Business feasibility studies are thorough investigations and financial analysis that determines whether a business idea or product is viable. Prior to putting your business plan or pitch deck together, especially of you are involved in a large project which requires significant investment, you will need to conduct a feasibility analysis. Estimates of income, costs, barriers, and technical issues are included in the study. A feasibility study for a small business often costs R25,000 or more. For organisations with a multimillion-rand launch budget, however, they can cost up to R100,000.
We’ll go through what business feasibility studies are and how they vary from a business plan. We hope that will support you in evaluating whether you require a business feasibility study, a business plan or perhaps both.
What are Business Feasibility Studies and How Does It Work?
Businesses usually undertake feasibility studies to see if their idea or product is viable. It’s one of the more difficult and expensive methods of putting a business idea to the test.
A research can take weeks or months to prepare, depending on the intricacy and scope of the proposal. Business owners can do feasibility studies on their own using templates or applications. They frequently hire an expert to create the report because of the in-depth research and intricate financial estimates.
Feasibility studies don’t make the ultimate choice; instead, they provide all of the facts and offer a strong recommendation about whether or not to proceed. Using the study as a guide, the entrepreneur, stakeholders, and/or other authorities determine whether to pursue the company idea or product.
Who Should Have a Business Feasibility Study Performed?
A feasibility study is used by small business owners to avoid making the costly mistake of launching an unsuccessful firm, product, or project. You can utilise a research to assist you in making strategic decisions, such as whether you should:
- Create a new company.
- Establish a new store or factory.
- Alter your product lineup or strategy.
- Extend your business to a new region or market.
- Invest in another business.
- Invest a considerable amount of money in new technology.
- Enter a market segment that is already crowded or competitive.
- Make a personal investment in a project.
Business Plan vs. Feasibility Study
Because the facts and data revealed in the feasibility study are incorporated in the business plan, it is common for the feasibility study to come before the business plan. Furthermore, if the feasibility report advises against moving further, you may want to reconsider your business idea or product before making a strategy.
What Should a Business Feasibility Study Include?
Each of the factors listed below will be used to some extent depending on the project or business. The organisation of the feasibility study may vary based on its focus—you may have a section for each of the following topics:
The executive summary summarises the project and the company.
The final conclusions are given in this section. It should be approximately one page long.
A marketing study assesses the demand for your product or service in the industry in which you intend to sell it. Even if you have a physical location, you need think about the internet parts of your organisation.
Problems with the technology:
What tools, hardware, or software are you going to need to start your firm or develop your product? Will you build the technology yourself, buy it, or rent it? The facilities, which include layout, shelving, offices, and production space, are also included in this part.
Vendors, pricing schedules, exclusive agreements, and franchised product contracts are all covered in this article. Obtaining materials and delivering final products, as well as interacting with online features such as an ecommerce site, are examples.
Legal requirements and legislation
Do you require any permits? Is there anything you should be aware of in terms of regulations or prohibitions? What about problems like the environment, history, or legacy?
Marketing strategy
In this part, the target market will be defined as precisely as possible: What would you do to suit their requirements and how will you target them? How much will your website development or ecommerce store cost and who is the best team to build this for you?
Staffing requirements: How many workers will you require? What are their credentials? What is the average pay in your neighbourhood? Where will they be recruited from? You can include an example organisational chart as well as a discussion of who among your present employees could be considering changing careers to fill new positions.
Forecasts, projections and milestones
This section comprises financial and physical project milestones, as well as a completion timeline and key performance indicators by which the progress or completion of these can be measured.
Financial Forecasts
This component will feature an opening day balance sheet that includes total assets and liabilities on the first day of your business, in addition to estimated expenses and potential profits. This financial data indicates your return on investment (ROI). ROI: It makes no sense to establish or expand a firm if you don’t see a return on investment. A feasibility study forecasts when you’ll make money and how much you’ll make.
Analysis
You’ll hear people ask things such, “Does that seem realistic?” Are the sources reliable? Are there any data points that should be considered as outliers? Analyse potential dangers as well: What are the worst-case possibilities, and what are the chances of them happening?
Recommendations
This provides a go/no-go recommendation as well as particular recommendations depending on the primary elements. It may provide alternatives if the project is not possible.
What Does a Feasibility Study Cost?
A small business feasibility study takes an average of 60 to 90 days to complete and can cost anywhere between R25,000 and R150,000. As a general rule, a feasibility study will cost 1% of the entire cost of opening a firm or developing a product. So, if you want a feasibility study for a difficult firm with millions of dollars in launch expenditures, expect to pay more than R100,000.
The cost is also dictated by the depth of the study, the instruments required to do it (survey software, focus groups, and lawyers), and the project’s breadth. A study to assess if a company should bring manufacturing back to the United States from overseas, for example, will cost more than a study to determine whether to open a restaurant.
Who is in charge of feasibility studies?
Finding a company that just does feasibility studies could be difficult. In addition to other services, a market research business may offer feasibility assessments.
There are also companies that specialise in feasibility studies and write business plans. The Caban Group’s business plan consulting team consist of a team of MBA’s, Management consultants and accountants, specialising in the creation of market reports that includes extensive market research, industry analysis and feasibility studies.
When Purchasing a Feasibility Study, Follow These Tips and Best Practices
First, perform a preliminary analysis: Before you spend thousands of dollars on a feasibility study, run a quick check to make sure the company idea or product has no insurmountable technical, legal, or financial problems.
Include stakeholders in the process: Keep everybody involved in the business informed before, during, and after the study. Obtain their suggestions, opinions, and feedback.
Examine the research: Examine the facts from the feasibility study to determine whether you reach the same conclusion as the research analyst. You can even consider paying for a second expert’s advice on the final decision.
Examine your existing business or situation: Consider your own strengths, shortcomings, and financial circumstances before making a final choice on whether or not to pursue a company idea or product.
Conclusion
Feasibility studies might be expensive, but they can save you millions in the long run if you make the wrong business decision. They investigate the technological, financial, and operational elements of a new business or product concept. The study examines the data and makes recommendations about whether or not you should pursue your project or idea, as well as how to maximise its success.
