Why should you consider a feasibility study before setting up your business?
Introduction to feasibility studies
What is a feasibility study? A Feasibility Study is a systematic approach to identifying issues and possibilities, setting goals, characterizing conditions, defining successful outcomes, and weighing the costs and advantages of various solutions to a problem. It is widely used to assist in making key decisions making based on an analysis of cost-benefit which in turn helps the business or project’s feasibility. In a nutshell, a feasibility study is an analytical tool that provides suggestions and restrictions to help decision-makers determine if a business concept is viable.
Why should you conduct feasibility studies?
- A well-executed feasibility study aids the entrepreneurs like you in gaining a broad view as well as a detailed examination of the potential business viability.
- The feasibility study guarantees that all decisions are taken before entering the business rather than discovering its flaws afterward. Different business options are considered, and the most optimal one is taken.
- It allows entrepreneurs to concentrate on long-term and short-term organization objectives. The success or failure of a business/project depends on the feasibility study.
- The feasibility study’s research and information will aid in the business/project’s planning stage and cut down on research time. As a result, Business Plan costs will be reduced.
- It can help in learning more about a business/project before committing funds, time, or other resources to it.
What kind of projects can be considered for feasibility studies?
Some of the types of projects which can be considered for feasibility studies are
- Cost Competitiveness: A manufacturing business could do the feasibility study to see if a new innovative design is cost-competitive, considering the costs of components, energy, material, labor, and machine.
- Distribution analysis: A retail store company develops research to evaluate the risks and possibilities involved with opening a retail presence in a new market.
- Operations: An illustration of operational feasibility, consider the following example: The viability of self-sufficiency utilizing battery systems and solar panels with the grid as backup is determined by a data centre.
- Product Development: A FMCG company may take the services of a market research agency to determine if customers would buy a premium tea from a well-known tea region.
- Legal: A bank could think about offering a new financial product. A feasibility study focused on legal factors such as regulatory and compliance risk might be conducted.
Other projects are new business ventures, spas, and salons, sports facilities, and complexes, restaurants, school-related projects, industrial parks, etc.
Different Components of a feasibility study
- Financial Feasibility: A feasibility study is used to identify & understand the financial attractiveness of a business idea and the monetary resources that are required used to carry out the execution. This involves estimating all expenses that will be important from the start of the project through the operating costs in the later phases of its lifecycle.
- Technical Feasibility: Technical feasibility refers to the support systems that are necessary for the firm to function smoothly. These include the methods for product manufacturing/service delivery, material, labour, transportation, and other business-related technology.
- Economic Feasibility: A cost-benefit analysis of the project is generally included in this review, which helps firms determine the project’s viability, cost, and benefits before devoting resources. It also serves as an unbiased project evaluation, enhancing project credibility by aiding decision-makers in assessing the proposed project’s favourable economic benefits to the company.
- Market Feasibility: Market feasibility is an important element of feasibility research. Important information is acquired, such as the industry’s size, share, and trends. The specific market is also examined, as well as the market’s future potential. To ensure the business’s success, a thorough assessment is necessary.
- Operational Feasibility: This entails researching to evaluate whether the project will be able to meet the organization’s needs. Operational feasibility studies further examine how well a project plan satisfies the criteria indicated in the requirements analysis phase of system development.
- Legal Feasibility: Any legal restrictions that might obstruct operations must be considered. This investigation investigates all the legal issues that might arise because of the planned venture. Every applicable statute or protective act is considered. Learning about any sort of locational restrictions that a company may encounter owing to legal regulations may save a lot of time and effort for a company.
- Scheduling Feasibility: The various stages of the business’s lifetime are planned and taken into consideration. The essential milestones, as well as the timeline for achieving them, are highlighted. The various stages of company activity are estimated based on future forecasts. All the necessary activities are listed, along with their completion dates.
Step by step approach followed by feasibility study consultants
- Business idea analysis: The first step in a feasibility study is to define and outline the business idea. Identifying the issue that the entrepreneurs are attempting to address. Determining the Unique Selling Proposition, for example. Determine if, at the very least theoretically, this firm will be able to cover its costs and generate a profit.
- Forecasting the income of the business idea: Entrepreneurs begin with a set amount of money they hope to make at the end of a fiscal year. Then, with the assistance of the expert, determine how much investment money entrepreneurs will need to generate that income.
- Market Research: This is one of the most essential aspects of the feasibility study since it offers entrepreneurs revenue estimates that are as near to reality as possible. It considers things like competition analysis, market value, demographics, risk, market share, and growth alternatives.
- Definition of the operations and planning resources: Entrepreneurs must evaluate operational expenses as well as other inevitable costs such as equipment, manpower, and real estate costs in this phase. This helps in making important decisions. For instance, a hosting platform is required for online business.
- Financial control: Entrepreneurs should prepare a balance sheet before beginning their firm, according to a feasibility study. This section provides information on the business’s funding options, as well as any assets and their worth. Lease costs/purchase of land, buildings, and equipment are examples of liabilities.
- Reviewing and Analysing: This step helps in having a quick reality check. The numbers might not match because there are so many guesses and unknowns. For example, the financial statement and balance sheet give two entirely different stories about business. This helps in preparing for a contingency plan and reducing the impact of financial risk.
- Make a go/no-go decision: This is the conclusion of all the preceding steps. Before making this decision, make sure the concept is worthwhile in terms of time, money, and effort, and that it is appropriately linked with the business’s vision and goal.
The feasibility study’s findings should go through the various scenarios in detail. The underlying assumptions must be scrutinized and challenged by the project’s executives. While it is the responsibility of the entrepreneurs to make the go ahead or no go ahead decision, based on the findings, our consultants at RAG shall ensure that our expertise in conducting feasibility studies comes to guidance at every step.
RAG Global Business Hub understands that building UAE as a Nation of Entrepreneurs is the way to realize its Economic Vision and continue its impeccable growth story. Towards this end, RAG Global Business Hub is committed to launching Entrepreneurs, one person, at a time. RAG is in the business of setting up new companies and helping the existing ones to grow exponentially. We do it by getting business licenses for Entrepreneurs, providing economical office spaces, conducting market research, and liaising with Government authorities through the PRO and allied services. Get free consultation – call Toll Free number 800724249 or write to firstname.lastname@example.org to know how our team consisting of consultants from the World Economic Forum and our international partners Stratagem Partners, Brexit Partners can help you set up, grow and scale.