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February 9, 2020, 1:34 pm 32

The Importance of feasibility study for a Business Venture

Many business organisations have failed to achieve their objective because they do not begin or understand the implications of conducting a Market feasibility study. This blog analyzes the effect of feasibility analysis on project and organizational performance. It equally tries to determine the reasons and causes of project failures irrespective of conducting feasibility studies on such projects.

I have referred to a study published in the International Journal of Research in Social Sciences for this article. The study was done by 2 PhD scholars Achilike .I. Nicholas Ph.D (Department of Accountancy, Business Administration and Banking and Fianance, Federal University Ndufu-Alike Ikwo, Nigeria) and Akuwudike Hilary Chinedum Ph.D (Department of Management Hezekiah University, Umudi Nkwerre Imo State Nigeria).

The business world is dynamic and the business strategies that are applicable today may quickly change within a few months. Irrespective of the size of the organization, the management needs to keep pace with the changing dynamics and always refer back to the plans as laid down in the study.

Getting customers in the door, encouraging them to spend and ultimately generating a profit are basic objectives that can at times seem difficult to achieve. A Feasibility study report provides answers to questions that help the organization to assess potential and predict the likelihood of success and failure. As the name implies, a feasibility study is an analysis of the viability of an idea. It focuses on helping answer the essential question of ―should we proceed with the proposed idea.

The key reasons why a feasibility study should be conducted are given in the table below. The reasons provided are in ascending order of Relative Importance Index (R.I.I.)

#

Responses

R.I.I

1.

To determine the viability and profitability of the business venture

0.838

2.

To establish and prove to the lenders and investors the existence of the market for the business.

0.827

3.

To identify the flaws, business challenges, strengths, weaknesses, opportunities, threats and unforeseen circumstances that might affect the success and sustainability of the business venture.

0.759

4.

To estimate the financial, human and technological resources that will be needed to ensure the successful launching of the business.

0.857

5.

To estimate the financial, human and technological resources that will be needed to ensure the successful launching of the business.

0.872

6.

To estimate the amount of competition expected in the market place with a view of weighing the chances of success.

0.763

7.

It helps in the preparation of business plan.

0.807

8.

It helps in the development of new products, processes, models, experiences or services.

0.804


There is another very important aspect where even though a feasibility analysis was conducted, the business still failed to take off. The reasons that are sighted for such a scenario are elaborated in the table below.

#

Responses

R.I.I

1.

Sheer Incompetence

0.872

2.

Down Right Dishonesty

0.882

3.

Changes in Legislation

0.710

4.

Demographic Shifts

0.695

5.

Inability to recruit and/or keep suitable staff

0.879

6.

Unexpected events such as flood, fire and burglary

0.732


Now, since we have some idea of the importance of a Feasibility study as well as the reasons why a business can fail even when a Feasibility study has been conducted, I think now it is a good time to know what exactly a business Feasibility Study should include. There are 3 sections in which a Feasibility study is divided. The 3 sections and the structure within each of these sections is provided in the table below. The structure essentially covers all aspect of the business. In the current form, it is suitable for any online business but it can be tweaked slightly to apply it for any online or offline business.

#

Parameters

Ranking ( 1 -10)

1.

Business

Ex. Summary

 

 

Products

 

 

Market Scenarios

 

 

Comparative Analysis

 

 

Risk Analysis

 

 

Marketing Strategy

 

 

Organizational Structure

 

 

Legislations Applicable

 

 

Success Strategies

 

 

 

2.

Technical Section

Tools and Technologies

 

 

Architecture

 

 

UX

 

 

Security

 

 

 

3.

Commercial Section

 

 

 

Cost of tools

 

 

Cost of Development

 

 

Operational Expenses

 

 

Financial Forecasts

4.

Appendix

 

Finally, I will list down the points on the key findings that one can derive from a Feasibility Study.

  • It helps to determine the amount of capital to start a business, estimation of the financial, human and technological resources that will be needed to ensure successful launching of a business.
  • The determination of the viability and profitability of a business venture were attributed as critical factors for conducting feasibility studies.
  • It was also found out that conducting feasibility studies aid management in decision making.
  • It was equally discovered that the conduct of feasibility studies to a very positive extent improves organizational performance. This is because, it enables the organization identify the flaws, challenges, strengths, weaknesses, opportunities, threats and unforeseen circumstances that might affect the organization with a view to avoiding such problems.
  • The conduct of feasibility studies and passing feasibility test should not be seen as a guarantee to business success. Inability to recruit/keep suitable staff, down-right dishonesty and sheer incompetence equally contributes to business failure.

Connect with us at info@intelligentq.co.in if you have a requirement to develop a feasibility study for your venture. 


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