Feasibility Study and Its Importance In Project Management

A Quick Guide to Feasibility Study

A feasibility study is conducted to determine whether or not a given project or system is economically viable. Before embarking on a project involving thousands of resources and costing millions of dollars, executives and the board of directors want to see a feasibility study report. If a large error is made during the decision-making process, it may have an impact on the organization's future performance. As a result, preparing a feasibility study report is essential for determining the project's viability. The sorts of feasibility studies used in project management will be discussed in this article. 

A well-designed study should include information such as a description of the product or service, accounting statements, details of operations and management, marketing research and policies, financial data, legal requirements, and tax obligations, as well as a historical background of the business or project. Technical development and project implementation are usually preceded by such research.

Major benefits that feasibility study in project management can provide you

• Project teams' focus is improved.
• Provides pertinent information that aids in making a decision on whether or not to proceed.
• Finds a convincing cause to continue with the project.
• Assists in the decision-making process for projects.
• Determines why proceeding is not a good idea.
• It boosts the success rate by considering numerous parameters.
• The number of company possibilities is reduced.
• New possibilities are discovered.
• Measures a project's ability and likelihood of being completed effectively.
• Potential issues are highlighted.

5 types of Feasibility study in project management

Because a feasibility analysis assesses a project's chances of success, perceived neutrality is a critical aspect in the study's credibility with possible investors and lenders. There are five different types of feasibility studies, each of which examines a different topic, as stated below.

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1. Legal Feasibility:- This assessment looks into if any component of the proposed project violates any regulations, such as zoning rules, data protection legislation, or social media laws. Assume a company wishes to develop a new office building at a specified location. A feasibility study may discover that the desired location for the company is not designated for that sort of business. That organisation has just saved a lot of time and effort by discovering early on that their idea was not feasible.
    
2. Economic Feasibility:- This evaluation typically includes a cost-benefit analysis of the project, which aids firms in determining the project's viability, cost, and benefits before spending financial resources. It also acts as an objective project review, boosting project credibility by assisting decision-makers in identifying the proposed project's beneficial economic benefits to the organisation.
    
3. Technical Feasibility:- The technological resources accessible to the organisation are the subject of this examination. It aids companies in determining whether technical resources are adequate for the job and whether the technical team is capable of turning concepts into operational systems. The proposed system's hardware, software, and other technical needs are also evaluated for technical viability. An organisation, for example, would not want to try to install Star Trek's transporters in their facility because it is currently not technically feasible.
    
4. Operational Feasibility:- This evaluation entails conducting research to evaluate whether—and to what extent—the organization's needs can be addressed by completing the project. Operational feasibility studies also look at how a project plan meets the requirements specified during the system development requirements analysis phase.
    
5. Scheduling Feasibility:- Scheduling a feasibility evaluation is critical to project success; after all, if the project is not completed on time, it will fail. When scheduling feasibility, a corporation estimates the length of time it will take to complete a project. Following the consideration of all of these elements, the feasibility study can assist in identifying any potential project restrictions, such as:
   - External restrictions include logistics, the environment, rules and regulations, and so on.
   - Technological, financial, and resource restrictions are examples of internal project constraints.
   - Technological, financial, and resource constraints are among the project's internal constraints.

Steps for - How to conduct a feasibility study in Project management

When doing a feasibility study, there are several procedures to take.

1. Conduct an introductory analysis - Before making an investment, a preliminary analysis is used to summarise project concepts, outline market circumstances, and identify potential hurdles. You can determine whether the proposal has promise based on the facts gathered in this step. If there are no big stumbling barriers, you can move on to the following phase.
    
2. Define the scope - It's vital to define the project's scope in order to determine the feasibility study's scope. The project's scope will also evaluate the influence it will have on internal stakeholders as well as external clients or customers. It's crucial to think about how the project might affect different parts of the firm.
    
3. Develop a projected income statement - Estimate how much money the project will make and how much money it will take to make that money. The first step in producing a projected income statement is to figure out how much money you have. Analyze and calculate the cost of the required services in order to create income.
    
4. Conduct a market research - One of the most critical phases in a feasibility study is to do market research. A market research project might be carried out by an internal specialist or by an outside agency. The goal of conducting a good survey is to establish accurate revenue projections. Market research is a comprehensive study that includes population trends, demographic characteristics, market volume, opportunity, location, and other factors.
    
5. Roadblocks and alternative solutions - It will research measures to assure the project's success if any potential barriers develop during the investigation.
    
6. Plan business organization and operations - At this stage, corporate organisations and operations are designed in sufficient detail to identify the organization's technological capabilities and operational costs.
    
7. Develop an opening day balance sheet - An opening day balance sheet is a chart that calculates total assets and liabilities on the first day of the firm before it earns money, using Prepaid Expenses, Other Assets, Current Liabilities, and Owners' Equity. The complete capital structure of your company is shown on the opening day balance sheet. Financial ratios are used to measure the project's financial situation.
    
8. Review and analyze - Review all of the work from the previous steps to ensure that you have included all of the relevant information and that nothing needs to be changed. Make a comparison of the charts and information from the previous steps to ensure that everything is in order. Examine the potential dangers that may arise during the project.
    
9. Make a final decision - Make a decision regarding whether the option is viable or not based on the information supplied in the previous steps. You will have adequate inputs to support your decision-making process if all of the preceding phases have been completely completed.

Key Features of a feasibility study for a good project

A project feasibility study evaluates the following topics in project management:

1. Time - How long do you think it'll take to finish?
    
2. Risk - What are the dangers of finishing this project? Based on the predicted rewards, is the risk worth the company's money and time?
    
3. Legality - Is the company well-equipped to complete the project in terms of technical resources?
    
4. Budget - Is the organisation financially capable of completing the project, and does the cost-benefit analysis justify proceeding?
    
5. Operational Feasibility - Is the project addressing the organization's needs in its intended scope by resolving issues and/or capturing opportunities?
    
6. Technical capability - Is the company well-equipped to complete the project in terms of technical resources?
    

Importance of Feasibility study in Project Management

The value of a feasibility study stems from the goal of an organisation to "get it right" before investing resources, time, or money. A feasibility study may unearth fresh ideas that totally alter the scope of a project. It's preferable to make these decisions ahead of time rather than rushing into a project only to discover that it won't work. A feasibility study is usually advantageous to a project since it provides you and other stakeholders with a clear picture of what is being proposed.
 

Suggestions - Some best practices to conduct project feasibility study

Feasibility studies are unique in that they represent the project's goals and requirements. The following recommendations, on the other hand, can be employed in any feasibility assessment. You might want to try the following, for example:

1. Make a preliminary choice about whether or not to go ahead with the strategy.
2. Prepare a balance sheet forecast.
3. Make an income statement that is projected.
4. Make plans for your business, organisation, or operations.
5. Conduct a market survey or market research to aid with data collection.
6. Analyze and test your data to make sure it's accurate.
7. Obtain input on the new concept from the appropriate stakeholders.

Conclusion

Many companies make the mistake of skipping the "feasibility analysis" process and jumping right into the project. In the vast majority of situations, this results in the project's failure. It's important to keep in mind that it's impossible to avoid potential losses if a choice to proceed has been taken without a thorough feasibility analysis. As a result, doing a feasibility study and creating a report for any sort of project that entails risks and uncertainties is a sound business practice. 

We hope that this article titled “Importance of Feasibility study in Project Management”  has clarified the concept of a feasibility study for you. Explore our library of Project Management articles for additional information, or enroll in our Project Management programme, which covers new trends, developing practises, customised considerations, and fundamental capabilities required of a Project Management expert. 

Good luck with your reading!

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