Great ideas might be great in theory, but only a feasibility study will tell you if they're going to be great in practice.
Before investing a single dollar or allocating any human resources to a new project, a smart project manager will assess if the project is worth doing at all. They’ll look at market demand and the costs involved, and they’ll probably work out relatively accurately the benefits and profits in numbers they expect to achieve.
If you dig a little deeper into the process of projects, you’ll quickly see that a good chunk (if not the largest) of work is set in the first few phases of a project lifecycle. In this article, we uncover what goes into a project feasibility study, how it’s structured, and whether every project needs one.
What is a feasibility study?
A feasibility study is a detailed analysis of a project’s viability. It’s done during the project initiation phase, and it answers the question: Is this project worth pursuing, and do we have the capacity to deliver it successfully?
Before you do a feasibility study, you need to have completed the business case for your project because it will be used as a base.
The purpose of a feasibility study is to:
- Establish if there is ample market demand
- Analyze technical and operational requirements needed to complete the project
- Consider financial costs and benefits
- Assess the risks and see if they can be reduced or overcome
- Identify potential alternatives
- Help project sponsors and stakeholders make an informed decision on whether or not to approve the project.
Feasibility study is also known as feasibility analysis or feasibility reports. Whatever you call it, it’s a vital decision-making tool that can make all the difference to stakeholder buy-in if the project strategically aligns with business goals.
6 elements feasibility study evaluates
Most feasibility studies evaluate six key elements that paint a clear picture of the potential outcome based on existing needs and operational possibilities.
Market feasibility
Market feasibility involves researching and understanding existing market demand for the product or service you are looking to sell or launch. This is one of the most important aspects of any project because if there is no need or not enough of it, the end result will be a flop. In many cases, this can be a time-consuming process, and if you don’t have the right in-house team to manage this, it’s best to get an external provider that specializes in market research surveys.
Even if the project is delivered successfully, the investment will reflect in a business loss.
There are several market-related questions you need to answer in this section:
- Who is the target market for this project’s product or service, and what pain points will we solve for them?
- What is the market size, and how saturated is it?
- What are the strengths, weaknesses, opportunities, and threats (SWOT matrix) for you when compared to key competitors?
- What are the current and projected industry trends?
- What is the forecast demand we expect
Financial Feasibility
Financial feasibility clearly establishes, in numbers, if the project is going to generate profit or save on costs, enough to justify the estimated investment, operation, and maintenance costs.
So here, not only do you need to establish whether the project is worth the investment, but also if it will be financially sustainable into the future.
The questions you’ll need to answer in this section are:
- What are all the initial development and ongoing operating costs?
- How much funding is needed, and where will it come from?
- What is the expected revenue outcome?
- What is the expected profit margin?
- When do you expect to begin making a profit?
- What will the return on investment be?
- What are the financial risks based on the market and industry environment?
- Will you have enough cash flow to meet and sustain project needs?
Technical Feasibility
A technical feasibility study determines if you have the technology, resources, and expertise to develop and launch the project successfully.
So it basically tells you if the project is doable with what you have at your disposal.
Here, the questions you need to find the answers to include:
- What are the reliable tools, systems, and technologies we need for this proposed project?
- Do we have the expertise needed in-house, or do we need to outsource?
- Do we have the infrastructure and equipment needed to see the proposed project through?
- How long will the proposed project take to build and implement, and is this timeline realistic?
- Are there any technical challenges or risks we need to be aware of?
Operational Feasibility
Operational feasibility works out if your team or organization, in its current capacity and structure, can complete the project successfully, as well as manage and sustain it post-implementation.
Some of the questions you’re looking to answer here are:
- Do we have the people, resources, and systems for this project?
- Are our current employees qualified to manage the product or service post-launch, or do we need to onboard new team members?
- Will the service or product integrate with our current systems and operations?
- Is our organization capable of managing the change?
- Once implemented, will it improve efficiency or create bottlenecks?
- Do we have the ongoing technical support needed post-launch?
- What will be the impact on customers or users?
Legal & Regulatory Feasibility
Legal and regulatory feasibility establishes if your project complies with all the relevant laws, regulations, and requirements of your country and industry. It also helps you uncover key legal risks or barriers, which can lead to fundamental changes to the proposed project.
Here are some of the questions you should answer:
- Is the project compliant with existing laws based on your industry and location?
- Do you need to obtain licenses, certification, or permits, and how long will they take?
- Does the project involve the use of Intellectual Property, and are there any risks you need to consider?
