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What is the difference between a strategic plan and an operational plan.
A strategic plan outlines the long-term vision, mission, and goals of an organization, focusing on growth and direction over several years.
In contrast, an operational plan details the short-term tasks, processes, and resource allocation needed to achieve those strategic goals, emphasizing day-to-day efficiency and productivity.
The operations plan defines the clear goals of your business and what actions will be taken daily to reach them. So, investors need to know where your business stands and it will prove the viability of the goals helping you in getting funded.
Some of the factors that affect the operations plan are:
Yes, both a startup and a small business need an operations plan to get a better idea of the roadmap they want for their business.
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Last Updated : 12/17/2023
Before investing in a project, you need to conduct a complete analysis of factors that may affect it. Aspects, such as economic, technical, and legal, affect projects differently. As a project manager, you need to evaluate them before you invest. The success of your project depends on how you prepare your feasibility study.
In this guide, you will get insights about the feasibility study, the components of the study, the multiple questions, and reliable tips on how to conduct and prepare a feasibility study.
From its term, a feasibility study is an assessment carried out to check on the viability of a proposed idea or project. The project manager typically carries out the exercise before beginning any other phase, to check on the likelihood of the project performance.
It highlights the project’s fundamental goals, the shortcomings of the project, and its alternative solutions. Besides that, a feasibility study outlines the crucial factors of legal, economic, cost, and time requirements for the project to ensure its success.
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Perform a preliminary project analysis.
The phase typically outlines your plan and focuses on the demand than the supply of the proposed product or service. You are then required to weigh the possibility of the success of the project.
You need to establish a complete income statement that will estimate both the project’s returns and the investment needed to achieve the project goals. The income statement accounts for the planned services, its costs, and other revenue adjustments.
Good market research is a vital key to the proposed project’s success. It provides you an opportunity to study your market and its responsiveness, its demographic factors, and the competitors involved. The research will also map a clear picture of the realistic revenues to expect from a project.
Upon completing the previous steps, it is advisable to lay out the plans for the project operations. It would be best if you did it thoroughly; outline the operation and startup costs, and the fixed investments. It focuses on things including real estate and overheads.
A concise, balanced sheet composes of assets and liabilities estimates of the project. It needs to be more accurate for a better cost overview. You may incur liabilities such as leasing a building and a land property or paying for assets and account receivables.
The review and analysis of data is the most crucial step in determining the viability of your project. You may analyze the market research data to ascertain your product’s level of demand or review the competition. You can also re-examine the steps involving the financial statements to ensure accurate estimates for your project.
It is the final step involved during a feasibility study. The previous steps will determine if the project is feasible enough for the organization. The decision you make should be worthwhile the time and money the organization spends on the project.
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You might consider the below standard components when conducting or preparing a feasibility study for your project.
You need to develop a piece of descriptive information concerning the proposed project, its products, services, and business plan.
Check for the things you may need for the project. You may acquire the technical requirements you need for the project, considering the organization’s budget.
It would be best to study the already existing market for the business plan or the proposed project’s products and services.
You will provide in detail the strategies used for project marketing. It may span from social media marketing to search engine optimization techniques.
It involves outlining the organizational structure and identifying the human needs required to help the project achieve its goals and objectives.
Project schedule and duration that states the interim expiry dates for the project. It will help you in operating the project within the estimated project time frame.
It includes the balance sheet and profit and loss statements, which map the project’s overview costs. The project profits must outweigh the expenses. An in-depth cost-benefit analysis will give you some clear insights into the financial resources for the project.
It evaluates the various categories involved in the project and assists in making significant decisions for its goodwill.
Feasibility study comes with an array of questions that managers and team leaders use to understand, implement, and execute whether the laid feasibility strategies are constructive. The piece describes some of the most critical questions that should be appropriately comprehended to succeed in a project proposal.
Do we have adequate technical resources to make this project achievable enough? Does the company have accurate resources to achieve the planned output? The questions are essential to analyze, compile, and summarize the technical resources needed to achieve the best in a particular project proposal.
