Starting a new business or launching a project without proper evaluation is a risky decision. Many business ideas fail not because they lack potential, but because they were never properly assessed before execution. This is where the feasibility assessment process plays a vital role.
A feasibility assessment is an analytical tool used during the project planning process. It helps organizations evaluate whether a proposed idea is practical, financially viable, and worth pursuing.
It examines key assumptions related to finances, technology, market conditions, and operational requirements before any major commitment is made.
In this article, we will explore the feasibility assessment process in detail, including how it works, why it matters, and how it differs from a business plan.
What is a Feasibility Assessment Process?
The feasibility assessment process is a structured method used to analyze the viability of a business idea or project. Its primary purpose is to answer one important question — should this proposed project idea move forward?
A business is considered feasible when it can produce adequate cash flow and profits, manage emerging risks, remain viable in the long run, and accomplish its original goals.
The feasibility process applies to a wide range of ventures including starting a new company, buying an existing one, expanding current operations, or adding a new division to an existing business.
The process includes an informational framework that guides what to include in the study, how to conduct it, and when it should be performed. This framework ensures the process is well-organized and that maximum benefit is extracted from the study.
How the Feasibility Assessment Process Works
1. Exploring Business Alternatives
The feasibility assessment process is one step within the broader business development journey. It is generally conducted after decision-makers have discussed a number of business ideas and scenarios. During this stage, certain alternatives are dropped while others show enough promise to be examined more deeply.
The number of alternatives under consideration decreases rapidly during this process. A variety of methods for organizing the business and positioning the product in the marketplace can be explored. The process resembles an exploratory journey where many paths are considered before arriving at the most suitable destination.
2. Conducting a Pre-Feasibility Study
Before beginning a full feasibility study, a pre-feasibility analysis is often conducted first. This initial review helps sort out relevant alternatives and filter out ideas that are clearly unworkable. It saves valuable time, money, and energy by identifying the weaknesses of an idea at an early stage.
If the results of the pre-feasibility study are favorable, the process moves forward to a complete feasibility analysis.
At this point, some fundamental issues are resolved and the scope of the study becomes clearer. While a consultant can assist during this stage, the relevant business person must remain actively involved in the process.
3. Performing a Market Assessment
A market assessment is a critical part of the feasibility process. It helps determine whether the proposed product or service has genuine viability in the marketplace. It also identifies opportunities within specific market segments that the business could realistically target.
If no market opportunities are found, the study should not proceed further. However, if opportunities are identified, the market assessment provides concentration and direction for developing business alternatives. It also supplies most of the information needed for the marketing section of the full feasibility study.
4. Analyzing and Concluding the Study
The conclusion of the feasibility study should outline all the alternatives that were examined. It should also highlight the strengths and weaknesses of each option. At this stage, the project leader should review the study carefully and challenge its assumptions with a skeptical eye.
No single alternative should be immediately accepted as the only best option. The feasibility study rarely produces an overwhelmingly positive conclusion. As the analyst gathers information and explores alternatives, the results may remain neither clearly positive nor clearly negative for some time.
Important obstacles may appear that contradict the project. Some of these weaknesses can be reduced or resolved, while others may be more difficult to overcome.
Ultimately, the feasibility assessment helps evaluate the tradeoff between the risks and returns of moving forward with the business project.
The Go or No-Go Decision
One of the most critical outcomes of the feasibility assessment process is the go or no-go decision. This is essentially the zero return point in business development. Once a decision is made to pursue a business venture, it is generally very difficult to reverse. The consequences of that decision may need to be lived with for a long period of time.
It is important to understand that it is not the role of the consultant to make this decision. The responsibility lies entirely with the project leader.
The feasibility study serves as a major source of information to support that decision. This highlights how important it is for the study to be properly and honestly prepared.
Feasibility Study vs Business Plan
Many people confuse the feasibility study with the business plan. However, these two documents serve very different functions and should not be treated as the same thing.
1. Purpose of a Feasibility Study
A feasibility study serves an investigative function. It examines the viability of a business venture and explores many possible methods or alternatives for achieving business success.
It narrows down the scope of the project to identify two or three strong alternatives or scenarios. The best alternative is then selected through careful analysis conducted by the consultant in collaboration with the work group.
2. Purpose of a Business Plan
A business plan serves a planning function. It deals with only one alternative or model — the one that has already been identified as the most viable. It outlines the specific actions required to take the proposal from idea to reality. It acts as a roadmap and blueprint for the creation and development of the proposed business.
3. The Correct Order
The feasibility study is always performed before the business plan. Only after the business venture is proven to be feasible should a business plan be developed.
If the venture is found to be unfeasible, attempts can be made to fix its weaknesses, other alternatives can be explored, or the idea may ultimately be abandoned.
Reasons Why Feasibility Studies are Skipped
Despite its importance, the feasibility assessment step is sometimes skipped due to various pressures. These pressures may come from people both inside and outside the project.
Some of the common reasons why feasibility studies are avoided include the belief that the feasibility has already been considered in advance, or that someone else has conducted a similar study in the past.
Some people view the feasibility study as unimportant or simply as a tool for generating fees for consultants. Others may assume that because the equipment supplier has already conducted an analysis, no further study is needed.
In some cases, decision-makers feel that hiring a general manager who can handle the analysis is sufficient. There are also those who believe that conducting a feasibility study is simply a waste of time and that action should be taken immediately.
None of these reasons justify skipping the feasibility study. When the decision to proceed with a business venture is made without proper evaluation, it becomes very difficult to reverse course later. The consequences of a poorly evaluated decision can last for many years.
Project Selection and Benefit-Cost Analysis
From a financial perspective, project selection is a two-part process. The first part involves conducting a feasibility study to determine whether the project can be done at all. The second part involves a benefit-cost analysis to determine whether the organization should actually do it.
The feasibility study validates that the project meets all necessary requirements including cost, marketability, technology, safety, and ease of execution.
Organizations may bring in outside consultants or Subject Matter Experts (SMEs) to assist with both the feasibility study and the benefit-cost analysis. In some cases, the project manager may not even be assigned until after the feasibility study has been completed.
1. Role of Subject Matter Experts
During the project selection process, senior management often seeks inputs from Subject Matter Experts and lower-level managers. Rating models are commonly used for this purpose. These models identify the business and rating criteria against which each alternative will be evaluated.
2. Benefit-Cost Analysis
Once feasibility is confirmed, a benefit-cost analysis is performed to further validate the project. This analysis examines whether the project will deliver the required financial and non-financial benefits if executed correctly.
It requires more detailed information than what is typically available during the feasibility study alone. As a result, this stage of the process can become more time-consuming and costly.
Conclusion
The feasibility assessment process is a fundamental step in responsible project planning and business development. It provides decision-makers with the information they need to evaluate ideas honestly, explore alternatives thoroughly, and make sound go or no-go decisions.
Skipping this process may save time in the short term, but it exposes organizations to significant financial and operational risks down the line.
A properly conducted feasibility assessment not only increases the chances of project success but also builds a solid foundation for the business plan that follows.
Whether you are starting a new venture or expanding an existing one, investing in a thorough feasibility assessment is always a wise and worthwhile decision.
See Also: Elements of Feasibility Assessment
