Feasibility Study Outline
A feasibility study is an important step in business development.
What is a Feasibility
Study will help you understanding the concept of a
feasibility analysis and what it means for business development.
When to Do
and How to Use a Feasibility Study provides you with a
framework and the decision points needed for using a feasibility analysis
in business development.
The outline below can be used to help you create your study. However,
not all feasibility studies are alike. The elements to include in a
feasibility study vary according to the type of business venture analyzed
and the market. So the listing below may not be a complete listing of the
factors that should be considered in your specific situation. The success
of a feasibility study is based on the careful identification and
assessment of all of the important issues for business success. Depending
on the business project, additional items may also be important.
Remember, the basic premise of a feasibility study is to determine the
potential for success of a proposed business venture.
Identification and exploration of business scenarios.
- Identify alternative scenarios or business models of what the
project may entail and how it might be organized. These may come from
the idea assessment or market assessment that you may have already
- Eliminate scenarios and business models that don't make sense.
- Flesh-out the scenario(s) and model(s) that appear to have potential
for further exploration.
Definition of the project and alternative scenarios and models.
- List the type and quality of product(s) or service(s) to be
- Outline the general business model (ie. how the business will make
- Include the technical processes, size, location, kind of inputs
- Specify the time horizon from the time the project is initiated
until it is up and running at capacity.
Relationship to the surrounding geographical area.
- Identify economic and social impact on local communities.
Identify environmental impact on the surrounding area.
Feasibility (This can be based on a
marketing assessment that you may have already completed.)
- Describe the size and scope of the industry, market and/or market
- Estimate the future direction of the industry, market and/or market
- Describe the nature of the industry, market and/or market segment(s)
(stable or going through rapid change and restructuring).
- Identify the life-cycle of the industry, market and/or market
segment(s) (emerging, mature)
- Investigate industry concentration (few large producers or many
- Analyze major competitors.
- Explore barriers/ease of entry of competitors into the market or
- Determine concentration and competitiveness of input suppliers and
- Identify price competitiveness of product/service.
- Will the product be sold into a commodity or differentiated
- Identify the demand and usage trends of the market or market segment
in which the proposed product or service will participate.
- Examine the potential for emerging, niche or segmented market
- Explore the opportunity and potential for a "branded product".
- Assess estimated market usage and potential share of the market or
- Estimate sales or usage.
- Identify and assess the accuracy of the underlying assumptions in
the sales projection.
- Project sales under various assumptions (ie. selling prices,
Access to market outlets.
- Identify the potential buyers of the product/service and the
associated marketing costs.
- Investigate the product/service distribution system and the costs
Determine facility needs.
- Estimate the size and type of production facilities.
- Investigate the need for related buildings, equipment, rolling-stock
Suitability of production technology.
- Investigate and compare technology providers.
- Determine reliability and competitiveness of technology (proven or
- Identify limitations or constraints of technology.
Availability and suitability of site.
- Access to markets.
- Access to raw materials.
- Access to transportation.
- Access to a qualified labor pool.
- Access to production inputs (electricity, natural gas, water, etc.).
- Investigate emissions potential.
- Analyze environmental impact.
- Identify regulatory requirements.
- Explore economic development incentives.
- Explore community receptiveness to having the business located
- Estimate the amount of raw materials needed.
- Investigate the current and future availability and access to raw
- Assess the quality and cost of raw materials and markets of easily
- Investigate the availability of labor including wage rates, skill
- Assess the potential to access and attract qualified management
Estimate the total capital requirements.
- Assess the "seed capital" needs of the business project and how
these needs will be met.
- Estimate capital requirements for facilities, equipment and
- Determine replacement capital requirements and timing for facilities
- Estimate working capital needs.
- Estimate start-up capital needs until revenues are realized at full
- Estimate contingency capital needs (construction delays, technology
malfunction, market access delays, etc.
- Estimate other capital needs.
Estimate equity and credit needs.
- Identify alternative equity sources and capital availability --
producers, local investors, angel investors, venture capitalists, etc.
- Identify and assess alternative credit sources -- banks, government
(ie. direct loans or loan guarantees), grants, local and state economic
- Assess expected financing needs and alternative sources -- interest
rates, terms, conditions, covenants, liens, etc.
- Establish debt-to-equity levels.
Budget expected costs and returns of various alternatives.
- Estimate expected costs and revenue.
- Estimate the profit margin and expected net profit.
- Estimate the sales or usage needed to break-even.
- Estimate the returns under various production, price and sales
levels. This may involve identifying "best case", "typical", and "worst
case" scenarios or more sophisticated analysis like a Monte Carlo
- Assess the reliability of the underlying assumptions of the
financial analysis (prices, production, efficiencies, market access,
market penetration, etc.)
- Create a benchmark against industry averages and/or competitors
(cost, margin, profits, ROI, etc.).
- Identify limitations or constraints of the economic analysis.
- Determine project expected cash flow during the start-up period.
- Identify project an expected income statement, balance sheet, etc.
when reaching full operation.
- Outline alternative business model(s) (how the business will make
- Identify the proposed legal structure of the business.
- Identify any potential joint venture partners, alliances or other
- Identify availability of skilled and experienced business managers.
- Identify availability of consultants and service providers with the
skills needed to realize the project, including legal, accounting,
industry experts, etc.
- Outline the governance, lines of authority and decision making
- Are the people involved of outstanding character?
- Do the founders have the "fire in the belly" required to take the
project to completion?
- Do the founders have the skills and ability to complete the project?
- What key individuals will lead the project?
- Is there a reward system for the founders? Is it based on business
- Have the founders organized other successful businesses?
The study conclusions contain the information you will use for deciding
whether to proceed with creating the business. The major categories this
section should include are:
- Identify and describe alternative business scenarios and models.
- Compare and contrast the alternatives based on their business
- Compare and contrast the alternatives based on the goals of the
- Outline criteria for decision making among alternatives.
After the feasibility study has been completed and presented, you
should carefully study and analysis the conclusions and underlying
assumptions. Next, you will be faced with deciding which course of action
Potential courses of action include:
- Choosing the most viable business model, developing a business plan
and proceeding with creating and operating a business.
- Identifying additional scenarios for further study.
- Deciding that a viable business opportunity is not available and
moving to end the business assessment process.
- Following another course of action.