Conducting a Feasibility Study

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.

1. Describe or outline as specifically as possible the planned services, target markets, and
unique characteristics of the services by answering these questions:

o Does the practice serve a currently unserved need? (e.g., multicultural populations
or age groups who are not currently being served)
o Does the practice serve an existing market in which demand exceeds supply?
o Can the practice successfully compete with existing practices because of an
"advantageous situation," such as better design, price, location, or availability
(e.g., balance assessment and rehabilitation, programmable devices)?

2. Determine whether there are any insurmountable obstacles. A "yes" response to the
following indicates that the idea has little chance for success:

o Are capital requirements for entry or continuing operations unavailable or

unaffordable?
o Do any factors prevent effective marketing to any or all referral sources?

If the information gathered so far indicates that the idea has potential, then continue with a
detailed feasibility study.

Step Two: Prepare a Projected Income Statement

Anticipated income must cover direct and indirect costs, taking into account 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.

Factors that determine this statement are services provided, fees for services, volume of services,
and adjust-ments to revenues (e.g., actual reimbursement levels).

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.
The major steps include:

 Define the geographic influence on the market.

  Review population trends, demographic features, cultural factors, and purchasing power
in the community.
 Analyze competing services in the community to determine their major strengths and
weaknesses. Factors to consider include pricing, product lines, sources of referral,
location, promotional activities, quality of service, consumer loyalty and satisfaction, and
sales.
 Determine total volume in the market area and estimate expected market share.
 Estimate market expansion opportunities (e.g., responsiveness to new/enhanced services).

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. Extensive effort is necessary to develop detailed plans for:

 Equipment
 Merchandising methods
 Facility location and design (or layout)
 Availability and cost of personnel
 Supply availability (e.g., vendors, pricing schedules. exclusive or franchised products)
 Overhead (e.g., utilities, taxes, insurance)

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.

Prepare a list of assets required for practice operations. The list should include item, source, cost,
and available financing methods. Necessary assets include everything from cash necessary for
working capital to buildings and land. Although the resulting list is rather simple, the amount of
effort required may be extensive.

Liabilities to be incurred and the investment required by the practice must also be clarified.
These items need to be considered:

 Whether to lease or buy land, buildings, and equipment

 How to finance asset purchases
 How to finance accounts receivable

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."
  Reexamine the Projected Income Statement and compare with the list of desired assets
and the Opening Day Balance Sheet. Given all expenses and liabilities, does the Income
Statement reflect realistic expectations?
 Analyze risk and contingencies. Consider the likelihood of significant changes in the
current market that could alter projections.

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. Additional considerations include:

 Is there a commitment to make the necessary sacrifices in time, effort and money?
 Will the activity satisfy long-term aspirations?

Overview: What is a feasibility study?

Simply put, a feasibility study is a practicality assessment for a proposed plan,
product, project management tool, or new execution method.

The importance of a feasibility study is to establish whether or not a company, team, or

organization will deliver on its promises in a satisfactory manner and a reasonable
period of time.

This is one of the most important project management techniques you’ll want to learn to

save your organization time, money, and lots of headaches.

The final feasibility report is a part of the fifth step of your project management plan and
is presented after you’ve made your initial business case to your stakeholders.

Feasibility study characteristics and best practices

Feasibility assessments don’t always green light or kill projects or ideas altogether. In
most cases, a feasibility study will provide a clear picture of your budgetary, scheduling,
or logistical strengths, and allow you to adjust the scope of your proposition so that it fits
your abilities.

These studies also provide many other benefits including:

 Bringing to light new opportunities that weren’t obvious from the start
 Improving the focus of your team members
 Providing analysis into team trends and characteristics
 Enhancing the success rate of your projects
 Increasing insight for better project decision making
 Clarifying the need for the project
There are certain characteristics that make up a feasibility report, most importantly the
core questions of feasibility. These are the five questions most feasibility studies have to
answer in order to justify a new project, plan, or method:

1. Is this plan technically feasible?

Starting off, this question will help you determine whether or not your organization has
the technical resources to successfully execute this project.

This includes evaluating all of the hardware, software, and other technical assets you
have at your disposal and whether or not they meet the requirements of your new
project.

2. Is this plan legal?

Does your organization meet all of the requirements, laws, and regulations to complete
this project?

It’s a complete nonstarter if your project doesn’t meet the legal threshold for completion,
which includes anything from data protection laws to building requirements.

Otherwise, you’ll make it halfway through your project before you realize that your team
isn’t meeting some overlooked regulation that’ll waste more time and resources to
rectify later.

