditions in most countries of the world, a large number of people are starting their own business, even if they have full-time professions.
How many successful projects do you think? In the small town in which I live, for example; A large number of restaurants are opened annually that can exceed the twenty mark. How many successful restaurants? I really don't remember, it could only be one restaurant!
Imagine only one restaurant out of 20 restaurants that was able to meet market challenges, customer requirements, high prices of raw materials, and at the same time was able to take care of advertising, accounts, employees and management. Only one restaurant managed to succeed in all of this..
What is the reason why it succeeded while other restaurants faced failure and bankruptcy? One reason is that the owner of this restaurant was able to answer an important question clearly and correctly, which is what is the feasibility study?
What is a feasibility study?
The definition of the feasibility study academically “is a study designed to determine the possibility of the project’s “feasibility” succeeding or not. This study covers the financial, legal, marketing and other aspects.
We can also know the feasibility study as follows: It is a set of research and information processes that aim to acquire sufficient knowledge that enables us to know whether a project will be feasible or not.
What is the function of the feasibility study and the purpose of its work?
The word “feasibility” means benefit, and the goal of conducting a feasibility study for any project is to study the amount of benefit accruing to the person when setting up this project, or is there a real feasibility in establishing this project?
The following points explain in detail the function and purpose of the feasibility study:
1. Determine the financial return
One of the most important aspects covered by the feasibility study is to determine the expected financial return for this project, and the financial return for the project contributes significantly to determining whether this project will succeed or not.
Meaning that if the capital is one million pounds, for example, and the expected financial return for the project after five years is only 100,000 pounds, then this project is in fact useless.
Also, if the project requires a capital of at least one million pounds, while the available amount is only 100,000, this means that the project is not achievable from the ground up.
Of course, these are matters that the project owner can specify in detail in the case of small projects , or specialists in the feasibility study in the case of large projects.
2. Personnel management
The feasibility study also contributes to determining the number of workers in the project itself and the appropriate salaries for them. If the project is a library for the sale of stationery, the number of workers in it cannot exceed 4 people.. Why?
The library project is a project with a relatively small capital. If 8 people are appointed, for example, this means an increase in employment, and the danger of this is that each worker receives 3000 thousand pounds per month, which means expenses estimated at 24 thousand pounds.
This amount will not be payable constantly, especially for the nascent projects, not to mention that the inflation of workers may cause confusion in tasks and countless problems in the division of work and follow-up on its progress.
Here lies the function of the feasibility study, which can determine for you the appropriate employment for a particular project, with a specific capital.
3. Limiting the risks
Limiting the risks that any project may be exposed to is a matter that requires effort, and facing the risks with a new or under construction project is almost impossible. Here comes the role of the feasibility study, which enables you to identify all potential risks before starting the project from the ground up.
These risks could be competitors, who have many advantages, the most important of which are seniority, preference and confidence in customers, their knowledge of the nature of the market, all of these things give an advantage to competitors.
Therefore, the feasibility study cannot be done without studying the competitors extensively.
These risks can be the law, such as that your papers do not meet the required conditions, and your project is at risk of being closed, so studying the legal issues and avoiding the risk of not completing the required papers completely when doing the feasibility study is important.
4. Market Study
The market study is one of the most important pillars of the feasibility study, so how can a project be established that targets specific people, and we do not know these people sufficiently, their needs, aspirations, financial and social level and others.
There are also important questions that the study must answer, such as: Is there another competitor that provides the same service with better quality or at a lower price? What distinguishes my project from others?
All the previous points the study is working on to cover completely, with the aim of making the project popular and achieving the desired sale, which is required when conducting the study.
What is the importance of the feasibility study?
Now that the definition of the feasibility study is logical and clear to us, we can say that some of us (from the definition only) were able to realize, even if superficially, the importance of this study.
What is the actual importance or benefit expected to accrue to the owner of the project if he conducts a feasibility study in a correct and orderly manner?
1. A more comprehensive view
The feasibility study, if done properly, is an accurate simulation of what could happen after the project is established. It refutes all the ideas and proposals that make you see things from the outside instead of looking at the expected financial gain.
It is a fundamental reason why you should either decide to move forward with the project, improve it or even abandon it completely and find another idea that is more suitable.
2. Enhance the probability of success
The feasibility study makes you study the aspects of the danger and put your hands on it, but also provide solutions for yourself with the aim of avoiding them, and this makes it easier to deal with them when they occur.
