What is a feasibility study? And why do I even need it? Let's start a little from the back... Due to the unfavorable economic conditions in most countries of the world, a large number of people start their own business, even if they have full-time professions.
How many successful projects do you think? In the small town where I live, for example; A large number of restaurants open annually, which can exceed twenty. How many successful restaurants? I don't really remember, it could only be one restaurant!
Imagine just one restaurant out of 20 that was able to meet the demands of the market, the demands of customers, the high prices of raw materials, and at the same time was able to take care of advertising, bills, employees, and management. Only one restaurant managed to succeed in all this.
What is the reason that he succeeded while other restaurants faced failure and bankruptcy? One reason is that the owner of this restaurant was able to clearly and correctly answer an important question: what is a feasibility study?
What is a feasibility study?
The definition of a feasibility study from an academic point of view “is a study designed to determine whether a project is “feasible” or not. This research covers financial, legal, marketing, and other aspects.
We can also know the feasibility study as follows: it is a set of research and information processes aimed at obtaining sufficient knowledge that allows us to know whether the project will be feasible or not.
Feasibility Study in English means Feasibility Study
This is the definition of a feasibility study in academic and concise form, but we want to break down this definition and explain it in detail, and to know the expected benefits of a feasibility study in general, keep reading the following lines.
What is the function of the feasibility study and the purpose of its work?
The word "feasibility study" means a benefit, and the purpose of conducting a feasibility study for any project is to examine the amount of benefit that a person receives in creating this project, or is there a real possibility of creating this project?
The following points explain in detail the function and purpose of a feasibility study:
1. Definition of financial return
One of the most important aspects covered by a feasibility study is to determine the expected financial return from this project, and the financial return from a project largely determines whether this project will be successful or not.
This means that if the capital is, for example, £1 million, and the expected financial return from the project in five years is only £100,000, then the project is effectively worthless.
In addition, if a project requires at least one million pounds of capital and the available amount is only 100,000, this means that the project is not achievable from scratch.
Of course, these are questions that the project owner can specify in detail in the case of small projects or feasibility studies specialists in the case of large projects.
2. Personnel management
The feasibility study also helps to determine the number of workers in the project itself and the corresponding wages. If the project is a stationery library, then the number of workers in it cannot exceed 4 people. Why?
The library project is a project with relatively little capital, if for example 8 people are appointed, then this means an increase in employment, and the danger of this is that each employee receives 3,000 thousand pounds sterling per month, which means costs are estimated at 24 thousand pounds.
This amount will not be paid all the time, especially for nascent projects, not to mention that employee inflation can cause task confusion and countless problems in dividing work and tracking its progress.
This is the function of a feasibility study, which can determine for you suitable employment for a specific project with a certain capital.
3. Risk limitation
Limiting the risks to which any project can be exposed requires effort, and it is almost impossible to face risks in a new or under construction project. This is where the role of the feasibility study comes in, which allows you to list all the potential risks before starting the project from scratch.
These risks can be competitors who have many advantages, the most important of which are seniority, preference, and trust of customers, their knowledge of the nature of the market, all these things give an advantage to competitors.
Thus, a feasibility study cannot be carried out without a thorough study of competitors.
These risks may be legitimate, for example, your documents do not meet the required conditions and your project is in danger of being closed, so studying legal issues and avoiding the risk of not completing the necessary documents when performing a feasibility study is important.
Also Read: Nine Building Blocks Business Model (detailed explanation)
4. Market Research
Market research is one of the most important pillars of a feasibility study, so how can a project be created that is focused on specific people, and we do not know enough about these people, their needs, aspirations, financial and social level, and so on.
There are also important questions that the study must answer, such as: is there another competitor that provides the same service of better quality or at a lower price? What makes my project different from others?
All the previous points the study is working to cover completely, in order to popularize the project and achieve the desired sale, which is required when conducting the study.
Read also: What is a market research and how to do it professionally
What is the importance of a feasibility study?
Now that the definition of EFT is logical and clear to us, we can say that some of us (just from the definition) were able to realize, albeit superficially, the importance of this study.
What is the real value or benefit that the project owner is expected to gain if they conduct the feasibility study correctly and in an orderly manner?
