Before giving the green light to a project that could cost up to thousands of euros, a feasibility study will certainly be required from the board of directors of the organization.
First of all, the feasibility study determines, if the project is likely to succeed and if it may or may not be an opportunity for the organization.
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The feasibility study is generally conducted before undertaking any initiative concerning a project, including planning. It is one of the fundamental factors, if not the most important, which determine whether the project should be carried out or not.
Although project managers are not necessarily the ones who conduct the feasibility study, they can still act as reference persons during this phase.
What is a feasibility study?
Specifically, a feasibility study is used to determine the feasibility of an idea, for example to ensure that a project is legally and technically feasible as well as economically justifiable.
The feasibility study says if a project is worth the investment. For example, if a project requires too many resources, this prevents those particular resources from performing other tasks. In general, failure to use those resources for the time necessary to carry out the project may also cost more than the organization could earn from that particular project.
A well-designed feasibility study should therefore offer a series of parameters that we a Project manager could define as essential for the complete evaluation of a project. We can start from a historical basis of the activity or project, including the description of the product or service, accounting statements, details of operations and management, market research and policies, financial data, legal requirements and obligations taxes, potential risks and possible alternative solutions. Nothing should be left to chance.
Five feasibility areas of the project
A feasibility study evaluates the potential success of the project. Perceived objectivity is therefore an important factor in the credibility of the study for potential investors and stakeholders.
this evaluation focuses on the technical resources available to the organization. It helps organizations determine if technical resources meet capabilities and if the technical team is able to convert ideas into operating systems. The technical feasibility also involves the evaluation of hardware, software, and other technological requirements.
this evaluation usually involves a cost / benefit analysis of the project, helping organizations to determine the feasibility, costs, and benefits associated with a project before financial resources are allocated.
this evaluation involves carrying out a study to analyze and determine whether and to what extent the needs of the organization can be met by completing the project. The operational feasibility studies also analyze how a project plan meets the requirements identified in the analysis phase.
this evaluation is the most important for the success of the project. A project will fail if it is not completed in time. In the feasibility planning, an organization estimates how long it will take to complete the project successfully.
Once these areas have been examined, the feasibility study makes it possible to identify any constraints that the proposed project could face, including:
- Internal constraints: technology, budget, resources, etc.
- Internal business constraints: financial, marketing, export, etc.
- External constraints: logistics, environment, laws and regulations, etc.
Benefits of a feasibility study
The importance of a feasibility study is based on the organizational desire to guarantee an excellent job before using resources, time, or budget.
A feasibility study could reveal new ideas that could completely change the purpose of a project.
It is better to do this analysis in advance, rather than being halfway and understanding that the project will not work.
Here are some key advantages of a feasibility study:
- Improves the attention and motivation of the project team
- Identifies new opportunities
- Restricts commercial alternatives
- Identifies a valid reason to undertake the project
- Improves the success rate by evaluating multiple parameters
- Helps the decision making process on the project
- Identifies the possible reasons for not proceeding
How to conduct a feasibility study
Anyone who conducts a feasibility study must follow several steps. These actions include:
- Preliminary analysis: before proceeding with the actual feasibility study process, many organizations will conduct a preliminary analysis, a sort of project pre-selection. The preliminary analysis aims to discover insurmountable obstacles and risks that would make even a feasibility study useless. If important blocks are not discovered during this analysis, it is possible to proceed with the more detailed feasibility study.
- Define the scope: it is important to outline the scope of the project in order to be able to determine the scope of the feasibility study. The scope of the project will include the number and composition of both internal and external stakeholders. Moreover, it is important not to forget to examine the potential impact of the project on all areas of the organization.
- Market research: no project can be undertaken without this analysis. Those who conduct the feasibility study will deepen the existing competitive landscape and determine if there is room for the project within that market.
- Financial evaluation: the feasibility study will examine the economic costs related to the project, including the equipment or other resources, the hours of work, the proposed benefits of the project, the associated financial risks, and the potential financial impact in case of failure of the project.
- Alternative solutions: if any potential problems should emerge during the study, alternative solutions will be examined in order to ensure the success of the project.
- Reassessment of the results: a reassessment of the feasibility study is essential, particularly if time has passed since it was first undertaken.
- Go / No-go decision: this is the final step of a feasibility study. In short, here it is decided whether the project can be started (go) or not (no-go).
In conclusion, it must be remembered that a feasibility study is more a way of thinking than a bureaucratic process.
As the scope of the project grows, it becomes increasingly important to document the feasibility study, particularly if large amounts of money are involved and / or if the delivery is critical.
The feasibility study must not only contain sufficient details needed for the operational phase of the project. It should also be used for comparative analysis at the end of the project. It will be at this stage that a project manager will analyze what was produced compared to what was initially proposed in the feasibility study. The smaller the gap, the greater the professionalism of those who drafted the study.