The feasibility study also makes you have a clear idea of the steps that you must follow in order to achieve success. The study answers all the questions that come to your mind about the project, how? when? Why? How many? From? All this increases the likelihood that you will be successful when you launch the project.
3. Distinguish the pros and cons
The feasibility study puts in front of you the real pros and cons of the project, so do not see things completely rosy, wanting to establish the project in any way, or see them completely black, affected by the opinions and fears of those around you regarding the new project.
We can say that the feasibility study makes you see the project in a more realistic and real way, and makes your decision to build it or not easier.
Types of feasibility study
A group of experts divides the feasibility study into 3 types, another group into 5 types, and a third group into 10 types. In the following lines, we will try to briefly identify the most important types of feasibility study.
1. Feasibility Study
Its objective is to know the economic feasibility of the project and to compare the cost to the return, in order to know the expected financial gain for the project, even if the project is not for profit, this study helps to know the costs to be covered in general.
2. Technical feasibility study
This study is concerned with the technical aspects of the project, such as the ability of employees to perform the required tasks, the number of employees in each department, and if a headquarters will be chosen for the project, it helps in knowing whether the location is suitable for the nature of the project or not.
This study also measures whether the available resources serve all technical aspects of the project or not, and how the proposed ideas can be converted into tangible and other aspects.
3. Legal Feasibility Study
The legal feasibility study aims to find out whether the project or one of its aspects may conflict with the laws of the region or town or not. For example, is expansion allowed in this area? Is it allowed to set up a specific project in a specific land?
The legal feasibility study also covers all the papers that the project may need, and ensures that they are fully prepared before the actual start of the project.
4. Administrative feasibility study
This study is useful in analyzing the management staff participating in the project, the structure and number of employees, and whether they are suitable for the administration at the current stage or not, the extent of its ability to perform and implement tasks and its commitment to the agreed times.
Examples of a feasibility study
In fact, the examples of the feasibility study are endless, and take many forms, from the way the monthly house expenses are divided, to the huge real estate development projects.
Therefore, we offer you examples of two feasibility studies initially, to make the picture clearer:
The first example is “a project to expand a gym.” To create a preliminary feasibility study for this project, this study must include the following axes:
The number of labor that will contribute to the expansion operations, and their cost.
The materials and equipment to be used in the expansion process and their cost.
Will expansions affect the club's profits?
How will creations affect existing club members? Is there a possibility of disrupting their activities?
Will the market accept these expansions, or will the project face risks and rejection?
Are there any legal issues that will occur as a result of the expansion process?
Based on this, the author of the feasibility study will be able to determine the actual feasibility of the project, its pros and cons, the possibility of moving forward with it or abandoning it.
The second example is “Opening a Family Restaurant.” It is the most popular project currently in our societies, with different types of restaurants, social levels and the tastes they cover.
When creating a feasibility study for this project, this study should include the following questions:
Market study: in the sense of knowing the average number of families living in the area, the average ages, and the preferred tastes of these ages.
Location: The location of the restaurant is very important in the feasibility study, as it identifies the closest competitors to it, the nature of the service they provide, and how my restaurant will be distinguished and preferred by customers, i.e. what do I have to offer?
The location of the restaurant should be in a central and crowded place, the city center is always an ideal place to establish restaurants.
Study aspects related to restaurants: such as reception and hospitality services, for example, these matters require comprehensive knowledge and you can gain experience in them by reading, and attending specialized training courses.
Cost: This aspect needs a thorough and comprehensive study, starting with identifying the main and suitable suppliers for your project so as not to spoil or inflate the cost.
Employment: A very important aspect, you must determine the number of workers that you will need to provide in each department, the management department and its requirements, the salaries of these workers, to what extent they are professional.
All these aspects and more need to be covered in the initial feasibility study in order to make the family restaurant project a success.
How does a feasibility study work?
We in the winners previously tried to answer this question in detail, we invite you to read the article How to make a feasibility study in detail (comprehensive guide) .
This article helps you to try out a feasibility study on your own, and we also recommend the Project Manager application , which helps you to conduct a feasibility study for small projects without the need for specialists.
In the end, you must be well aware that conducting a professional, detailed feasibility study for a project in which you are going to put all your money, your time and effort, is not a worthless step, or just a waste of time, but it is a first step that puts you on the path to success.