The purpose of a feasibility study is to analyze a business proposal to determine if the project is viable and if it should be followed through with. Determining if a business is feasible prior to establishing it prevents an investor from wasting money and time on a failed business venture.
Some concerns that are addressed through a feasibility study include:
- Will the business generate adequate cash flow?
- Will the business be able to encounter and withstand risks?
- Will the business meet the goals intended by the founders?
A feasibility study is conducted in the idea stage of planning a business. It is not to be confused with a business plan. A business plan is only created after a feasibility study is conducted and a decision is made to move forward with the business.