Proposed projects have goals that include building a successful high-quality product targeted to solve a particular existing problem. The operational feasibility study weighs whether the proposed project in question achieves its objective in solving a particular problem, whether the upcoming project will be highly manageable, reliable, efficient, and matches all its necessary operations.
Adhering to the famous phrase that goes by, failing to plan is planning to fail, proposed projects highly call for extensive budgeting. Every project component will require a specific amount of finance to plan, build, and execute the project component. Economic feasibility generally entails budgeting for the proposed project, the number of profits outputs in the project, the level of investment terms, and any other relevant money matter. Be sure to appropriately and correctly analyze whether the upcoming project will be highly profitable and good enough. Profits making, investments, and growth have always been the most desired positive consequences.
Planning also involves accounting for a specific, definite time to complete the specified proposed project. Structurally plan how long the design work should take, analyzing its financial matters, group collaboration, actual deadlines, etc. Setting definite periods creates focus and determination to make the project highly accurate and useful.
Does the proposed project comply with the existing government policies, measures, or any other relevant terms? Adhering to the existing government laws ensures that the proposed product service is valid and efficient to its future users in general.
With a clear overview and understanding of some of the crucial questions on conducting a feasibility study, the next step dictates starting and implementing some of the best strategies which put the proposal idea in its inception stage. The below tips involve making it to a successful feasibility study that gives companies, groups, and individuals to start and excel in conducting a feasibility study.
Conducting a preliminary study exposes a potential individual or group to the actual atmosphere in which their proposed project belongs. The preliminary analysis enhances planning for the upcoming project, studying any related products, seeking any challenges likely to be experienced by the product, etc. Preliminary is essential for preparation, which is an ideal, move in making and achieving the desired product goals.
Data reviewing and manipulation is significant entirely for contingency planning. Comparing the set of data values achieved in the project activities confirms the efficiency, accuracy, and validity of the proposed project in question. The relevant and accurate data makes it possible to create a visualization of the project components, which aid in planning, commencing the project, and creating efficient decisions that are highly significant.
Relevant business documents carry out specific business purposes to achieve specific objectives. For instance, the balance sheet document outlines data, computes, and compares whether assets and liabilities are accurately equivalent to capital.
Conducting market research is an essential technique that familiarizes a potential producer to the existing market, exposes one to the potential risks, educates the market, and helps understand the consumers, etc. With excellent and extensive exposure to the market, the producer studies and implements realistic goals which are likely to be achievable in the existing market. Market research promotes preparedness and initiates higher chances of a particular project proposal in the future market.
The right amount of positive energy boosts motivation and is simply one step behind achieving the intended objective. Be sure to be passionate and optimistic in planning, implementing, and succeeding in executing the proposed project. A positive atmosphere also builds a tremendous amount of courage to always continue despite high and low business times.
Feasibility study entails analyzing factors that may affect the successful implementation of your project. As a project manager, you should audit the economic, legal, and technological factors before you make any investment. To prepare a feasibility study, you need to understand its components and the steps involved.
The components need to be correctly analyzed, implemented, and appropriately exercised to achieve more remarkable outcomes. It would be best to comprehend and exercise the best tips and methodologies when preparing and conducting your project’s feasibility study. Before you invest, take time and examine the viability of the project to confirm whether it will be successful.
Q: Should I hire external consultants to conduct the feasibility study?
A: It can sometime help to get an objective third-party perspective, but it is important the consultant has experience in your industry. Consultants with expertise in market analysis, financial modeling, and your sector can provide valuable insights. Yet — balance the costs versus value added.
Q: What if the feasibility study shows the project is not viable — then what?
A: Don’t despair. The study findings help you understand what factors need to change to make the project viable. You can use this information to asses and make adjustments to the business model or project until it demonstrates stronger feasibility.
Q: How frequently should feasibility studies be updated?
A: For larger, long-term projects it’s wise to redo the feasibility study every 6–12 months. Market conditions change, so regular updates let you adjust course as needed.
