Importance of a Sound Feasibility Study to Ensure Success of Business Plan

Feasibility study enables a business entity or an individual to assess the viability and practicality of a business venture before commencing with the project. 

The main objectives behind a feasibility study are:

  • Understanding the overall market potential for the new venture
  • Understanding the demand and financial risks involved
  • Projecting cash flows and profits
  • Assessing the sustainability of the project on a long-term basis

Feasibility study, therefore, provides a framework to help entities make an informed decision on the go/no-go roadmap for the proposed business venture.

A feasibility study has two main components: 

  1. Market research to assess the potential of the product/service in target geographies or markets
  2. Financial feasibility to fundamentally gauge if the project would be profitable over a certain period and estimating the time for this 

Market research assessment helps in understanding demand for the product/solution, and scope for the project in the identified geography. At a broader level, it focuses on:

  • Identification of current and potential market demand in the stated geography for the business venture
  • Analysis of key competitors in the market (both direct and indirect) and their business strategies
  • Assessment of distribution channels adopted by competitors
  • Development of insights on customer behavior while purchasing similar product/service 
  • Identification of key decision-makers involved in product/solution purchase
  • Estimation of the potential addressable market

The study helps in developing a go-to-market strategy, assessing underlying opportunities in the market for a new entrant, and understanding critical factors or competitive advantage a new player can leverage. 

If the overall market conditions for the venture are positive from the market research aspect, the entity should proceed with financial feasibility. It will help the entity in gaining a perspective on the financial viability of the business venture, based on the financial risks involved. 

Financial analysis entails:

  • Estimation of initial investments required 
  • Identification of various capital funding sources
  • Estimation of operational expenses on the day-to-day functioning of the project
  • Projection of breakeven point and benefits of the project in terms of cash inflows and returns on investments under different scenarios (i.e., optimistic/pessimistic, etc.) and over a pre-determined period (10–15 years).

Feasibility study enables an entity to obtain a bird’s eye view of the overall market potential, which helps businesses in adopting the right top-down approach before making any investments in terms of finances, time or resources. 

Furthermore, conducting a feasibility study may also help organizations consider new possibilities and opportunities not assessed originally.




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