What Is Economic Feasibility?
Economic feasibility is the cost and logistical outlook for a business project or endeavor. Prior to embarking on a new venture, most businesses conduct an economic feasibility study, which is a study that analyzes data to determine whether the cost of the prospective new venture will ultimately be profitable to the company. Economic feasibility is sometimes determined within an organization, while other times companies hire an external company that specializes in conducting economic feasibility studies for them.
The purpose of business in a capitalist society is to turn a profit, or to earn positive income. While some ideas seem excellent when they are first presented, they are not always economically feasible. That is, that they are not always profitable or even possible within a company’s budget. Since companies often determine their budget’s several months in advance, it is necessary to know how much of the budget needs to be set aside for future projects. Economic feasibility helps companies determine what that dollar amount is before a project is ultimately approved. This allows companies to carefully manage their money to insure the most profitable projects are undertaken. Economic feasibility also helps companies determine whether or not revisions to a project that at first seems unfeasible will make it feasible.