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How to Conduct Feasibility Study A

Beginners Guide
Ajaero Tony Martins
Feasibility Study
Do you know how to conduct feasibility study on a business idea? What if I provide you with a
feasibility study template and sample? If I show you a practical feasibility study outline, will you
appreciate it? If your answer is yes, then read on.

In the previous article wrote, I stressed the importance of conducting feasibility study on your business
idea before taking it to the marketplace. Today, I will be teaching you how to conduct feasibility study on
your business idea. Since conducting feasibility study is such an important process that must be carried
out on your business idea or proposal, I will advise you print out or bookmark this article for future
reference.

A man that is prepared has half won the battle. Sydney M. Bremer

5 Reasons Why You Must Conduct Feasibility Study

What is the importance of conducting feasibility study before starting a business? Can conducting
feasibility study give your business an advantage and help reduce the high rate of business failure?

A feasibility report is an often ignored but vital prerequisite to building a successful business from scratch.
In fact, not doing feasibility is one of the silly mistakes entrepreneurs make when starting a business. So
in this article, i will be stressing the need to conduct feasibility study.

Starting a business is like jumping out of an airplane without a parachute. In mid air the entrepreneur
begins building a parachute and hope it opens before hitting the ground. Rich Dad.
Few years ago, before starting a business of my own, I was privileged to assist my dad in overseeing the
affairs of his business. Our company was in the business of importing and distributing sanitary wares.

Business moved on smoothly for many years till we began to experience a decline in sales and decrease
in profit margin due to stiff competition and inconsistent government policies. My dad decided to diversify
so he made a move into the clothing line based on the recommendation of a nephew.

Since he started his first business from scratch without conducting a feasibility study, he thought he could
repeat the feat in the clothing line. As expected, the business flopped in less than two years due to many
unforeseen factors I wouldnt want to mention here; and we lost a lot of money.

Though this experience was painful, I learned a lesson I will never forget in my life and that is: The
Importance of Conducting a Feasibility Study before Starting a Business. Now i know many out
there have made this same business mistake and many are still to bound to make it. Having shared my
story; let me highlight five reasons why you need to conduct feasibility study before starting a business.

Importance of Conducting Feasibility Study Before Starting a business

 a. Feasibility study will help you to determine the profitability of the business venture. Before
starting a business, seasoned entrepreneurs and investors would want to know if the business would be
worth their time, effort and resources. It is worthwhile to know that many entrepreneurs have abandoned
solid business ideas because the profitability could not be ascertained on conducting a feasibility study on
the business idea.

b. A feasibility study report will help prove to the entrepreneur, venture capitalists, lenders and
investors the existence of the market, the liquidity of the business venture and the expected return on
investment.

c. Feasibility study will help you identify the flaws, business challenges, strengths, weaknesses,
opportunities, threats and unforeseen circumstances that might affect the success and sustainability
of the business venture. Just like the case of my dads business, the business failure and loss of money
would have been avoided if we had carried out a feasibility study. We simply jumped in based on
someones recommendations because we were flushed with cash and we paid dearly for it.

d. Before starting a business, feasibility study will enable you estimate the financial, human and
technological resources that will be needed to ensure the successful launching of the business.
Feasibility study helps to reveal the number and level of skill or unskilled workers to be employed and
their salary scale.

e. Feasibility study will help you to determine the amount of capital required to start the business. It
will also help you in establishing the budget plan, working capital and cash flow projections of the
business.

As a last note, my advice to you is this:

Never invest a dime without first carrying out feasibility study on the business idea.

How to Conduct Feasibility Study Sample Template

A Typical Feasibility Study Template and Outline

1. Economic Analysis
Running a business requires deliberate actions and plans to make the business succeed and part of what
you need to do as an entrepreneur if you want to build a business with a solid foundation is to ensure that
you conduct economic analysis for your business from time to time.