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What is a feasibility study, understanding a feasibility study, types of feasibility study, importance of feasibility study, benefits of a feasibility study, what is included in a feasibility study report, tools for conducting a feasibility study, examples of a feasibility study, what is the purpose of a feasibility study, how do you write a feasibility study, 7 steps to do a feasibility study, how to conduct a feasibility study, feasibility study vs. business plan, reasons to do or not to do a feasibility study, enroll today with these pgp on project management to enhance your skills, what is a feasibility study a comprehensive guide.
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The growth and recognition of project management training have changed significantly over the past few years, and these changes are expected to continue and expand. And with the rise of project management comes the need for a feasibility study.
It can be thrilling to start a complex, large-scale project with a significant impact on your company. You are creating real change. Failure can be scary. This article will help you get started if you have never done a feasibility study on project management.
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A feasibility study is a comprehensive evaluation of a proposed project that evaluates all factors critical to its success in order to assess its likelihood of success. Business success can be defined primarily in terms of ROI, which is the amount of profits that will be generated by the project.
A feasibility study evaluates a project's or system's practicality. As part of a feasibility study, the objective and rational analysis of a potential business or venture is conducted to determine its strengths and weaknesses, potential opportunities and threats, resources required to carry out, and ultimate success prospects. Two criteria should be considered when judging feasibility: the required cost and expected value.
As the name implies, a feasibility analysis is used to determine the viability of an idea, such as ensuring a project is legally and technically feasible as well as economically justifiable. It tells us whether a project is worth the investment—in some cases, a project may not be doable. There can be many reasons for this, including requiring too many resources, which not only prevents those resources from performing other tasks but also may cost more than an organization would earn back by taking on a project that isn’t profitable.
A well-designed study should offer a historical background of the business or project, such as a description of the product or service, accounting statements, details of operations and management, marketing research and policies, financial data, legal requirements, and tax obligations. Generally, such studies precede technical development and project implementation.
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Project management is the process of planning, organizing, and managing resources to bring about the successful completion of specific project goals and objectives. A feasibility study is a preliminary exploration of a proposed project or undertaking to determine its merits and viability. A feasibility study aims to provide an independent assessment that examines all aspects of a proposed project, including technical, economic, financial, legal, and environmental considerations. This information then helps decision-makers determine whether or not to proceed with the project.
The feasibility study results can also be used to create a realistic project plan and budget. Without a feasibility study, it cannot be easy to know whether or not a proposed project is worth pursuing.
A feasibility analysis evaluates the project’s potential for success; therefore, perceived objectivity is an essential factor in the credibility of the study for potential investors and lending institutions. There are five types of feasibility study—separate areas that a feasibility study examines, described below.
This assessment focuses on the technical resources available to the organization. It helps organizations determine whether the technical resources meet capacity and whether the technical team is capable of converting the ideas into working systems. Technical feasibility also involves the evaluation of the hardware, software, and other technical requirements of the proposed system. As an exaggerated example, an organization wouldn’t want to try to put Star Trek’s transporters in their building—currently, this project is not technically feasible.
This assessment typically involves a cost/ benefits analysis of the project, helping organizations determine the viability, cost, and benefits associated with a project before financial resources are allocated. It also serves as an independent project assessment and enhances project credibility—helping decision-makers determine the positive economic benefits to the organization that the proposed project will provide.
This assessment investigates whether any aspect of the proposed project conflicts with legal requirements like zoning laws, data protection acts or social media laws. Let’s say an organization wants to construct a new office building in a specific location. A feasibility study might reveal the organization’s ideal location isn’t zoned for that type of business. That organization has just saved considerable time and effort by learning that their project was not feasible right from the beginning.
This assessment involves undertaking a study to analyze and determine whether—and how well—the organization’s needs can be met by completing the project. Operational feasibility studies also examine how a project plan satisfies the requirements identified in the requirements analysis phase of system development.
This assessment is the most important for project success ; after all, a project will fail if not completed on time. In scheduling feasibility, an organization estimates how much time the project will take to complete.
When these areas have all been examined, the feasibility analysis helps identify any constraints the proposed project may face, including:
The importance of a feasibility study is based on organizational desire to “get it right” before committing resources, time, or budget. A feasibility study might uncover new ideas that could completely change a project’s scope. It’s best to make these determinations in advance, rather than to jump in and to learn that the project won’t work. Conducting a feasibility study is always beneficial to the project as it gives you and other stakeholders a clear picture of the proposed project.
