What is a Feasibility Study?
A feasibility study is a structured assessment of whether a proposed project, investment, or change is practical, viable, and likely to succeed. It evaluates technical, financial, market, legal, operational, and scheduling factors to identify potential obstacles, quantify costs and benefits, and help decision‑makers decide whether to proceed, modify the plan, or stop.
Key takeaways
– Purpose: determine whether a project should proceed and how to structure it for success.
– Focus areas: technical feasibility, market/economic viability, financial returns (ROI, cash flow), legal/regulatory constraints, operational capability, and risks.
– Outcome: a go/no‑go recommendation with supporting analyses, assumptions, and a contingency plan.
(Source: Investopedia)
Main objective
The main objective of a feasibility study is to determine whether a proposed project or venture is likely to succeed and to identify major risks, resource needs, and realistic costs and benefits so leaders can make an informed go/no‑go decision.
Who conducts a feasibility study?
– Internal project teams or project managers for smaller projects.
– Cross‑functional working groups (finance, engineering, operations, legal, marketing).
– External consultants or specialist firms for complex projects or to provide independent credibility (common for large capital projects or when seeking external financing).
Four common types of feasibility
1. Technical feasibility: Do we have (or can we get) the technology, systems, and technical skills to build and operate the solution?
2. Economic/market feasibility: Is there sufficient market demand or social benefit? What are revenues, market size, competitors, and pricing?
3. Legal/regulatory feasibility: Are there laws, permits, zoning, or regulatory constraints that would block or limit the project?
4. Operational feasibility: Can the organization operate and maintain the project? Does it have the people, processes, and supply chains needed?
Benefits of a feasibility study
– Reduces the risk of committing time and money to unviable projects.
– Quantifies costs, benefits, and break‑even points.
– Identifies alternatives and contingency plans.
– Improves credibility with investors, lenders, and stakeholders.
– Clarifies project scope, resource needs, and timelines.
How to conduct a feasibility study — practical step‑by‑step guide
This is a practical, repeatable process you can adapt to projects of different size and complexity.
Phase 0 — Preparation
1. Define the project scope and objectives clearly. What problem are you solving and what does success look like?
2. Identify stakeholders (sponsors, users, regulators, financiers) and their decision criteria.
3. Appoint a study leader and core team; decide whether to hire external experts.
Phase 1 — Preliminary analysis (initial screening)
4. Perform a high‑level feasibility screen:
– Quick estimate of costs and benefits.
– Identify fatal flaws (e.g., prohibited land use, missing critical technology).
– Decide whether to proceed to a full study.
5. Articulate alternative solutions (including “do nothing”) to be analyzed.
Phase 2 — Detailed feasibility study (if preliminary looks promising)
6. Market and demand analysis
– Size the market, forecast demand, analyze customer segments and competitors.
– Assess pricing, uptake rates, and sensitivity to economic assumptions.
7. Technical feasibility
– Define technical requirements, design options, technology readiness, site constraints, and implementation approach.
– Conduct pilot tests or prototypes where appropriate.
8. Financial analysis
– Prepare detailed capital expenditure (CapEx) and operating expenditure (OpEx) estimates.
– Build cash‑flow projections (revenues, costs, taxes) over project life.
– Calculate financial metrics: NPV, IRR, payback period, and break‑even analysis.
– Conduct sensitivity and scenario analysis (best, base, worst cases).
9. Legal, regulatory, and environmental review
– Identify permits, compliance requirements, environmental impact, and zoning issues.
– Estimate time and cost to obtain approvals.
10. Operational feasibility and resourcing
– Determine staffing needs, organizational structure, training, suppliers, and maintenance requirements.
11. Risk assessment and mitigation
– Identify risks (technical, financial, schedule, market, legal).
– Estimate probability and impact; propose mitigation and contingency plans.
12. Funding and financing strategy
– Distinguish funding (grants, appropriations, revenue) from financing (bonds, loans, investor equity).
– Outline likely sources and timing of funds; model financing costs and debt service.
13. Governance, stakeholder engagement and communications
– Plan how decisions will be made, who approves milestones, and how stakeholders will be involved and informed.
