How to Conduct a Feasibility Study: Key Steps & Examples

Running complex initiatives with a significant impact on your organization provides many exciting moments. Your work creates actual organizational transformations, whereas failure creates intimidating feelings.

A feasibility study comes as a savior at this point. 

For those beginning with project management or those who have never used feasibility studies in project management, this piece provides complete guidance from start to finish—all you need to know!

What is a feasibility study? 

A feasibility study is also called a feasibility report or feasibility analysis.

The main goal of performing a feasibility study is to determine if a project plan will have the potential to succeed. The practicality of a proposed project plan goes through evaluation within a feasibility study to determine if you should execute the project. 

A feasibility study answers these important questions to reach its conclusions. 

Is it wise to proceed with this project?

Does our team possess sufficient resources and equipment to undertake this project?

Is the projected ROI big enough to justify the project investment? 

Or are we going to get the expected ROI for this project?

Importance of conducting a feasibility study

Conducting a feasibility study brings several essential advantages before starting a new project.

The analysis verifies market opportunities by identifying the target market before dedicating substantial financial resources.

Detects potential challenges and risks at a preliminary stage.

The study delivers extensive information that helps executives make superior choices about project implementation viability.

The process generates documentation that provides forecasts about both expenses and advantages and includes a financial evaluation.

Stakeholders become more supportive of the project after the due diligence demonstration.

Your business needs feasibility studies when making substantial financial decisions regarding new projects. Feasibility assessments should be performed for projects that significantly shape your market position.

Your role as project manager does not require direct involvement in feasibility study management, yet you must understand what these assessments entail. Learning about the various components of feasibility studies enables you to back the team driving feasibility study effectively while creating optimal results from the project.

Examining technical feasibility determines if project implementation is realistic from a technological perspective or meets achievable technical implementation criteria. Technical feasibility evaluates the availability of resources along with their functional capabilities and suitability.

This part of the feasibility study seeks answers to identify— is required hardware as well as software, and infrastructure are available. Does our team hold the required technical skills, or can they easily obtain them if needed? Does the project face any crucial technical obstacles or operational constraints?

Technical feasibility example: An online ordering service for a bakery targets a peak demand of 150 loaves per hour. However, their current ovens have the capacity to bake only 50 loaves per hour. Technical feasibility analysis reveals that the current equipment for their business fails to support online order requirements; thus, they need additional ovens or alternative methods to manage online orders.

This also shows the value of project estimation techniques in setting realistic capacity targets and resource needs.

Economic feasibility represents the most essential factor that stands out to multiple stakeholders. The analysis requires experts to evaluate all project costs against their potential financial returns to establish both financial viability and an adequate rate of investment (ROI).

During the project feasibility study stage, a detailed analysis of all project-related costs takes place, where the research investigates development costs, implementation costs, operational expenses, and maintenance expenses.

Project costs are contrasted with anticipated benefits, which include revenue rise and cost reduction, efficiency gains, and enhanced market share.

Economic feasibility example: Establishing a new retail business branch in a different city requires economic feasibility testing. The analysis requires estimating startup costs, including lease, inventory, and staff, while projecting revenue from market research data against ongoing operational expenses, including rent, utilities, and salaries. The financial analysis requires the comparison of these numbers to establish ROI. A high ROI determines the business's financial strength by its investment criteria, while a low ROI indicates an unprofitable branch.

This type of analysis should be part of the overall project report submitted to stakeholders.

A complete feasibility analysis needs to evaluate operational and legal dimensions, along with technology and economics.

Legal feasibility involves verifying how well the proposed project meets existing laws, including all necessary permits, regulations, and required licenses, including environmental regulations, zoning laws, intellectual property rights, and adherence to industry-specific laws. 

Operational feasibility assesses how well an organization can handle and support the implemented project to maintain effectiveness. The assessment checks how the organization manages its framework and resources and integrates new projects with current operational activities.

