Before giving the go-ahead to launch a project, the first thing on a project manager’s agenda is the feasibility study. While project managers are not required to conduct the feasibility study themselves, they use it as a guideline to drive the project and to get an end-to-end understanding of project parameters, business goals, and risk factors. Let us explore more about the feasibility study in project management.
What is a Feasibility Study?
A feasibility study is an analysis done to determine the viability of a project from an economical, legal, and technical perspective. Simply put, it gives us an insight into whether a project is doable or worth the investment.
A feasibility study, that’s well-designed should offer insights on the description of the project, resource allocation, accounting statements, financial data, legal requirements, and tax obligations. It helps to determine whether the project is both possible and profitable for the company to undertake. Hence, this study is mandatorily done before technical development and project execution.
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Features of Feasibility Study
For a financial feasibility study to be practical, it must first and primarily be thorough and include every area of the project since judgments made by the company based on an incomplete financial feasibility report would be unsuccessful.
A business feasibility study should weigh the advantages and disadvantages of launching a new venture or project, and it shouldn't be prejudiced because that will result in mistakes. Consequently, regardless of whether it injures the psyche of the upper executives, the business should not proceed with the strategy. If you want to learn more about financial feasibility analysis, you can opt for the online course for PMP certification that covers financial feasibility study and other project management techniques.
The five most important features include:
- Demographic research
- Competitive evaluations
- Pricing research
- Online polls
- Participant interviews
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Steps to conduct a feasibility study
The following stages are involved while conducting any feasibility study, in general:
- A preliminary analysis: This is like a pre-screening of the project. It helps discover the viability of the project as well as identify any roadblocks if any.
- Scope definition: This step includes outlining the project’s scope as well as its potential impact on the organization.
- Market research: This is an essential factor, as no project is begun without adequate market research. A thorough analysis of the existing market and competition is done to manage the project accordingly.
- Financial assessment: In this stage, all the costs related to the project, including equipment, man-hours, the financial risks, and the benefits associated with the project are estimated and scrutinized.
- Alternative solutions: Whenever any hiccups arise, the team should be well-prepared to come up with a solution. This is an integral yet dynamic part of a feasibility study.
- Go/no-go decision: The final stage of a feasibility study is the course of action, in other words, whether the project is worth proceeding with or not.
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How to Conduct Feasibility Study for a Project?
Perform an Initial Analysis
An initial examination is required to decide if a comprehensive economic feasibility study is necessary. To evaluate the program's potential and arrive at a form of information about its viability, crucial data will be acquired during this stage. This process should involve a study of pertinent papers, important personnel interviews, and polls of prospective users or clients.
Create an Anticipated Income Statement
It would help if you produced a predicted net income before conducting an economic feasibility study. Your expected financial statements display how much revenue your company is anticipated to grow in the upcoming year. It will contain both your projected earnings and your projected outlays. You will need this paper to make wise business decisions, so use it wisely.
Carry Out Market Research Or Review of Consumer Base
Every feasibility study should include a stage for doing market research. You may figure out if there is a demand for your goods or service by becoming familiar with the requirements and preferences of your prospective customers. Additionally, one can learn more about what your rivals are up to and how to structure your company to serve the requirements of your intended clientele best.
Arrange Your Company's Structure and Systems
Planning your structure and processes is among the first tasks you should do when beginning a firm. This entails organizing your business's structure and determining its operational procedures. When managing your business and operations, there are several things to keep in mind, such as:
- Finance which includes NPA, Assets, Liquid Cash, Stock Prices, etc.
- Time Management
- Organization's structure and hierarchy
- Logistics
Construct a Launch Day Financial Statement
The corporation's economic situation at the start of the commercial venture is captured in the first-day income statement. The initial day financial statement is a snapshot of the company's finances and a running tally of its outgoings and incomings. Developing informed business decisions requires the use of this knowledge. These items will be on the first-day balance sheet:
- Money on reserve
- Payables outstanding
- Stock
- fixed costs
- Fixed resources
- Receipts to be made.
- Notes to Pay
- Long-term obligations
Examine and Evaluate Data
All information pertinent to the construction plan should be analyzed as part of the feasibility assessment. Any differences between the data collected and the source material should be noted. The objective of the feasibility study is to lay a foundation for decision-making, and the information ought to be adequate. If you are considering being a project manager, then going for a PRINCE2 certification would help you learn things that you can use to improve your firm’s performance and decision-making process more quickly.
Depending on the outcomes of the feasibility report, organizational leadership must determine whether to move forward with the project. If the project is accepted, the company must develop a business plan with a detailed schedule and a budget.
Decide Whether to Proceed or Not
When launching a company, you must understand when to minimize your losses. When doing a financial feasibility study, a go/no-go choice is made. A feasibility study's crucial go/no-go conclusion will assist you in deciding whether or not your proposed business is worthwhile exploring.
When launching a company, knowing when and how to minimize your expenses. A feasibility study's crucial go/no-go conclusion will assist you in deciding the extent to which your proposed business is worthwhile exploring.
Benefits of A Feasibility Study
Below are the benefits of doing a feasibility study in project management:
- Get a clear-cut idea of whether the project is likely to be successful, before allocating budget, manpower, and time.
- Enhances the project teams’ efficiency and focus.
- Helps detect and capitalize on new opportunities.
- Substantiates with evidence of why and how a project should be executed.
- Streamlines the business alternatives.
- Diagnoses errors and aids in troubleshooting them.
- Prevents threats from occurring and helps in risk mitigation.
- Gives valuable insights to both the team and stakeholders associated with the project.
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Conclusion
The feasibility study is an integral aspect of project management. Well-planned projects are less likely to fail. A detailed, well-defined feasibility study will only increase the likelihood of project success. To explore more concepts in project management like these, sign up for any one of our immersive series of project management professional course workshops here.
