What Is a Feasibility Study for Small Business?

A feasibility study is a process used by businesses to determine whether or not their project will be successful based on the projected returns. A good feasibility analysis can help identify possibilities, and also gauge risk involved with the business idea before spending time, money and resources.

A feasibility study is a tool that helps to determine the viability of a business. It will help you identify what aspects of your business are working and which ones need improvement. A sample of a feasibility study for a small business would be something like this: “This project is not viable because it does not have enough capital, or it does not have the resources needed to succeed.” Read more in detail here: sample of a feasibility study of a business.

A small company feasibility study is an in-depth investigation and financial analysis that determines whether or not a business concept or product should be pursued. Estimates of income, expenses, barriers, and technological issues are included in the research. A feasibility study for a small firm often costs $5,000 or more. However, for organizations with a multimillion-dollar launch budget, they may cost up to $100,000.

We’ll go through what a feasibility study is and how it varies from a business plan throughout this post so you can evaluate if you actually need one for your company.

What Is a Feasibility Study and How Does It Work?

Businesses usually undertake feasibility studies to see whether their concept or product is viable. It’s one of the most difficult and expensive methods of putting a company concept to the test.

A research might take weeks or months to prepare, depending on the intricacy and breadth of the proposal. Business owners may do feasibility studies on their own using templates or applications. They often engage an expert to prepare the report because of the in-depth research and intricate financial estimates.

Feasibility studies don’t make the ultimate choice; instead, they provide all of the facts and offer a strong recommendation about whether or not to proceed. Using the research as a guide, the entrepreneur, stakeholders, and/or other authorities determine whether to pursue the company concept or product.

Who Should Have a Feasibility Study Performed?

A feasibility study is used by small company owners to avoid making the expensive error of starting a failed firm, product, or project. You may utilize a research to assist you in making strategic choices, such as whether you should:

• Create a new company.
• Establish a new shop or factory.
• Alter your product selection or strategy.
• Extend your business to a new region or market.
• Invest in another business.
• Invest a considerable amount of money in innovative technologies.
• Enter a market niche that is already crowded or competitive.
• Make a personal investment in a project.

Business Plan vs. Feasibility Study

Because the facts and data revealed in the feasibility study are incorporated in the business plan, it is common for the feasibility study to come before the business plan. Furthermore, if the feasibility report advises against moving further, you may want to reconsider your company concept or product before making a strategy.

Business Plan vs. Feasibility Study

What Should a Feasibility Study Include?

Each of the factors listed below will be used to some extent depending on the project or company. The structure of the feasibility study may vary based on its focus—you may have a section for each of the following topics:

• The executive summary outlines the project and the company. The final findings are given in this section. It should be around one page long.
• A marketing study assesses the demand for your product or service in the sector in which you intend to sell it. Even if you have a physical location, you need think about the internet parts of your organization.
• Problems with the technology: What tools, hardware, or software are you going to need to start your firm or develop your product? Will you build the technology yourself, purchase it, or rent it? The facilities, which include layout, shelving, offices, and production space, are also included in this part.
• Vendors, price schedules, exclusive agreements, and franchised product contracts are all covered in this article. Obtaining materials and delivering final items, as well as interacting with online features such as an ecommerce site, are examples. Issues with location may be addressed here.
• Concerns with the law: Do you need any permits? Is there anything you should be aware of in terms of rules or prohibitions? What about problems like the environment, history, or legacy?
• Strategy for marketing: This area will be used to narrow down the target market as much as possible: What would you do to suit their requirements and how will you target them?
• Staffing requirements: How many workers will you require? What are their credentials? What is the average pay in your neighborhood? You might include an example organizational chart as well as a discussion of who among your present workers could be considering changing careers to fill new roles.
• Scheduling: This section comprises financial and physical project milestones, as well as a completion date.
• Financials: This component will feature an opening day balance sheet that includes total assets and liabilities on the first day of your firm, in addition to estimated costs and possible earnings. This financial information indicates your return on investment (ROI).
• It’s pointless to establish or build a firm if you can’t see a return on your investment. A feasibility study forecasts when you’ll make money and how much you’ll make.
• Analysis: You’ll hear people ask things such, “Does that seem realistic?” Are the sources reliable? Are there any data points that should be considered as outliers? Analyze possible dangers as well: What are the worst-case possibilities, and what are the chances of them happening?
• Recommendations: This section provides a yes/no recommendation as well as detailed ideas depending on the primary factors. It may provide alternatives if the project is not possible.