I believe this is where your feasibility study should start from. What is the essence of carrying out market
research or even going ahead to start a business when the economy of your country or state does not
favor entrepreneurship or private ventures?

Simply put, economic analysis is a strategy employed by business owners to effectively and optimally
allocate and make use of the scarce resources available to them in their business. An effective economic
analysis will ensure that you start your business on a positive footing because it will help you maximize
the resources within your disposal with little or no stress. For instance, if a proper economic analysis is
done before you start executing your business plan, you will realize that you will only spend more time
and resources on the most important factors that has the potential to either make or mar your business.

Analyzing the economy will help you align your planned business with the economic situation on ground.
Economic feasibility should include analysis on:

Governments fiscal and monetary policies

Opportunity cost of resources
Social cost
Import and export rate
Inflation rate
 Tax rate, levies and duties
Currency exchange rate, etc.
Once you are able to go through the process, the next thing to do is to sit back and review the document
generated from your economic analysis. As a matter of fact, you can liaise with someone or perhaps a
practicing economist to help you with the review of the document; it might attract a fee though. The truth
is that you would notice the professional touch once an economist helps you review your economic
analysis document.

Conducting a thorough economic analysis before starting a business will enable you start and run the
business with little or no pressure because you would have succeeded in taking care of all the areas that
you are likely going to get pressure from.

2. Market Analysis
The next thing you should be analyzing is the market for your proposed business idea. Carrying out a
feasibility study on the market will enable you know if there is actually a need or market for your business
idea. Market analysis will also help you to determine the size of the market, demographics and
psychographics of the market, level of competition and the size of the market you can compete for.

3. Technical Analysis
There are certain aspects of setting up a business that an entrepreneur need not neglect and technical
analysis is one of them. Technical analysis is all about collecting and studying all the needed techniques
that will help you effectively run your business. In some quarters, especially the financial industry (stock
market), technical analysis is about the collection of price trends with the aim of forecasting or predicting
the future price trend of stocks, commodities, and futures et al.

Although technical analysis is majorly used in the stock market, but you can apply same principle to your
startup. The essence of conducting technical analysis for your startup is to ensure that you are well
equipped with the right resources to successfully launch your business. Technical analysis is almost
similar to economic analysis because it also involves the law of demand and supply market fluctuation
et al.

Now let us quickly consider some of the key steps you need to follow to be able to effectively conduct
technical analysis for your startup business;

Study and Research-: If you want to successfully conduct an effective technical analysis for your
startup business, then you must spend time to study and research your line of business. This part of a
feasibility study deals with the technological requirements of the business. Technical analysis will
enable you determine the method of production to be employed, equipments, spare parts and tools,
site development, supporting facilities, the nature of the factory building, fencing and so on.
Constantly Review Your Technical Analysis Document-: Once you are able to successfully
follow all the steps discussed above, then you would have succeeded in conducting a technical
analysis for your startup. What is expected of you to do with your technical analysis document is to
constantly review it so that you wont be operating your business with obsolete techniques and
equipments. So ensure that you read journals and any available material that relates to your line of
business. It will help you to stay abreast with the changing trends and technology in your industry.
No doubt if you are able to conduct technical analysis before launching your business, you would have
succeeded in putting in place machineries and structures that will guarantee you huge success with your
startup business.

4. Location Analysis

This is carried out with a view to determine the best location for the business in terms of nearness to high
traffic roads, nearness to infrastructure, accessibility to customers, ease of transportation of raw materials
and finished products, nearness to cheap labour, cost of land acquisition and so on.

5. Manpower Analysis
 This part of a feasibility study deals with the process of estimating the level of skill, professionalism and
number of employees to be hired by the business. The salary scale, incentives and pay package are also
estimated at this point. In studying and researching your line of business, you are expected to get a good
idea of the technical skills required to successfully run the business and how you can source for such
skills.