3. Is this plan operationally feasible?

Will this proposed project solve the problems you hope it will solve? Is the solution
reliable, maintainable, and affordable?

There is no sense in sinking time, money, and energy into a project that isn’t likely to
produce quality results for your team or your stakeholders.

4. Is this plan feasible within a reasonable period of time?

This is one of the most important questions: do you have the time to complete this
project?

It’s important that you establish a realistic project schedule for project completion,
otherwise, you’ll find yourself dropping the ball on deadlines and quality for your
deliverables.

5. Is this plan economically feasible?

Finally, we reach the most obvious of the feasibility questions.

This is where you will assess whether or not this project will provide the supposed value
needed to justify its cost. You can assess this area of feasibility based on several
different factors, including:

 Projected profitability
 The total cost of completion
 Estimated investment by outside parties
No matter how incredible a project may seem, if the numbers don’t add up, then either
you’ll have to seek out larger budgets or the plan isn’t worth the risk.

How to conduct a feasibility study

A feasibility analysis is an in-depth process to determine the factors that will lead a
project to success or failure. In the interest of simplicity, I’ve taken the liberty of breaking
up this process into five steps.

Step 1: Conduct the preliminary analysis

Performing a full-blown feasibility study is time- and resource-consuming, so instead of
jumping headfirst into this monstrous assessment, it’s important to test the waters and
conduct preliminary analysis. Consider this to be an eligibility qualification before the
feasibility study.

There are four key steps to performing a preliminary assessment:

1. Create an idea outline: Outline everything you hope to achieve by taking on this project
and why this project is important to your team, organization, or business.
2. Assess the market space for this project: Try to find examples of this type of project and
whether or not others have had success in execution.
3. Examine your competitive advantage: What will you do differently to ensure that your
idea will succeed, such as talent, location, technology, etc.
4. Determine the risks of the project: Risk management is a huge part of assessing the
viability of any project. Perform a risk assessment to outline anything that may pose a
threat to your success.

Once you’ve completed your preliminary assessment you will have a better idea about
whether or not to continue exploring your project feasibility. If there aren’t any major
insurmountable risks that you find during this assessment, then it’s time to move onto
the full feasibility study.

Pro Tip: This is not the last word on whether or not a project is truly feasible. All of your
preliminary research is only surface deep, and issues you didn’t see before may come
up later during the actual feasibility study.

Step 2: Create a project scope outline

Now that you have a rudimentary understanding of what you are getting yourself into
with this project, it’s time to create a scope outline.

This outline will detail the objectives of the project by using the five feasibility questions
that I explained earlier in this guide:

 Is this plan technically feasible?

 Is this plan legal?
 Is this plan operationally feasible?
 Is this plan feasible within a reasonable period of time?
 Is this plan economically feasible?
Using these five questions, you will outline the core tenets of this project including what
the current situation or issue is that you plan to solve, what you plan to accomplish,
estimations on the impact of the project, and what it will take to accomplish this goal.

Pro Tip: Before you create your outline, create a strengths and weaknesses
assessment of your organization in relation to this project. Find out what aspects of your
organization will impact this project and its success or failure.

Step 3: Perform your market research

I use the term “market research” since it is the most common way of describing this
step, however, not all projects have to do with competing with other businesses.

Some projects are about improving team performance, trying out a new management
method, or maybe in your case implementing new project management software.

Anyhow, this step is crucial in discovering the feasibility of your proposed project idea.
What better way to find out if your project will be a success than looking to others
who’ve done it before?

The five key benefits of market research are:

1. Identification of other market opportunities for your project (new customers, additional
uses, etc.) through focus groups, surveys, and potential client interviews.
2. Insight into your competition including their products, services, marketing choices, client
base, etc.
3. Information on the market for your project including the size and needs of your potential
clients.
4. Conclusions on whether or not this project has succeeded in the past, what it cost to
complete, and what success looks like.
5. Insight on the best ways to execute a project, such as a timeframe, the required
personnel, and even management styles.

I mentioned a few ways to conduct market research in my benefits list, but here is a
more comprehensive list of methods:

 Focus groups
 Surveys
 Personal interviews (customers, experts, etc.)
 Observation of other organizations
 Social media listening (great for researching marketing methods)
 Public domain data

Whichever methods you choose, be sure that your research answers the five feasibility
questions once you’re done.

Pro Tip: Remember that focus groups and interviews provide more subjective data than
other methods, like surveys, social media listening, and public domain data. Try to
gather a mix of subjective and objective data when performing your market research.
Step 4: Calculate the financial cost
We’re nearly there. No matter what kind of project you are proposing, many times it’s
the financial cost that sinks the feasibility.