What Does a Feasibility Study Cost?

A small company feasibility study takes an average of 60 to 90 days to complete and may cost anywhere between $5,000 and $10,000. As a general rule, a feasibility study will cost 1% of the entire cost of starting a firm or developing a product. So, if you want a feasibility study for a difficult firm with millions of dollars in launch expenditures, expect to pay more than $10,000.

The cost is also dictated by the depth of the research, the instruments required to do it (survey software, focus groups, and attorneys), and the project’s breadth. A study to assess if a company should bring manufacturing back to the United States from abroad, for example, will cost more than a study to decide whether to build a restaurant.

Costs for several feasibility study initiatives are shown below:

Who is in charge of feasibility studies?

Finding a company that just does feasibility studies might be difficult. In addition to other services, a market research business may provide feasibility assessments. Drive Research, for example, in Syracuse, New York, provides a wide range of market research services, including feasibility studies.

There are other firms that specialize in feasibility studies and write business plans. Wise Business Plans creates a report that includes extensive market research and industry analysis.

You might use the freelancing portal Upwork to connect one-on-one and pick your own independent market researcher for a feasibility study. There are a number of market research professionals and analysts that could be interested in taking on your project. Because you can check a freelancer’s previous work to determine whether they’d be a good match, Upwork is a fantastic site for finding market researchers.

When Purchasing a Feasibility Study, Follow These Tips and Best Practices

• First, do a preliminary analysis: Before you spend thousands of dollars on a feasibility study, do a quick check to make sure the company concept or product has no insurmountable technical, legal, or financial problems.
• Involve stakeholders: Keep those who are important to the company informed before, during, and after the research. Obtain their thoughts, opinions, and comments.
• Examine the facts from the feasibility study to determine whether you reach the same conclusion as the research analyst. You can even consider paying for a second expert’s advice on the final decision.
• Assess your present company or position: Before deciding whether or not to pursue a business concept or product, think about your own strengths, shortcomings, and financial status.

Feasibility Study Frequently Asked Questions (FAQs)

Is it preferable to rent a feasibility study out?

Yes, most certainly. Expert data analysis and financial estimates are frequently included in feasibility studies. By contracting out the task, you’ll obtain a more impartial assessment of the project’s possible flaws and triumphs. It’s human tendency to be swayed by our own opinions, which a third person can help us avoid.

What should I budget for a feasibility study?

Expect to spend somewhere between $5,000 and $10,000 for a short research on a company concept or product. A feasibility study should cost 1% of the estimated project budget or company cost to create, according to the usual rule of thumb.

Should feasibility studies contain both answers and a list of potential roadblocks?

Yes, the more information provided by the research, the better it will assist in decision-making. Because of the time and money required, feasibility studies should offer an objective assessment.

Is it possible for my feasibility study to become my business plan?

Yes, many times. A feasibility study may be re-imagined as a business plan with certain variations in emphasis and scope. However, make sure it satisfies the objective, which describes the strategic and tactical measures required to run the company.

Conclusion

Feasibility studies might be expensive, but they can save you millions in the long run if you make the wrong business choice. They investigate the technical, financial, and operational elements of a new company or product concept. The research examines the data and makes recommendations on whether or not you should pursue your project or idea, as well as how to optimize its success.

A feasibility study is a process that helps small businesses determine whether or not they can afford to start up. It is an important step in the process of starting a business. Reference: what is feasibility study.

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