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Steps to prepare a feasibility study for your project from scratch
Preparing a feasibility study for your project from scratch, which includes five main steps:
Perform the initial analysis
Outline mode
Conduct market survey/research
Calculation of financial cost and expected revenue
Review and analyze results
1. Perform the initial analysis
This is the first and essential step in preparing a feasibility study for your project from scratch. In this step, you define your project idea, its objectives, and its benefits, and evaluate whether your project solves a problem or meets a need in the market. You also define the targets of your project, whether they are clients, partners, investors, or others.
In this step, you should ask yourself some important questions such as:
What is my project idea?
What are my project goals?
What is the benefit of my project?
What problem does my project solve?
What need does my project meet?
Who are the beneficiaries of my project?
How will I provide my project services or products?
How will I share my project success story?
Answering these questions helps you define your project's concept, vision, and mission, and gives you a general idea of what you want to achieve through your project.
2. Develop an outline
After you have identified your project idea and objectives, you must develop a detailed outline for your project. This diagram contains all the main aspects that affect the success of your project, such as:
Technical feasibility: This part determines the technical feasibility of your project, and is based on evaluating the technical resources available to you, estimating whether they are suitable for production capacity, determining the size of production, machinery and equipment, determining the required manpower for management, and whether the technical team is able to convert ideas into systems a job.
Marketing feasibility: This part determines the feasibility of your project in terms of marketing, and is based on analyzing the market, competition, demand and supply, identifying the market opportunity and the gap that your project fills, identifying target consumers, their needs and expectations, determining the marketing strategy, promotion, distribution and prices for your project.
Financial feasibility: This part determines the financial feasibility of your project, and is based on calculating the direct and indirect costs of the project, identifying sources of funding and expected revenues for the project, preparing financial statements such as the income statement and balance sheet, and evaluating the project’s profitability and interest.
Legal feasibility: This part determines the legal feasibility of your project, and is based on studying the laws, regulations, and taxes applicable to your project activity, determining the legal form of the project (individual, partnership, or company), specifying the documents and permits required to establish and register your project.
3. Conduct market survey/research
Market survey or research is the process of collecting and analyzing information about the target market, competitors, customers, suppliers, trends, opportunities and challenges in the market. This process helps you understand what customers want and need from your project, how you can provide them with added value, how you can outperform competitors, and how you can set appropriate prices for your services or products.
To conduct a survey or market research, you may use one or all of the following methods:
Secondary survey: It is the use of available external sources to gather information about the market, such as reports, statistics, studies and previous research related to your project or the sector in which you are active. This survey helps you to benefit from reliable and comprehensive data collected by specialized agencies, and to save time, effort and cost in collecting information on your own. You can use the Bing search engine to search for these resources with ease.
Primary survey: Gathering information about the market yourself, such as questionnaires, interviews, focus groups, tests, and observations. This survey helps you obtain up-to-date, specific information tailored to your project, understand the opinion, satisfaction and behavior of current or potential customers, and identify the strengths and weaknesses of your project and competitors. You can use tools like Google Forms or SurveyMonkey to easily create and distribute surveys.
4. Calculating the financial cost and expected revenue
This is an important step in preparing a feasibility study for your project from scratch. In this step, you calculate the financial costs related to establishing and operating your project, and the expected revenues from selling your services or products. This step helps you determine whether your project is able to achieve profitability and benefit, and what is the break-even point at which your project begins to generate profits.
To calculate financial costs, you must take into account both the direct and indirect costs of the project, such as:
Direct costs: are costs that change proportionately to the volume of production or service, such as the cost of raw materials, wages, taxes and fees.
Indirect costs: These are the costs that do not change significantly with the volume of production or service, such as the cost of rent, maintenance, insurance and administration.
To calculate projected revenue, you need to take into account both fixed and variable revenue for the project, such as:
Fixed Revenue: Revenue you receive from fixed or periodic sources, such as subscription fees, subsidies, or donations.
Variable revenue: This is the revenue you receive from variable or non-cyclical sources, such as selling your services or products.
5. Review and analyze the results
This is the final step in preparing a feasibility study for your project from scratch. In this step, you review and analyze all the results obtained from previous steps, and draw conclusions and recommendations about the feasibility and success of your project. This step helps you make a final decision on your project, and determine the next steps to implement it.
To review and analyze your results, you can use one or both of the following methods:
SWOT analysis: It is the analysis of the strengths, weaknesses, opportunities and threats associated with your project, and determining what distinguishes your project from competitors, and what needs improvement or change in your project.
PESTEL analysis: is the analysis of the political, economic, social, technical, environmental and legal factors that affect
your project, and identify what could benefit or harm your project in the future.
BCG Analysis: It is a growth-share matrix analysis that ranks your business' products or services according to their market share and growth rate, and determines what could be a star, question, cow, or dog in your business.
Practical tips and examples for preparing a feasibility study for your project from scratch
In addition to the steps for preparing a feasibility study for your project from scratch, there are some tips and practical examples that can help you complete this process better, such as:
Be realistic and objective in evaluating your project idea, and do not be affected by emotions or excessive optimism.
Make your feasibility study simple, understandable, and structured, and don't use complicated or imprecise language.
Use numbers and data to support your project idea, and don't base it on assumptions or guesswork.
Ask for the opinion of experts or consultants in the field of your project, and do not ignore the opinions of others or feedback.
Look for feasibility studies for projects similar to yours, and don't reinvent the wheel.
