If you have a business idea and want to know if it is workable or suitable. It doesn’t make any difference if it’s a product or service. A feasibility study will provide you with the discipline and insight to reassure yourself that your idea is worthwhile pursuing. Furthermore, if you need to finance the business, lending institutions and investors, typically require a feasibility study. The feasibility study evaluates the project’s potential for success. At Wadid Rizkalla we have prepared feasibility studies for hundreds of business start-ups, as well as, established companies seeking to introduce a new product or service.
Feasibility studies contain standard components. The exact appearance of each study varies. This depends on the industry studied, the critical factors for that project, the methods chosen to conduct the study – primary and secondary research, and the budget. Most studies have multiple potential uses, e.g. validate your assumptions, reassure investors and lenders that the proposed venture is economically suitable, etc. so they must be designed to serve everyone’s needs.
There are usually three components to the feasibility study, however, depending on your business; the technical analysis may not be required.
• Market Analysis
• Technical Analysis
• Financial Analysis
The market analysis should be managed first because it is critical to the success of the business to understand the environment in which you will compete. There must be sufficient demand for your product or service. If not, your business idea may not be feasible and there is no need to go any further. Market analysis results in organizing information about the market potential. Its basic components include:
• Evaluation of market size
• Projected market share
• Analysis of the competition.
In addition to the market analysis, the financial evaluation is a critical component of the feasibility study. Without the “financials” it will be impossible to determine how feasible the business idea is. Included in the financial evaluation is revenue and income projections for the first year along with start-up costs to determine how much funding your business will need. Key components of the financial evaluation include:
• Capital Requirements
• Start-up Costs
• Revenue Projections
• Gross Profit Margins (GPM)
• Net Income
Armed with the information that has been compiled and analyzed for the feasibility study, a recommendation by Wadid Rizkalla is provided so the client can make a GO / NO GO decision regarding the feasibility of launching the business venture.