Below are some key benefits of conducting a feasibility study:
Apart from the approaches to feasibility study listed above, some projects also require other constraints to be analyzed -
Preparing a project's feasibility study is an important step that may assist project managers in making informed decisions about whether or not to spend time and money on the endeavor. Feasibility studies may also help a company's management avoid taking on a tricky business endeavor by providing them with critical information.
An additional advantage of doing a feasibility study is that it aids in the creation of new ventures by providing information on factors such as how a company will work, what difficulties it could face, who its competitors are, and how much and where it will get its funding from. These marketing methods are the goal of feasibility studies, which try to persuade financiers and banks whether putting money into a certain company venture makes sense.
When starting a business, one of the most important steps is to conduct a feasibility study. This study will help to determine if your business idea is viable and has the potential to be successful. Several factors need to be considered when conducting a feasibility study, including the marketability of your product or service, the competition, the financial stability of your company, and more. A feasibility study should cover the amount of technology, resources required, and ROI.
The results of your feasibility studies study are summarized in a feasibility report, which typically comprises the following sections.
While every project has its own goals and needs, the following are best practices for conducting a feasibility study.
Here are the some suggested components for conducting a feasibility study:
A local university was concerned about the state of the science building, which was built in the 1970s. School officials sought to determine the costs and benefits of expanding and upgrading the building, given the scientific and technological advances over the past 20 years. A feasibility study was therefore conducted.
School officials looked at several options and weighed the costs and benefits of updating and expanding the science building. There were concerns expressed by school officials about the project's cost and public reaction. The proposed new science building will be larger than the current one. The community board rejected similar proposals in the past. The feasibility study will address these concerns and any possible legal or zoning issues.
The feasibility study examined the technology requirements of the proposed concept(new science building), the potential benefits for students, and its long-term viability. Modernizing the science facility will increase the scientific research potential and ameliorate its modules. It also would allure new students.
Financial projections provided information about the scope & cost of this project and also provided information on raising funds. This covers issuing an investor's bonds and tapping into its endowment. Projections also help determine how the new science program attracts more fresh students to enroll in offered programs, increasing tuition and fees revenue.
The feasibility study proved that the proposed concept was feasible, which allowed for the expansion and modernization of the science building. The feasibility study would not have allowed school administrators to know if the expansion plans were feasible without it.
A feasibility study is an important first step in starting a new business. It is a detailed examination of whether or not a proposed business venture is likely to be successful. A feasibility study aims to provide information that will help business owners make informed decisions about their new venture.
The feasibility study will answer important questions about the proposed business, including:
This feasibility study will outline why your business idea is worth pursuing and will also help you identify any potential risks or problems that could occur. When writing a feasibility study, there are a few key things to keep in mind:
A preliminary investigation is necessary to determine whether a full feasibility study is warranted. During this stage, key information will be gathered to assess the project's potential and make a preliminary decision about its feasibility. This should include a review of relevant documents, interviews with key personnel, and surveys of potential customers or users.
To do a feasibility study, you must create a projected income statement. Your projected income statement will show how much money your business is expected to make in the coming year. It will include both your estimated revenue and your estimated expenses. This document will be essential in helping you make informed decisions about your business.
Conducting market research is an important step in any feasibility study. By understanding the needs and wants of your potential customers, you can determine if there is a market for your product or service. You can also get an idea of what your competition is doing and how to best position your business to meet the needs of your target market.
There are a variety of ways to conduct market research. One popular method is to conduct a survey. You can survey potential customers directly or use data from secondary sources such as surveys conducted by other organizations. You can also use focus groups or interviews to get feedback from potential customers.
Once you have gathered your data, you can use it to create a profile of your ideal customer. This will help you understand your target market and how to reach them.