6. Calculating the financial cost and expected revenue
This is an important step in preparing a feasibility study for your project from scratch. In this step, you calculate the financial cost of establishing and operating your project, and the expected revenue from selling your services or products. These calculations help you determine how profitable your project is, and whether it is worth the investment or not.
To calculate the financial cost of your project, you must include all the direct and indirect costs that you incur for establishing and operating your project, such as:
Construction costs: They are the costs you incur to establish your project, such as buying or renting land, building or shop, purchasing or renting machinery, equipment, furniture and devices, paying permits, licenses and taxes fees, paying consulting and expert fees, paying design, decoration and advertising fees.
Operating costs: They are the costs you incur to operate your project, such as paying the salaries of workers, managers, accountants and others, paying water, electricity, internet and telephone bills, paying maintenance, repair and renewal costs, paying raw materials, suppliers or inventory costs, paying marketing, promotion and distribution costs.
To calculate the expected revenue from your project, you must include all the revenue you get from selling your services or products, such as:
Sales Revenue: This is the revenue you get from selling your services or products to customers. You can calculate this revenue by multiplying the price of the service or product by the number of units sold in a specific time period.
Other revenue: It is the revenue that you get from sources other than sales, such as paying subscription fees, membership, loan, rental or investment.
7. Review and analyze the results
This is the final step in preparing a feasibility study for your project from scratch. In this step, you review and analyze the results obtained from the previous steps, and evaluate the feasibility and success of your project. This step helps you to make a final decision about your project, and define a clear action plan for its implementation.
To review and analyze the results, you should use some financial and statistical indicators and tools, such as:
Profitability ratio: It is a ratio that measures the profitability of your project, and is calculated by dividing the net profit by the total revenue. The higher this percentage, the more profitable your project will be.
Break-even point: It is a point that measures the ability of your project to cover financial costs, and is calculated by dividing the total fixed costs by the profit margin per unit. This point represents the number of units that must be sold to make zero profit or loss. The lower this point, the less risky your project.
Capital Payback Period: It is a period that measures how quickly you can recover the capital invested in your project, and is calculated by dividing the total invested capital by the net annual revenues. This period represents the number of years it takes for your project to recover the invested capital. The shorter this period, the more attractive your project will be.
Net present value: It is a value that measures the value of your project at the present time, and is calculated by adding the value of all future cash flows of the project after deducting the value of the capital invested in it. This value represents the net benefit of your project. The higher this value, the more investable your project will be.
Feasibility Index: It is an indicator that compares the value of all future cash flows of the project and the value of the capital invested in it. This indicator is calculated by dividing the net present value by the value of the invested capital. This indicator represents the rate of return of your project. The higher this indicator is than 1, the more feasible your project.
After you have calculated these indicators and tools, you should compare them with the criteria and goals that you set for your project in the previous steps, and see if they are compatible with them or not. If your results are positive and encouraging, this means that your project is worthy of investment and implementation. If your results are negative or unsatisfactory, this means that your project is not worth the investment or needs modifications or improvements.
Some of the skills required to enter the field of feasibility study
The field of feasibility study is a field concerned with evaluating the feasibility and success of a project or investment idea before starting its implementation. This field uses scientific and practical methods and tools to collect and analyze information related to the technical, marketing, financial, legal and environmental aspects of the project, and to identify opportunities, risks and challenges in the market. This field helps decision makers to make a final decision about their project, and to define a clear plan of action for its implementation.
The field of feasibility study requires skills and experience in different fields, such as:
Management and planning: to define the objectives and vision of the project, develop a detailed project plan, and manage human, material and time resources.
Research and analysis: To conduct a survey or market research, analyze the collected data, and use financial and statistical indicators and tools to assess the feasibility of the project.
Marketing and selling: to identify the market opportunity and the gap that the project fills, identify the target consumers, their needs and expectations, and challenge
d Marketing, promotion, distribution and pricing strategy for the project.
Technology: To determine the fixed assets needed by the project, and to estimate whether they are suitable for production capacity, to determine the volume of production, machinery and equipment, to determine the required manpower for management, and if the technical team is able to convert ideas into work systems.
Law: To study the laws, regulations, and taxes applicable to the project's activity, to determine the legal form of the project (individual, partnership, or company), to specify the documents and permits required for the establishment and registration of the project.
If you want to learn more about the field of feasibility study, you can read some of the following resources:
1: This resource explains what a feasibility study is in a simple and easy way, and mentions the steps for preparing a complete feasibility study for any commercial or investment project.
2: This resource explains the meaning of the feasibility study, its importance, components and steps, and provides practical examples of the feasibility study for some projects.
3: This source introduces you to what a feasibility study is and the purpose of its work, and explains to you how to carry out a feasibility study yourself in an easy and simple way.
I will conclude the article with some tips and recommendations to improve the quality and effectiveness of the feasibility study, namely:
Keep the feasibility study realistic and objective: Don't overestimate revenues, underestimate costs, or ignore risks or challenges. Make the feasibility study reflect accurate and reliable facts and figures, and be based on updated data and from approved sources.
Make the feasibility study flexible and subject to change: do not stick to your project idea or business plan without being ready to change or improve it according to changes that may occur in the market or in external conditions. Have the feasibility study include alternative or backup plans in case of any problems or difficulties.
Keep the feasibility study simple and organized: Do not make the feasibility study complex, vague, or crowded with technical or financial terms. Make the feasibility study easy to understand, read, and present, and use formats, graphics, tables, and charts to simplify and clarify the information.
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