A feasibility study is a verification of a specific business plan. The plan may be focused on various objectives: capital expenditure on new assets, new market entry, new product launch, etc.
Why is a Feasibility studies important?
Business plans are typically connected with utilizing smaller or larger amounts of financial resources for their actualization. Each business plan is at the same time connected with risks, such as that its objectives will not be achieved. Therefore, it is extremely important to scrutinize all assumptions that have been used for business planning, and then to quantify the risks of failure. A feasibility study is required almost in all cases when external sources (credit, venture capital) are going to be used.
What is a Feasibility study's deliverable?
The main deliverable is a written report that summarises findings from the verification of all inputs, and an appendix with calculations. Calculations are usually a forecast of financial reports for a defined time period (typically five to ten years), or calculations of the Return on Investment (ROI). The report is usually presented in the following sections (depending on the type of business plan):
- Objectives of the business plan;
- Assessment of the proposed technology (capacity, design, supplier);
- Assessment of proposed deadlines;
- Analysis of one-off costs and expenses (purchase price of the technology, costs of installation operation initiation, supplementary costs);
- Assessment of operating costs (price and availability of raw materials, other materials, energy, services, costs of personnel, maintenance costs, etc.);
- Assumed customers, distribution channels, costs of sales and marketing;
Environmental impacts; - Analysis of the relevant market (demand, competition, price);
Assessment of the location, likelihood of obtaining all approvals from government and local authorities; - The current position of the company, and the compliance of the plan with the business strategy.
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