All sorts of financial factors will go into determining the feasibility of a project proposal,
however, there are a few major considerations that you should keep in mind when
making these calculations:

1. Will your financial resources come from within your organization or from an outside
financier?
2. What is the financial cost of failure when executing your project?
3. Which risks will impose an undue financial burden on your project budget?
4. What is the break-even point for profit once your project is off the ground, if applicable?
5. How much will you need to complete this project, including risks?

Always keep Murphy’s Law in mind when running through the financial feasibility of your
project, because whatever can cost you money, will cost you money.

Call it confirmation bias, but I always operate under the logic that my projects will
always cost more than I initially estimated.

Pro Tip: It’s always better to overestimate the financial costs of your project. This will
become apparent when you are running through your risk assessment and assign the
costs and likelihood for all potential issues.

Step 5: Review your research and present your findings to the project stakeholders
The day of reckoning is upon us, and it’s time to evaluate everything you’ve uncovered,
compile it all, and present it to the relevant clients or stakeholders.

Make sure your findings answer all five feasibility questions, and if each one is
answered in the affirmative, that’s everything you need to recommend the go-ahead for
this project.

However, if there are some concerns with certain aspects of feasibility, this doesn’t
mean you have to scrap the project altogether. Perhaps this is an opportunity to
reevaluate your approach, your budgets, or your endgame to better suit your
organization.

One suggestion for nailing the stakeholder presentation: bring coffee and donuts
(preferably extra glazed and blueberry cake donuts).

Pro Tip: Even if the decision to move ahead with a project is up to another party, such
as a stakeholder, it doesn’t hurt to add in your own thoughts on the matter. Be sure to
use short, key findings from your research to make your summary case at the end of the
study.

The final step before moving to the execution phase

Once you’ve presented to your stakeholders and get the green light, that’s it. You’re
ready to start the execution phase of your project. If you want to learn more about the
project management process, be sure to read my guide: The 5 Core Steps of the
Project Management Process.

Trust me, you’ll always want to keep it handy, especially if you are new to project
management.

The Steps of a Successful Feasibility Study

Feasibility studies are an integral part of any successful business. Performed
before making big financial investments such as hiring new employees or
buying new equipment, feasibility research determines if a decision is practical
from an economic and operational standpoint. Though these studies are used
in a variety of fields, they are particularly important to the sports tourism
industry. At Sports Facilities Advisory, we plan sports facilities and community
centers, so we are familiar with feasibility research. To give you a better idea
of our services, we’ve outlined the steps of a feasibility study.

Step One: Preliminary Analysis

A feasibility study takes a lot of time and resources. This is why the first step,
the preliminary analysis, essentially analyzes if your idea is worth researching.
Let’s say you are planning on moving your sports center to a new location. If
you determine during the preliminary analysis that moving locations could
potentially bankrupt your business, there would be no need to continue with
the study. If you determine that moving might be a success, you should invest
more time in research. A preliminary analysis is fairly simple. First, outline
your plan. Second, examine the potential market and the commercial viability
of your plan. Third, assess the strengths and weaknesses of your plan. Last,
determine if there are any risks. Once you analyze your plan, you can
determine if you wish to continue with the study.

Step 2: Financial Survey

Examining financial costs is a major component of a feasibility study. By
looking at your plan from a financial perspective, you can determine if your
idea is viable. When you are looking at finances, look at the resources you will
need to complete your project and how much money you must earn to make a
profit. This research gives you a better idea of sales and overhead costs.
Step 3: Market Survey
Next, you need to examine the current market conditions. Determine your
target market, study their spending habits, look at competitors, and determine
how much of your resources you will have to devote to marketing and
advertising. This will give you a better idea of your revenue projection and
determine if your expected sales numbers are possible.

Step 4: Risk Assessment

Once you examine your finances and market, examine the potential risks with
your plan. During this step, assess what could potentially go wrong with your
plan. Determine how you could address these risks or how you could change
your plan to reduce them. You may also determine that the risks are too high
to follow through with the plan. That is okay—determining if a plan will work is
the purpose of a feasibility study.

Step 5: Revaluation of Data

Reviewing your data is a crucial component of a feasibility study. At this
phase, look over all of the previous research and determine if you missed any
factors or if anything has changed since testing. For example, perhaps market
conditions have changed since you started your research, making your plan
more or less feasible. Carefully looking at everything ensures the best results.