What are the 5 essential steps to conduct a feasibility study?

A feasibility study is a fundamental process that helps organizations determine whether a project is viable before investing significant time and resources. This structured evaluation assesses multiple factors such as technical feasibility, financial feasibility, and market potential to minimize risks and increase the chances of success.

For professionals managing complex projects, mastering feasibility analysis is critical. The Master in Project Management provides essential skills in project evaluation, strategic planning, and risk management, helping leaders navigate feasibility studies with confidence.

Main features of a feasibility study

A feasibility study serves as a roadmap for decision-making, ensuring that a project is not only theoretically possible but also practical and profitable.

Definition and purpose

A feasibility study is a systematic evaluation of a project's potential for success. It analyzes technical, economic, legal, and operational factors to provide a comprehensive picture of whether a project is worth pursuing. Its main objectives include:

• Identifying potential obstacles before significant investment
• Assessing the project's alignment with strategic goals
• Ensuring resources are used efficiently
• Providing stakeholders with data-driven insights for decision-making

Key components

A well-structured feasibility study typically includes the following elements:

1. Project Description: a clear overview of the project's scope, objectives, and expected outcomes.
2. Market Analysis: research on industry trends, target audience, demand, and competitive landscape.
3. Technical Feasibility: assessment of technological requirements, resource availability, and infrastructure needs.
4. Financial Feasibility: cost estimates, revenue projections, funding sources, and return on investment (ROI).
5. Risk Assessment: identification of potential risks and mitigation strategies.
6. Legal and Regulatory Considerations: compliance with industry regulations and local laws.

How do I know if a project is feasible or not?

Determining a project's feasibility involves evaluating multiple factors.

Critical indicators of feasibility

A project is considered feasible if it meets the following key criteria:

• Financial viability: it demonstrates strong financial projections and a positive ROI.
• Technical capability: the necessary technology and expertise are available to execute it successfully.
• Market demand: there is sufficient demand for the product or service being developed.
• Operational efficiency: the organization has the required workforce, resources, and logistics to implement it.
• Regulatory compliance: it adheres to relevant legal and environmental standards.

Common red flags

If a project exhibits any of the following warning signs, it may not be feasible:

• Unrealistic financial expectations: overly optimistic revenue projections without solid data.
• Lack of market demand: weak customer interest or a saturated market.
• High operational costs: expenses outweigh potential profits, making sustainability difficult.
• Regulatory barriers: strict legal requirements that could hinder implementation.
• Technical limitations: the required technology or expertise is unavailable or too expensive.

By conducting a feasibility study, businesses can make well-informed decisions and reduce the risk of project failure. In the next section, we will explore different types of feasibility studies and the five essential steps to conducting a successful evaluation.

Types of feasibility studies

A feasibility study is a multi-faceted analysis, and different types focus on specific aspects of a project. Below are the three primary types that help assess viability.

Technical feasibility

Technical feasibility evaluates whether a project is technologically possible with the available resources. It considers:

• Required technology: does it require advanced or existing technology?
• Infrastructure and resources: are the necessary tools, equipment, and facilities available?
• Expertise and skills: does the team have the required technical knowledge?
• Development timeline: can it be completed within the expected timeframe?

For instance, in the software industry, a company developing a new app must ensure they have the right development team and computing infrastructure.

Financial feasibility

Financial feasibility determines whether a project is economically viable by analyzing costs, revenue potential, and funding options. It includes:

• Initial investment: estimating startup costs, including infrastructure and staffing.
• Revenue projections: forecasting potential earnings based on market demand.
• Break-even analysis: calculating the point where the project starts generating profit.
• Funding sources: identifying possible investors, loans, or internal financing options.

A real estate company, for example, would analyze property acquisition costs, construction expenses, and expected rental income before investing in a development.

Commercial feasibility

Commercial feasibility assesses the market potential of a project, focusing on demand, competition, and pricing strategies. It includes:

• Target market analysis: identifying customer needs and behaviors.
• Competitive landscape: evaluating industry competitors and differentiators.
• Sales potential: estimating how many units or services can be sold.
• Marketing strategies: planning promotional efforts to maximize reach.

For example, an electric vehicle (EV) startup would need to study consumer interest, charging infrastructure availability, and government incentives before launching a new model.

5 steps to conduct a feasibility study

Conducting a feasibility study requires a structured approach to ensure all critical aspects are analyzed. Below are the five essential steps.

Step 1 - Define project scope and objectives

Start by outlining the scope, goals, and purpose of the project. The key questions to address are:

• What is the primary objective of the project?
• Who are the stakeholders involved?
• What are the expected deliverables?
• What is the estimated timeline?

Clearly defining these elements ensures alignment among all stakeholders.

Step 2 - Conduct preliminary analysis

Before committing extensive resources, perform an initial assessment to identify any major roadblocks or opportunities. This involves:

• Studying market trends and demand.
• Identifying potential risks and constraints.
• Analyzing competitors and industry benchmarks.

If the preliminary analysis reveals significant challenges or low market interest, the project may need to be reconsidered.

Step 3 - Assess different feasibility aspects

Perform in-depth evaluations of technical, financial and commercial feasibility, as outlined in the previous section. This step ensures that all aspects are quantified and validated with data.

Step 4 - Conduct a cost-benefit analysis

Compare the potential benefits against the expected costs. This involves:

• Calculating projected profits vs. operational expenses.
• Assessing intangible benefits (brand reputation, long-term growth).
• Determining if the investment risk is acceptable.

Step 5 - Evaluate and make a decision

Compile all findings into a final feasibility report and present recommendations. The decision options are:

• Proceed: the project is viable and should move forward.
• Modify: adjustments are needed to improve feasibility.
• Abandon: the project is not feasible and should not continue.

A well-executed feasibility study prevents costly mistakes and maximizes success rates.

Feasibility study: examples by sector

Feasibility studies apply to various industries, helping businesses avoid costly mistakes. Below are two real-world examples.

Real estate

A real estate developer considering a luxury apartment complex must assess demand, location suitability, and regulatory requirements. This involves studying population growth, local economic conditions, and zoning laws. If the study finds strong demand and favorable financial projections, the developer can confidently proceed.

However, if findings suggest limited buyer interest, the project might require reconfiguration—such as targeting a different demographic or adjusting pricing strategies.

Renewable energies

A company exploring a solar energy farm needs to evaluate sunlight availability, estimate installation costs, and analyze potential government incentives, among other factors. Additionally, the study must determine whether local energy providers are willing to purchase electricity at competitive rates. If all conditions align favorably, the company can move forward, securing funding and finalizing permits before construction.