- Are there any legal risks or liabilities, like a potential lawsuit, that you need to consider?
Schedule Feasibility
Schedule feasibility helps you evaluate if your project can be completed in a reasonable timeframe and if it can be delivered on time, based on the available resources and existing constraints.
The questions you’ll be looking to answer in this section are:
- How long will each project phase take, and is that realistically achievable?
- What are the project’s major milestones?
- Will the resources be available when needed based on existing workloads?
- Are there external factors that could lead to schedule changes?
- What are potential sources of delays, and how likely are they?
- What are the expected impacts of schedule delays?
- What are the contingency plans to manage unexpected delays?
What should feasibility study include?
When you have all this information, you need to compile it into a feasibility report, you’ll structure it into seven key parts.
1. Executive summary
In the executive summary,y you’ll give a concise overview of your feasibility study findings and include research-backed recommendations for stakeholders and project sponsors to consider.
Essentially, here you want to clearly present the project’s viability in a few critical points.
2. Project or product description
Next, you want to outline the details of the product, service, or initiative that the project is hoping to achieve. You should include the project’s goals and objectives, as well as the scope.
Be clear about the intended outcomes and solutions you expect to see realized if the project is completed and implemented.
3. Technical considerations
In the technical considerations section, you want to summarize all the technology, equipment, and expertise requirements. Here you can also include the regulatory compliance standards your particular initiative needs to meet.
An important thing you need to mention here is if you need to hire external consultants or contractors to fill any expertise gaps your organization or team lacks for successful completion.
4. Market survey
The market feasibility study and survey section should be a summary of the findings from the market research you or an external provider conducted. It should include a prediction of project return and success.
It’s a good idea to include key aspects of the competitor analysis, key figures on the existing and forecast market value return, and what share of the market you expect to win.
5. Operational possibilities
In the operational possibilities section, you’ll want to establish if it’s possible for your team to undertake the project based on the resources and organisational structure, and if you can maintain it operationally post-launch.
Outline if changes need to be made to the business in terms of training, additional hires, and current roles and responsibilities. It’s also worthwhile mentioning any resistance you might expect to get from employees.
6. Project schedule or timeline
Another thing your stakeholders and ultimate decision-makers will want to see in the feasibility report is the planned project schedule or timeline.
This can be included as a link that visually displays the estimated timelines for various project phases with key milestones, start and finish dates, and any dependencies. A Gantt chart is perfect for timeline visualization, but you can also include some key points in text.
7. Financial projections
The last part of your feasibility report will include your financial projections or return on investment, which you will get from the work you’ve done in the financial feasibility analysis we talked about above.
Here, you should include a full breakdown of expected costs to develop, implement, and maintain, as well as the predicted profit or cost savings over a set period of time.
Does every project need a feasibility study?
No, not every project needs feasibility study.
While a feasibility study is beneficial because it can help minimize the risk of investing in something that might not deliver good enough results, it’s not a must-have for every type of project.
The projects you can comfortably skip doing a feasibility study for are:
- Low-cost and low-risk projects
- Those that a similar to projects you’ve done before and know are feasible
- Where a feasibility study is already included within a business case
- Ones that have already been piloted and proven to be a success
However, the projects you definitely want to run through a feasibility study first are:
- High-investment initiatives, whether it be time, money, or resources
- New technology and new or emerging industries and target markets
- Those that have sensitive legal, environmental, or regulatory concerns
- Those that a similar to the project that have failed in the past
Use ActiveCollab to manage projects & feasibility studies
Feasibility study is one of the most beneficial tools to assess and establish if a project is worth pursuing.
Project management tools like ActiveCollab give you a workspace to initiate and manage a feasibility study along with all its components, which can then be used as a safeguard and guide to develop an effective project roadmap.
With project management, internal and external collaboration, and scheduling tools, the platform lets you set up individual workflows. You can establish everything from market surveys with external providers from within the tool, and analyze your resource capacities and create project timelines.
Past project reports and dashboards can also help you uncover where you underestimated costs and resource allocations on similar projects before, so you can make more accurate estimates for future projects.
Whether you are a software development team, a marketing or business consultancy firm, ActiveCollab has been designed for service-based businesses that want to streamline and simplify their project workflows. With historical project data at your fingertips, you can create a feasibility report that’s based on facts and not guesstimates.
Want to make sure your next project is achievable, profitable, and sustainable? Sign up for ActiveCollab’s 14-day free trial or book a demo with one of our people to see how our tool supports successful project planning.