Legal and operational feasibility considerations: For example, if you want to launch a new food product on the market, before launching a new food product in the market, you would need to check and ensure both legal requirements and operational management. Food safety regulations and health permit acquisition must be secured before launching a new food product (legal feasibility). You must examine whether its existing facilities, together with the supply chain and workforce, support the new production along with distribution (operational feasibility). Neglecting these components will lead to adverse effects on both project feasibility studies and their alignment with the established feasibility criteria approach. It also underlines the importance of understanding the types of project risk early in the planning stage.

Market feasibility analysis allows organizations to understand customer demand and market competition dynamics during product or service development. The assessment requires a detailed and in-depth study of market tendencies to reveal potential customers, what they require, and how much they would be willing to spend.

The competitive analysis uses existing competitors to uncover their market positions/shares, evaluate their pricing strategies, and identify their strengths and weaknesses. The analysis reveals insights about market potential and competitive intensity, which influence projected project success rates.

Market feasibility and competitive analysis example: Consider the scenario where you aim to introduce your outstanding eco-friendly cleaning product to the market. The first step to determine market feasibility requires the question: Do customers want green cleaning products? (Market Research). After analyzing market demand, you should look into existing products to see what different brands offer. (Competitive Analysis). Your feasibility study lets you determine whether your cleaner meets the market demand and whether it offers distinct features from existing products. The feasibility study suggests re-evaluation or changes in plans when customers do not show interest in green products or major organizations maintain control of the market.

At this point, it’s also useful to know how to create a project plan to align product development with feasible market opportunities.

A complete feasibility study requires businesses to follow these specific steps:

1. Preliminary Analysis: Provide an overview of the project concept and a list of vital feasibility aspects that require study.
2. Market Research: Clarity in Market Research includes a comprehensive investigation to determine the target customers' needs and competitive market conditions.
3. Technical Assessment: Evaluate the technical requirements, available technology, and necessary expertise for implementation.
4. Financial Analysis: The development of clear expense predictions accompanies revenue estimation and ROI assessment through financial analysis.
5. Organizational and Operational Assessment: Analyze the project's organizational structure, resource management capabilities, and operational impact.
6. Legal and Regulatory Review: Review all legal and regulatory requirements for assessment.
7. Risk Assessment: The procedure involves risk identification followed by risk management strategy development.
8. Data Analysis and Interpretation: Interpret all obtained data to understand the feasibility findings across selected domains.
9. Recommendation Formulation: The evaluation concludes with the development of a precise recommendation about proceeding with the project implementation, proposing changes, or terminating it.

The systematic application of these steps allows a complete assessment of all important feasibility criteria approaches that need evaluation. For those learning this process through professional courses, the Top PMP certification training often includes feasibility analysis in its curriculum.

The final output of the feasibility study takes the form of an extensive report that contains all findings. A report containing the analysis outcomes for each area of feasibility should present the information in a direct and understandable manner. Here are the things that should be included:

• A summary containing project identification alongside critical findings.
• A detailed description of the proposed project.
• The feasibility assessment includes market research data and competitive analysis for market feasibility analysis.
• The assessment of technical feasibility includes detailed specifications for necessary technology and resource requirements.
• Economic feasibility analysis is used by stakeholders to examine both benefit-cost analysis and return on investment computations.
• Legal and operational feasibility considerations review.
• Potential risks identification and assessment.
• The final assessment contains clear conclusions and recommendations that rely on findings from the entire project feasibility study.
   

Stakeholders need clear and understandable information that combines evidence and organized documentation in the report. A well-structured report drives effective decision-making and creates a reliable base from which stakeholders can proceed with or reject ongoing progress with the proposed project. If you're considering formal training on project feasibility and execution, the Best PMP course by Techademy can be a helpful next step.

Every new project must undergo feasibility checks to determine its practical implementation potential. The examination process is known as a feasibility study. The assessment shows both potential challenges and positive outcomes that might occur. Using this process will help you select options that develop your project in a positive direction. This guide demonstrated how to conduct feasibility studies with real-world examples that can assist you to plan and execute your future projects in the best possible way.