For example; if you intend starting an automobile repair and maintenance workshop, part of the technical
skills you would need to be able to run a complete auto workshop are auto mechanical skills, auto
electrical skills, panel beating skills and also marketing skills amongst others. Your business plan should
be able to point your areas of strength and weakness thereby affording you the opportunity to make
provision to either acquire the technical skills required or upgrade your existing technical skills.

Map out Strategy on How to Source for the Required Technique-: The next thing to do once
you are able to list the techniques needed to run your business is to sit down and map out strategies on
how to source for the required technique. As a matter of fact, sourcing for some of the technique
needed to run your business might involve hiring an expatriate to help you fill in the skill gap if you cant
find a qualified person to fill in the role in your country. That is why it is important to conduct technical
analysis before launching your business so that you will be well informed and prepared financially to
shoulder the expenses that come with hiring expatriates or consultants. There are other means you can
follow to source for people with the technical skills that is required in your business; you can poach
from your competitors, and you can as well hire fresh graduates and train them to fit into your plans.
List the Techniques that will be needed in effectively running Your Type of Business-: If you
successfully carry out a thorough research and feasibility studies, you will be able to pin point the
required skills needed to successfully run the kind of business, and how to source for the skills. So,
what is expected of you to do is to list all the techniques that will be needed and then conduct a proper
analysis to know the role and capacity each of the technique will play in your business. The truth is that
there are key techniques that you cant ignore from the day one of starting your business and there are
some other techniques that can be adopted as you grow the business
Develop Suitable Training Program-: The essence of conducting technical analysis before
starting your business is to ensure that you put in place all the techniques that are required to
effectively run your business. So, part of what you need to do is to develop suitable training program
that will help you equip your staff with the required technique needed to run your business and also to
help them operate effectively. The truth is that if you want to run a business that has the capacity to
compete globally, then you must ensure that you adopt best practices.
6. Financial Analysis

Part of what you need to do when you want to conduct financial analysis for your business is to draw up a
comprehensive budget for your business. Your budget should capture your expenses and your income
and also financial flow strategy. The truth is that the bulk of the job to be done when conducting your
economic analysis for your business will be done here budgeting. So you must endeavor to give it the
professionalism that is required to make it fly.

Although when conducting financial analysis for business it involves working with forecast and
projections, but at the same time it is important that you know your financial capacity. The bottom line is
that economic analysis revolves around managing the scarce resources within your disposal and finance
is the chief of the resources.

Financial analysis will be dealing with the estimation of the total capital involved, capital expenditures,
working capital; profit and loss analysis, pricing of products, cash flow projections, projected sales
revenue and the entire project viability. Everything concerning finance should be dealt with at this
juncture. If you are trying to raise venture capital for your small business startup, then you have to do a
clean job on the financial section of the feasibility report because this is where investors focus on. All they
are interested in knowing is how much is the percentage return on investment and the payback period.

7. Sensitivity and Risk Analysis

 This is the last part of a feasibility study and probably the most important. After all other factors have been
analyzed and proven viable, sensitivity and risk analysis can come in. Building a business without
properly conducting a risk analysis is like flying a plane without regards to weather condition. Before any
business idea is taken to the marketplace, its risk to reward ratio should be analyzed, the sensitivity to
competition should be determined and the liquidation rate of companies in the industry of your proposed
business venture should be calculated. With results obtained from sensitivity and risk analysis, growth
and survival strategies can be developed for your proposed business.

As a final note, if conducting feasibility study is too technical for you; then consider hiring a professional or
a business consultant to do the dirty work for you. Its going to save you time and energy. And just before I
drop my pen, always bear in mind that carrying out feasibility study on your business idea will enable you
write a business plan and help you forge a competitive advantage for your business and increase your
chance of success.

Related Posts
How to Research a Business idea
Evaluation Guide: Is your Business idea Really a Good One?
5 Conditions that Makes a Business Opportunity Feasible
How to Conduct Technical / Manpower Analysis
3 Difference between Feasibility Study and Business Plan

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