Feasibility Assessment process and project feasibility analysis both are interrelated with each other. Project feasibility analysis is an analytical tool employed during the project planning process which reflects how the company will function in the light of the clearly specified set of assumptions. The financial aspect (cost of goods, capital needs, volume, wages etc) of the project as well as the technology used (types of equipment, the facilities, manufacturing process etc) is included in these assumptions.
Feasibility Assessment Definition & Process
The analysis of the viability of an idea is made in the feasibility Assessment process. The important question about the proceeding of the proposed project idea is tried to answer in the feasibility study.
Although there are many ways of using the project feasibility analysis but proposed business ventures are primarily focused. The viability of the new business idea of farmers and others is determined through the feasibility study before continuing with the development of the business. The time, money and energy are saved by ascertaining at the early stage about the uselessness of the idea.
A business that will produce adequate cash flow & profits, resist the emerging risks, keep viable in the long run and accomplish the original goals is considered as feasible business venture. The venture may be starting new company, buying of an existing company, expansion of the current operations of the company or a new additional company for an existing company. Feasibility study includes informational file which provide outline for guidance on what to include and how to proceed with the study. It is also mentioned in the informational file that how and when feasibility study should be conducted so that the process is much facilitated and maximum benefit can be obtained from the study.
In the business idea assessment & business development process, feasibility assessment process is the only one step. After producers have discussed a number of business ideas and scenarios, a feasibility study is generally conducted. Certain business alternatives are dropped in the feasibility analysis while some of them look potential which are pointed out in order to examine them deeply. The number of business alternatives under considerations is mostly decreased in rapid manner during this process.
A variety of methods for organizing the business and positioning the product in the marketplace can be investigated during the feasibility study. It is resembles exploratory journey in which many paths are taken before arriving the final destination. If the result of the initial assessment is negative about particular proposal then it does not mean that the considered proposal lack any beneficial aspect. So the proposed idea should be organized in another style or even certain market condition are required to be altered for making for making the proposal practicable. In certain cases, the flaws or limitations in the idea can be rectified.
Relevant alternative are sorted out with the help of pre-feasibility study which may be conducted initially. Before starting a potential feasibility study, some kind of pre-feasibility analysis can be conducted. By conducting such pre-feasibility analysis, the uselessness of the business idea can be ascertained which will save the time, money and energy.
However if the results of the pre-feasibility study allow to go ahead for performing actual feasibility analysis , some fundamental issues are resolved. Although a consultant can assist in the pre-feasibility study but the relevant business person must be involved in the process. Hence the ordinary businessman can get an opportunity to comprehend the problems of the business development.
The viability of the proposed product in the marketplace is ascertained with the help of performing market assessment. The opportunities in the market or market segment are identified with the help of the market assessment. The study should not proceed if no opportunities are found in the market. In case the opportunities are identified, then the market can provide concentration & direction to the preparation of business alternatives for the purpose of investigation in the feasibility analysis. Most of the information on for marketing section of the feasibility study is provided by the market assessment.
Various alternatives examined should be outlined in the conclusion of the feasibility study along with the weaknesses & strengths of each alternative. The feasibility study should be viewed by the project leader in order to challenge its mentioned assumptions. At this stage, the study should be viewed skeptically.
Any single alternative should not be considered as the only best one immediately. Feasibility study does not immediately become negative or positive. As the analyst gather the information and inquire alternatives, neither a negative nor a positive result may appear. The decision to proceed further is not clear-cut in most of cases. Important stumbling blocks may appear that contradict the project. These weaknesses can be reduced sometimes. The feasibility assessment process gives overwhelmingly positive conclusion in rare cases. The tradeoff between risks and returns of moving ahead with the business project is assessed with the help of this study.
It is important to remember that it is not the role of consultant to decide or the purpose of the feasibility to whether or not go ahead with the business idea. It is the responsibility of the project leader. In business development, the go/no-go decision in very critical. It is the zero return point. Once it is finally decided to follow a business venture, there is generally no turning back. In making such decision, feasibility study will be a major information source. The significance of effectively prepared feasibility study is indicated by this.
Feasibility Study and Business Plan
A feasibility study is not like business plan. The different functions of the business plan and feasibility study are mostly misunderstood. An investigating function is provided by the feasibility study. It specifies the viability of the considered business venture. On the other hand, planning function is provided by the business plan. The actions required to take the proposal from idea to reality are outlined in the business plan.
Many methods or alternatives of accomplishing business success are outlines & analyzed in the feasibility study. So, best business model is identified by narrowing the scope of the project with the help of feasibility study. Only one alternative or model is dealt by the business plan. The scope of the project is narrowed with the support of the feasibility study to identify and specify two or three alternatives or scenarios. The best alternative for the considered situation is identified through conducting feasibility study by the consultant in collaboration with the work group. This serves as foundation of the business plan.
Feasibility study is performed before the business plan. After the business plan has been considered to be feasible, a business plan is then developed. When the feasibility of the considered business venture is proved favorable then a roadmap is created by constructing the business plan which provides the information & guidance about the creation & development of the proposed business. For project implementation, “blue print” is provided by the business plan. If the proposed business venture is considered to be unfeasible, attempts can be made to rectify its weaknesses, other alternatives can be searched, or finally the idea may be dropped.
There is some sort of pressure on the project leader that may compel him to skip the feasibility analysis step and go directly to develop a business. Pressure of skipping the feasibility step comes from a number of persons from within and outside the project.
Reason for not performing Feasibility Analysis
There are certain reasons for not performing the project feasibility analysis which are
- When the feasibility is considered in advance. A particular business is currently doing it
- Looking unfavorable to conduct the feasibility study as someone else had done the same in past
- The view that feasibility study is not much important and it is simply the tool for producing money by the consultants
- The business that is going to sell the equipment for the proposed business has already performed the feasibility analysis
- The consideration to hire general manager who can perform feasibility analysis
- When the feasibility study is considered to be waste of time. It is seemed that the building should be purchases and the site should be tied up and bid should be made on the equipment.
The person should not be dissuaded from conducting proper feasibility study for his proposed business idea by viewing the above mentioned reasons. When it is clearly decided to go ahead with a proposed business, then such decision is mostly difficult to be altered. For a long period of time, one may required to live with such decisions.
Project Selection Process
Project selection is fundamentally a two-part process from a financial perspective. First it should be ascertained by the organizations through conducting feasibility study that the project can be done or not. The second step is to conduct a benefit-cost analysis to view that whether the organization should do it or not. The feasibility study has the purpose to validate the project fulfills the feasibility of cost, marketability, technological, safety, technological and comfort of execution requirements. The organization can employ outside consultants or Subject Matter Experts (SME) to help in both benefit-to-cost analysis and feasibility study. Until after the feasibility study is finished, the project manager may not be assigned.
The senior management mostly solicits inputs from the Subject Matter Expert (SME) and lower level managers through rating models during the project selection process of feasibility assessment process. Generally the business and/or rating criteria against which rating will be created are identified by the rating models. The benefit-to-cost analysis is performed to validate the project when the feasibility is ascertained which will give the need financial & non-financial benefits, if it is executed correctly. It is needed in the benefit-to-cost analysis that more information should be examined than the normally available during a feasibility study. This can make the process an expensive one.