1. More complete view
A feasibility study, when done right, is an accurate simulation of what might happen after a project is created and refutes all ideas and suggestions that make you look at things from the outside rather than looking at the expected financial benefit.
This is the fundamental reason why you should either decide to go ahead with the project, improve it, or even abandon it entirely and find another, better idea.
2. Increase the likelihood of success
A feasibility study forces you to explore and tackle the hazards and come up with solutions for yourself to avoid them, and it makes it easier to deal with them when they arise.
A feasibility study also gives you a clear idea of the steps you need to take in order to be successful. The study answers all the questions that come to your mind about a project, how? when? Why? How much? From? All this increases the likelihood that you will be successful when starting a project.
3. Distinguish between pros and cons
The feasibility study puts before you the real pros and cons of the project, so you should not see things in a completely rosy way, wanting to fix the project in any way, or see them completely black, affected by the opinions and fears of others. about a new project.
It can be said that a feasibility study allows you to see the project more realistically and realistically, and makes it easier to decide whether to build it or not.
Feasibility study types
A group of experts divides feasibility studies into 3 types, another group into 5 types, and the third group into 10 types. In the following lines, we will try to briefly outline the most important types of feasibility studies.
1. Feasibility study
Its purpose is to know the economic feasibility of the project and compare costs with returns to know the expected financial benefits of the project, even if the project is non-commercial, this study helps to know the costs that need to be incurred. covered in general.
2. Feasibility study
This study is related to the technical aspects of the project, such as the ability of employees to perform the required tasks, the number of employees in each department, and if a headquarters is chosen for the project, it helps to know if the location is appropriate for the nature of the project or not.
This study also measures whether the available resources serve all the technical aspects of the project or not, and how the proposed ideas can be translated into material and other aspects.
3. Legal feasibility study
The legal feasibility study aims to find out if the project or one of its aspects may be contrary to the laws of the region or city, for example, is expansion allowed in this area? Is it allowed to create a specific project on a specific land?
The legal feasibility study also covers all documents that may be needed.
4. Administrative feasibility study
This study is useful for analyzing the management personnel involved in the project, the structure and number of employees, whether they are suitable for the administration at the current stage or not, the degree of its ability to carry out and implement tasks, and its commitment to the cause. agreed times.
Feasibility Study Examples
In fact, feasibility study examples are endless and take many forms, from the way monthly housing costs are allocated to large real estate development projects.
Therefore, we offer you examples of two feasibility studies initially, so that the picture is clearer:
Example #1
The first example is the “gym expansion project”. In order to create a preliminary feasibility study for this project, this study must include the following axes:
- The amount of labor that will contribute to the expansion of operations, and their cost.
- Materials and equipment to be used in the expansion process and their cost.
- Will the expansions affect the club's profits?
- How will the creations affect existing club members? Is it possible to disrupt their activities?
- Will the market accept these extensions, or will the project face risks and rejection?
- Will there be any legal issues as a result of the expansion process?
- Based on this, the author of the feasibility study will be able to determine the real feasibility of the project, its pros, and cons, the possibility of moving forward or abandoning it.
Example 2
The second example is "Opening a family restaurant." It is currently the most popular project in our society, with different types of restaurants, social levels, and tastes they cover.
When creating a feasibility study for this project, this study should include the following questions:
Market research: in the sense of knowing the average number of families living in the area, the average age, and the preferred tastes of these ages.
Location: The location of a restaurant is very important in a feasibility study, as it determines the closest competitors to it, the nature of the services they provide, and how my restaurant will be distinguished and preferred by customers, i.e. what should I offer?
The location of the restaurant should be in a central and crowded place, the city center is always the ideal place to open restaurants.
Learn aspects related to restaurants: for example, such as receiving and serving guests, these issues require comprehensive knowledge, and you can gain experience in them by reading and attending specialized training courses.
Cost: This aspect needs a thorough and comprehensive study, starting with the identification of the main and suitable suppliers for your project, so as not to spoil or overestimate the cost.
Employment: a very important aspect, you have to determine the number of workers that you will need to provide in each department, the management department and its requirements, the wages of these workers, how professional they are.
All of these aspects and more need to be covered in an initial feasibility study for a family restaurant project to be successful.
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