A feasibility study is a detailed analysis of a company and its operations that is conducted in order to predict the results of a specific future course of action. Small business owners may find it helpful to conduct a feasibility study whenever they anticipate making an important strategic decision. For example, a company might perform a feasibility study to evaluate a proposed change in location, the acquisition of another company, a purchase of major equipment or a new computer system, the introduction of a new product or service, or the hiring of additional employees. In such situations, a feasibility study can help a small business's managers understand the impact of any major changes they might contemplate.
"Conduct a feasibility study to start your course of action," consultants Judy Capko and Rebecca Anwar suggested in an article for American Medical News. "It will provide you with objective information to evaluate existing services and strengths. You will gain an understanding of the competition and marketplace indicators that affect your [business]. This is the best way for you to grasp the impact of future decisions you may be considering. The feasibility study will help you accurately anticipate what will and will not work in varied situations. You will be able to determine what resources are essential to complete varied situations and gain an understanding of how to draw on your strengths."
STEPS IN CONDUCTING A FEASIBILITY STUDY
The main objective of a feasibility study is to determine whether a certain plan of action is feasible—that is, whether or not it will work, and whether or not it is worth doing economically. Although the core of the study is dedicated to showing the outcomes of specific actions, it should begin with an evaluation of the entire operation. For example, a good feasibility study would review a company's strengths and weaknesses, its position in the marketplace, and its financial situation. It would also include information on a company's major competitors, primary customers, and any relevant industry trends. This sort of overview provides small business owners and managers with an objective view of the company's current situation and opportunities. By providing information on consumer needs and how best to meet them, a feasibility study can also lead to new ideas for strategic changes.
The second part of a good feasibility study should focus on the proposed plan of action and provide a detailed estimate of its costs and benefits. In some cases, a feasibility study may lead management to determine that the company could achieve the same benefits through easier or cheaper means. For example, it may be possible to improve a manual filing system rather than purchase an expensive new computerized database. If the proposed project is determined to be both feasible and desirable, the information provided in the feasibility study can prove valuable in implementation. It can be used to develop a strategic plan for the project, translating general ideas into measurable goals. The goals can then be broken down further to create a series of concrete steps and outline how the steps can be implemented. Throughout the process, the feasibility study will show the various consequences and impacts associated with the plan of action.
In most cases, a feasibility study should be performed by a qualified consultant in order to ensure its accuracy and objectivity. To be able to provide a meaningful analysis of the data, the consultant should have expertise in the industry. It is also important for small businesses to assign an internal person to help gather information for the feasibility study. The small business owner must be sure that those conducting the study have full access to the company and the specific information they need.