When an organization is interested in implementing a new project, the first step is determining its feasibility on a step-by-step basis. The project feasibility study is a process in which the business identifies, evaluates, and analyzes whether a proposed project has good potential for success. All or part of the feasibility study is then integrated into the business plan because the two documents share common elements.
A Project in Any Form
Projects can take many forms. One type of project is the introduction of new products or services. A project may involve expanding a business in the domestic marketplace or expanding into a new country. A business might want to install high-end technology that will impact prices, production abilities, or distribution systems. Another kind of project is a market study to assess new competition, new or unmet customer needs, industry changes, or emerging markets.
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Decisions to Invest Resources
When a project is implemented, it reflects a decision to invest human and financial resources. A project feasibility study allows the business to identify the possible positive and negative outcomes should the project be implemented. To complete this kind of assessment requires:
• Market analysis
• Review of the market structure
• Competitive analysis
• Project demand modeling
• Financial modeling, including revenue generation and cost analysis
• Capital needs analysis
Any business that intends on seeking funding will need to do a project feasibility study because it assesses and analyzes the market demand for new goods and services and the potential risks. It tests market assumptions so the business is comfortable that decisions are made using accurate information.
All in the Details
The research that is required to produce an accurate and useful feasibility study is detailed and targeted. For example, the market analysis identifies primary and secondary markets by accessing information like population statistics and market databases. The competitive analysis identifies and analyzes existing competitors and competitors in the process of development. The financial modeling uses the information gathered about markets and competitors to evaluate whether the project makes financial sense in terms of required investment, product and services pricing, costs, and logistics.
For this reason, most businesses use outside consultants who have access to relevant databases. If the project feasibility and market research indicates the project is a go, the research and strategic planning is incorporated into the business plan.
Illustrative business plan samples
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