A feasibility study helps an entrepreneur structure a new venture with preliminary data that defines a business opportunity and helps determine whether it is practical and likely to succeed in the marketplace (Campbell, 2013). The purpose of a feasibility study is to identify the likelihood of challenges a business may encounter and present a variety of solutions that will help deliver outcomes the proprietor envisions. For example, one aspect of a feasibility study focuses on handling risks and uncertainties by examining statistics and probability concepts that identify issues a business owner may face in a particular industry. This can help an individual assess variables to help predict the best path for productivity. Other components of the analysis may include: (a) the history practice of an industry, (b) typical industry risks; (c) exploration of economics; and (d) the identification of weaknesses and strengths (Mian, 2011). Research can also include feedback from surveys and questionnaires to help develop a detailed sustainable business plan based on the data collected.
Entrepreneurs are a unique group of individuals that do not accept the world as it is and often become game changers from ambitious ideas and innovations. They possess an unbridled drive and passion, but often fail to take into consideration all the components required to make a venture successful. A feasibility analysis provides research that helps entrepreneurs confront the truth about a variety of aspects of a venture by examining uncertain parameters that can hinder an enterprise, taking into consideration long term goals and past experiences that can affect the process (Edmond, 2007). It can also be used as part of a greater venture capitalization plan because it provides a comprehensive detailed analysis that displays a psychological commitment to the enterprise from the entrepreneur which is an integral component to attract funding from investors, shareholders, and banks.
A feasibility study can also help frame the venture opportunity and assess risks by identifying some of the following components: (a) who the competitors are; (b) is it a practical business; (c) what is the market share; (d) what is the location of similar businesses; (e) who the existing customers are; (f) determination of costs and break-evens; and (g) identifying potential pitfalls (Reilly & Milikin, 1996). In addition, a feasibility study can help business owners evaluate the basic financial requirements of a business, potential revenues, fixed and variable costs, and the working capital required to finance inventory, material, labor, marketing, shipping, and manufacturing costs. Zaharuddin (2008) developed a simple four step plan for reducing the risk involved with launching a new business: 1) identify the idea and vision; 2) create a feasibility plan to screen and test the idea to determine if its viable; 3) write a business plan; and 4) launch the business (Zaharuddin, 2008). These easy steps that include a feasibility study as part of the process can help entrepreneurs succeed in their entrepreneurial ventures.
Campbell, J. (2013, February 25). Feasibility study and you: A dynamic duo by June Campbell. Retrieved from WebSiteMarketingPlan.com: http://www.websitemarketingplan.com/techniques/feasibility.htm/
Edmond, J. (2007, February 5). Planning your new business: Feasibility analysis. Retrieved February 25, 2013, from articlesbase.com: http://www.articlesbase.com/home-business-articles/planning-your-new-business-feasibility-analysis-part-one-100572.html#ixzz1U1ZGAPdD
Reilly, M., & Milikin, M. (1996, August). Starting a small business: The feasibility analysis. Retrieved February 25, 2013, from Montguide MT0510: http://msuextension.org/publications/BusinessandCommunities/MT199510HR.pdf