How to Conduct Feasibility Study when intending to set up a business, brilliant ideas are not enough to make a business successful. There are various factors to consider. Therefore a business feasibility study needs to be done.
Although it is important to do this, many entrepreneurs often ignore this feasibility study. As a result, some of the efforts made sometimes deadlocked or even went out of business.
However, what exactly is a business feasibility study? What is its role in delivering a business to success?
Definition of Business Feasibility Study
For some lay people or businessmen, a business feasibility study may sound uncommon. In fact, this study plays an important role in determining the success of a business. Therefore, it is better if a novice businessman first understands the ins and outs of this activity.
Based on the Investopedia page, a business feasibility study is an activity carried out to determine whether a business is feasible or not. This activity includes identifying problems, opportunities, setting goals, describing how the business situation is and assessing the various benefits generated.
In relation to business, this study can be used to help entrepreneurs make the right decision. For a beginner, this study is very important because it can prevent business people from losing.
How to Conduct Feasibility Study For Beginner
When going to do this study, there are five areas that will be researched and analyzed. The five fields are:
- market description,
- business Description,
- necessary Technology,
- Details regarding the financial and organizational structure of the business,
- The conclusion of how the business that was started can move forward.
Pre Feasibility Study Stage
Is the stage of determining business candidates that need to be considered for implementation. Some of the things that need to be considered in determining the need for a feasibility study include:
- Is the business included in a potential sector?
- Is the market for the sector not saturated?
- Does the business not conflict with government policies?
- Is the overall business profitable?
Conducting a pre-feasibility study and understanding the rules How to Conduct Feasibility Study by examining the extent to which the prospective businesses can be implemented according to technical, institutional, social and external aspects, as follows:
Technical aspects: Technical aspects include production factors that affect business and marketing results. Production factors are:
- Ease of access to business locations.
- Availability of road infrastructure, water, electricity, fuel.
- Availability of raw materials and auxiliary materials.
- Availability of manpower both in quality and quantity.
- Potential product sales and profits generated.
- Target market and warehousing and transportation facilities.
Before continue to the other steps please understand How to Conduct Feasibility Study and preparing the technical aspects are reflected in the benefit cost ratio analysis, but with the analysis of the factors described above, it can already be considered whether this project should be rejected or further studies can be carried out.
The institutional aspect includes two things, namely government organizations and society.
- From the government’s point of view: Are there any policies that impede or expedite project development and operational activities, for example permits for business use rights, building permits and permits for the use of labor (foreigners, women, children).
- In terms of society: How the reaction of the surrounding community, social and labor organizations can hinder or facilitate the development and operational activities of the project.
The institutional aspect is not reflected in prices, therefore it cannot be analyzed in terms of benefit costs. However, the problems described can be a consideration for this business to be rejected or the feasibility study continued.
In this article we will guide you how to Conduct Feasibility Study step by step.
Besides aiming to meet the community’s need for a particular product before that learn more how to Conduct Feasibility Study, business establishment also has social objectives as reflected in the absorption of labor and distribution of income.
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Externality aspects are indirect results and side effects of projects that can have positive effects (provide additional benefits) or negative effects (result in community losses). For example, the establishment of a chicken slaughtering business in a residential area has a positive effect on employment and income distribution for the community, but at the same time has a negative effect due to air and water pollution and disease in the surrounding community. After considering these aspects, it can be determined whether or not a feasibility study is necessary.
Feasibility Study Stage
The end result of conducting a research to determine the level of feasibility of a business plan, must be taken through the stages of continuous activity, and follow the way how to Conduct Feasibility Study as follows:
- Preparatory stage.
- Stages of data collection (primary and secondary).
- Stages of processing and data analysis.
- Report preparation stages.
Types of Feasibility Study
- Technical Feasibility: Consists in determining if your organization has the technical resources and expertise to meet the project requirements.
- Economic Feasibility: You’ll need to do an assessment of the economic factors of your project to determine its financial viability. You can use a cost-benefit analysis to compare its financial costs against its projected benefits.
- Legal Feasibility: Your project must meet legal requirements. That includes laws and regulations that apply to all activities and deliverables in your project scope.
- Operational Feasibility: Operational feasibility refers to how well your project matches your organization’s capacity planning, resources, strategic goals and business objectives.
- Time Feasibility: Estimate the time that will take to execute the project and set deadlines. Then think how your project timeline fits with your current operations, such as your demand planning, production schedule, among many other things.