What is a Feasibility Study?
First, it is an integral part of developing a new business. An independent
feasibility study evaluates the project’s potential for success and reduces
risk. A careful study will show how a business can operate under a given set of
assumptions, and show project-specific sensitivity to the market place.
Second, a proper feasibility study presents independent third party conclusions based upon study findings that may be either positive or negative. Lenders frequently require an independent feasibility study before providing loans.
Feasibility studies contain certain standard technical and financial components. Typical studies contain an evaluation of financial and economic realities of the project, market potential, management factors for success, and technical and construction considerations.
Why Should You Prepare One?
Developing any new business venture is difficult
and frequently involves considerable financial risk. Lack of experience in a new
business venture increases that risk. Before investing in a proposed business
project, owners must determine if it can be economically viable and if
investment advantages outweigh disadvantages.
A feasibility study is called for to preview potential project outcomes and allow the leader to decide whether or not to continue. Although the costs of conducting a study may appear high initially, they are relatively minor when compared with total project costs and the risk of failure. The small initial expenditure on a feasibility study can help protect larger capital investments.
The objectivity of the independent evaluation is an important factor in the credibility of the study by potential investors and financiers. For this reason, independent third parties conduct most feasibility studies.
RCI-Rural Community Innovations
South Dakota Office:
1410 Dakota Ave. South, Huron SD 57350
605.352.6761
Montana Office:
210 Cirque Drive
Bozeman MT 59718
406.587.0783
e-mail: results@rci-usa.org