Feasibility Study

A feasibility study is used to find out if a project is viable prior to investing real resources and dollars. 

As business consultants, we are often hired to complete studies for clients to determine if a proposed venture will be profitable as well as what risks it will encounter.

Step One: Conduct a Preliminary Analysis

The primary purpose of the preliminary analysis is to screen project ideas before extensive time, effort, and money are invested. Two sets of activities are involved.

Step Two: Prepare a Projected Income Statement

Anticipated income must cover direct and indirect costs, considering the expected income growth curve. Working backward from the anticipated income, the revenue necessary to generate that income can be derived in order to build a projected income statement.

Step Three: Conduct a Market Survey

A good market survey is crucial. If the planner cannot perform this survey, an outside firm should be hired. The primary objective of a market survey is a realistic projection of revenues. 

Step Four: Plan Business Organization and Operations

At this point, the organization and operations of the business should be planned in sufficient depth to determine the technical feasibility and costs involved in start-up, fixed investment, and operations.

Step Five: Prepare an Opening Day Balance Sheet

The Opening Day Balance Sheet should reflect the practice's assets and liabilities as accurately as possible at the time the practice begins, before the practice generates income.

 

Step Six: Review and Analyze All Data

This review is crucial. The planner should determine if any data or analysis performed should change any of the preceding analyses. Basically, taking this step means "Step back and reflect one more time."

Step Seven: Make "Go/No Go" Decision

All the preceding steps have been aimed at providing data and analysis for the "go/no go" decision. If the analysis indicates that the business should yield at least the desired minimum income and has growth potential, a "go" decision is appropriate. Anything less mandates a "no go" decision.