Phase 3 — Report and decision
14. Compile the feasibility report with clear assumptions, methods, and results. Important elements:
– Executive summary and recommendation (go/no‑go/modifications).
– Key findings and supporting analysis (market, technical, financial, legal, operational, risk).
– Sensitivity tables and scenario outcomes.
– Implementation roadmap, funding plan, and contingency options.
15. Present to decision‑makers and stakeholders; address questions and recommended next steps.
Suggested components (recommended report outline)
– Title page, revision history, and study team.
– Executive summary and recommendation (the most important section).
– Project background and objectives.
– Alternatives considered and screening results.
– Market and demand analysis.
– Technical description and system design options.
– Legal/regulatory and environmental review.
– Financial model and key metrics (NPV, IRR, payback).
– Funding/financing plan.
– Operational model and staffing.
– Risk register and mitigation plan.
– Implementation schedule and milestones.
– Appendices (detailed cost estimates, data sources, interview notes, calculations).
Practical tips and best practices
– Document all assumptions explicitly; make models auditable.
– Use sensitivity and scenario analysis—show how outcomes change when key assumptions move.
– Include a “do nothing” baseline and at least one viable contingency plan.
– Engage stakeholders early and often to identify concerns and secure buy‑in.
– For large projects, use independent reviewers to validate assumptions and estimates.
– Tailor the level of detail to project size—don’t over‑engineer a small feasibility study or under‑estimate a large one.
– Consider time and cost tradeoffs: a rapid feasibility may suffice to make an early go/no‑go decision; a full feasibility is needed for financing.
Decision criteria (examples)
– Financial: NPV > 0, IRR above hurdle rate, payback within acceptable years.
– Operational: required capabilities can be procured or developed within time/cost constraints.
– Legal/environmental: required permits obtainable and impacts manageable.
– Strategic: aligns with organizational strategy and stakeholder objectives.
Examples (summaries)
– University science building: A university evaluated upgrading/expanding a 1970s science building. The study reviewed zoning and community concerns, technological needs, projected enrollment and revenue, and funding options (bond issue, endowment). Financial projections and projected benefits (improved research capability, attracting students/faculty) supported a green light to proceed.
– High‑speed rail (Washington State Pacific Northwest Corridor): A multi‑jurisdictional feasibility study explored a Vancouver‑Seattle‑Portland high‑speed rail. The study covered governance, stakeholder engagement, funding vs financing, cost estimates ($24B–$42B), revenue forecasts ($160M–$250M), benefits (economic growth, congestion relief), and a phased funding strategy with public and private sources. The study guided funding requests and federal support. (Source: Washington State Department of Transportation effort outlined in the Investopedia article.)
Common deliverables and timeline (example for medium project)
– Week 0–2: Project kickoff, stakeholder list, preliminary screening.
– Week 3–6: Market research, technical scoping, initial cost estimates.
– Week 7–10: Financial modeling and sensitivity analysis.
– Week 11–12: Risk assessment, regulatory review, and draft report.
– Week 13: Final report and presentation.
Deliverables: executive summary, detailed report, financial model, risk register, implementation roadmap.
When to stop the study early
– A fatal flaw is discovered (e.g., project illegal, required technology unavailable, or costs exceed reasonable limits).
– After preliminary analysis the project clearly fails to meet minimal success criteria and no viable alternatives exist.
The bottom line
A well‑executed feasibility study helps organizations avoid costly mistakes, quantify risks and returns, and prepare a realistic plan for implementation or withdrawal. It is both an analytical exercise (financials, technical design, legal checks) and a stakeholder exercise (engagement, governance, and funding strategy). Document assumptions, test them with sensitivity analysis, and include contingency and funding plans so decision‑makers can act with confidence.
Source
– Investopedia: “Feasibility Study” (provided source): https://www.investopedia.com/terms/f/feasibility-study.asp
If you’d like, I can:
– Provide a one‑page feasibility study template tailored to your project type (construction, product launch, IT system, nonprofit program), or
– Build a sample financial model structure (inputs, outputs, sensitivity tables) you can plug your numbers into. Which would you prefer?