What Is a Feasibility Study: Step-by-Step

Guide

Key takeaways

A feasibility study is an essential analytical tool that evaluates the viability of a

proposed project on multiple fronts, such as financial, technical requirements,
and market demand.

Conducted during the project initiation phase, this type of study serves as an early
checkpoint to identify potential roadblocks and assess risks.

Feasibility studies act as the line of defense against project failure, saving time,
money, and resources.

What is a feasibility study?

A feasibility study is an analytical tool used to evaluate the practicality of a proposed
project or business idea. It assesses various factors such as financial viability, technical
requirements, legal constraints, and market demand. The study aims to answer the question
“Are the goals of this project realistically attainable?” by examining data, studies, and
other relevant information.

A feasibility study is a crucial step to take before diving into any project and is
generally performed during the project initiation phase of project management
(https://technologyadvice.com/blog/information-technology/phases-of-project-
management/). It helps identify potential roadblocks, assess risks, and estimate resource
allocation; skipping this step can lead to project failure, wasted resources, and financial
losses.

Steps to conduct a feasibility study

Successfully executing a project hinges on thorough planning and risk assessment.
Following this step-by-step guide for conducting a feasibility study will help you
meticulously evaluate the viability of your project from the outset.

Step 1: Conduct preliminary analysis

This is where you take a good, hard look at your project to determine whether it’s worth
pursuing. At this stage, you should also decide if a more detailed feasibility study is
necessary.

A few key criteria usually come into play during this initial assessment. First, consider a
general sense of the market demand for your project, the resources you have at your
disposal, and some ballpark 몭gures for initial costs. If it’s dif 몭cult to get clear estimates, it
may be worthwhile to invest additional time and resources in a more comprehensive
feasibility study. If no signi 몭 cant roadblocks pop up in this preliminary analysis, then
you have the green light to proceed.

Some project management software includes useful features that can help you ef
몭ciently collect and organize all this data. These features can be very helpful in decision-
making, especially when you’re looking at multiple variables.

Step 2: Create a projected income statement

This vital component of the feasibility study involves forecasting the income, expenses,
and pro 몭tability associated with the proposed project. The projected income statement is
akin to peering into a 몭nancial crystal ball to see how the numbers might align.

There are several approaches you can take to assess a project’s 몭nancial impact. Historical
data and industry benchmarks, for example, can serve as reliable guides. These projections
are important for assessing 몭nancial feasibility and making informed decisions.

The signi 몭cance of these forecasts cannot be overstated — they help stakeholders
understand the project’s potential ROI and ultimately make the go/no-go decision
for the project.
Step 3: Survey the market

The market survey stage involves rolling up your sleeves to gather valuable data and
insights about your target market(s) and audience(s). Think of it as your project’s
reconnaissance mission: You’re scouting the terrain to understand what you’re getting into.

To start, you’ll want to learn your customers’ preferences to see if your project will ful
몭ll a need or solve a problem they currently face. For example, a software company’s
research might reveal customer demand for a new feature that aligns with the project’s
goals.

Also consider if your project is timely and whether it will make a signi 몭cant impact
now or in the near future, depending on emerging market trends. It may be useful to
conduct competitor research as well; knowing what and who you’re up against can help
stakeholders decide whether you should move forward with the project and, if so, how
you will approach it.

Surveys and interviews are ideal for 몭rsthand quantitative and qualitative data. However,
don’t underestimate the power of existing market reports. This preexisting data can offer
a broad market landscape view, helping you make data- driven decisions. You can also
leverage other research and data collection methods, such as focus groups and publicly
available databases like Statista (https://www.statista.com/) and the U.S. Census Bureau
(https://data.census.gov/).

Step 4: Review and analyze the data

With all of the necessary information in hand, use tools like a SWOT analysis to evaluate
the project’s strengths, weaknesses, opportunities, and threats. A risk assessment is
another go-to method that can help you identify potential pitfalls that could derail your
project.

At this point in the feasibility study, weigh key metrics and indicators like projected
ROI, milestone dates, market penetration rates, and possible vulnerabilities. These
gauges, when reviewed in tandem, paint a broader picture of your project’s viability and
value.

Step 5: Determine the next steps

Use your research-backed analysis to decide whether the project you’ve proposed is the
best way to address the problems it intends to address. If the metrics are favorable and the
risks are manageable, you should feel con 몭dent advancing to the planning phase. Too many
red 몭ags,
 however, may mean you need to go back to the drawing board.

Here’s a little tech tip to make this decision easier: Many project management
software dashboards (https://technologyadvice.com/blog/information-
technology/project-management-dashboard/) can compile your key metrics and
몭ndings neatly in one visual package. It’s like having a project feasibility snapshot right at
your 몭ngertips, which makes it much easier for stakeholders to understand important data
and make informed decisions.

Types of feasibility studies

There are different types of feasibility studies that each focus on a unique aspect of
projects and project planning (https://technologyadvice.com/blog/information-
technology/project-plan-examples/). By understanding the nuances of each, you’ll become
better equipped to make well-informed decisions, mitigate risks, and ultimately steer
your project toward success.

Technical feasibility

Economic feasibility

Legal feasibility

Operational feasibility

Scheduling feasibility

Feasibility study examples

Feasibility studies add value to the project lifecycle across diverse industries. With each
of these examples, the feasibility study is a critical preliminary step to identify potential
roadblocks and assess the likelihood of project success.

Construction Healthcare

Information technology
Why are feasibility studies crucial in
project management?
In project management, feasibility studies help you gauge whether your project is a go or
a no-go, saving you time, money, and a lot of headaches in the long run. But it’s not just
about giving your project a thumbs-up or down.

Feasibility studies are also invaluable for decision-making and risk assessment. They
provide the data and insights you need to make informed choices. Whether it’s deciding
on the project scope, budget, or timeline, these studies offer a comprehensive view of
what you’re up against.

Plus, feasibility studies help you identify potential roadblocks and risks, allowing you to
prepare effective contingency plans. Operating with a feasibility study as your project’s
foundation is like giving your team both a roadmap and a weather forecast to help you
better navigate your project journey.