What Is a Feasibility Study?

feasibility-study Credit: STEEX/Vetta/Getty Images

A feasibility study is a study that assesses the viability of an idea. It seeks to identify potential problems and to determine whether an idea will work. It provides details on how a business can succeed, and it serves as a tool for creating a good business plan.

Most owners generally perform a feasibility study before writing a business plan. It helps them identify how, where and to whom they must sell a product or service. It also allows them to assess competition and find out how much money is needed to start and run a business. In a feasible business venture, a business has the ability to generate sufficient cash-flow and profits, remain viable in the long run, meet the goals of the founders and withstand future risks.

A feasibility study is important because the information it gathers and presents helps people list everything they need to make a business work, develop marketing strategies to persuade an investor or bank that the business is a worthwhile investment and identify business-related problems and solutions.

A feasibility study typically consists of a business description, market feasibility, technical feasibility, financial feasibility, organizational feasibility and conclusions. It contains comprehensive information on the business structure, products or services, market, logistics of how to deliver these products or services and the necessary resources to run a business efficiently. Its conclusions will discuss methods on how a proposed idea can succeed.