When starting a business, one of the first things you need is to plan your organization and operations. This involves creating a structure for your company and figuring out the logistics of how you will run it. There are many factors to consider when planning your organization and operations, such as:
The opening day balance sheet is a snapshot of the company's financial position at the beginning of the business venture. The purpose of the opening day balance sheet is to give an idea of the amount of money that the company has to work with and track its expenses and income as they occur. This information is vital to making sound business decisions. The opening day balance sheet will include the following:
The feasibility study should include reviewing and analyzing all data relevant to the proposed project. The data collected should be verified against source documentation, and any discrepancies should be noted. The purpose of the feasibility study is to provide a basis for making a decision, and the data should be sufficient to support that decision.
The analysis should consider both the positive and negative aspects of the proposed project. The financial analysis should be thorough, and all assumptions should be documented. The risk assessment should identify any potential risks and mitigation strategies. The team assigned to the project should review the feasibility study and recommend the organization's leadership.
Organizational leadership should decide whether to proceed with the project based on the feasibility study's findings. If the project is approved, the organization should develop a project plan that includes a detailed budget and timeline
It is important to know when to cut your losses when starting a business. The go/no-go decision in a feasibility study comes in. The go/no-go decision is a key part of a feasibility study, and it can help you determine whether or not your business idea is worth pursuing.
Making the go/no-go decision is all about risk assessment. You need to weigh the risks and rewards of starting your business and decide whether the potential rewards are worth the risks. If the risks are too high, you may want to reconsider your business idea.
Now, let's discuss a few of the steps we take in order to do the feasibility study.
When starting a business, you must create two very important documents: a feasibility study and a business plan. While they may seem similar, they are two different things with different purposes.
A feasibility study is a preliminary document that assesses the feasibility of a proposed business. It looks at the market potential, the competition, the costs and benefits of starting the business, and the risks and rewards involved.
On the other hand, a business plan is a more detailed document that outlines how a business will be run and what its goals are. It includes information about its mission statement, its products and services, its target market, its finances, and its management team.
There are many factors to consider when deciding whether or not to conduct a feasibility study. The most important question is whether the study will help you make a better decision.
Some reasons to do a feasibility study include:
On the other hand, some reasons not to do a feasibility study include:
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This article introduces the concept of a feasibility study and provides a few tips on conducting one. A feasibility study is an important tool for evaluating a project before starting it. By understanding the feasibility of a project, you can make better decisions about whether to move forward.
We hope this helped you understand the concept of feasibility study better. To learn more about similar project management concepts , explore our library of Project Management articles or check out our Post Graduate Program in Project Management that covers new trends, emerging practices, tailoring considerations, and core competencies required of a Project Management professional .
Feasibility study helps decision makers to determine the success or failure of a proposed project or investment. It evaluates the predicted cost and benefits of the proposed project.
The first step in a feasibility study is to conduct the primary analysis and create the projected income statement. Followed by doing a market survey and accordingly planning business operations. The last step is to create a balance sheet to review and analyze data. Based on your analysis, you can decide whether to go or not go ahead with the proposed statement.
Feasibility study is done by the senior management of the organization. Sometimes, they take help from mid-senior employees to complete the analysis in short span of time.
The 5 types of feasibility study are Scheduling Feasibility, Operational Feasibility, Legal Feasibility, Economic Feasibility, and Technical Feasibility.
A feasibility study helps in identifying the financial, market and logistical challenges of a proposed project. It is done by evaluating the estimated funds for the project and return of investment.
The feasibility study is done before the business plan is created.
The objective of feasibility study is to assess the financial viability of developed plan and whether it will be successful or not.
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Welcome to our series of articles on feasibility studies.
In this post, we will touch on all the basic concepts behind a feasibility study. definition, benefits of doing it, main parts, differences with a business plan, etc. Aninver Development Partners is a consulting firm specializing in Feasibility studies for projects such as hotels, infrastructure, energy, technology, etc. We assist clients globally.
A feasibility study is a comprehensive and systematic analysis and evaluation of a proposed project, business venture, or initiative to determine its practicality, viability, and potential for success. It involves a thorough examination of various factors, such as financial, technical, operational, legal, environmental, and market-related aspects, to assess whether the project is feasible and worth pursuing.
The primary goal of a feasibility study is to provide stakeholders with essential information and insights to make informed decisions about whether to proceed with the project, abandon it, or make necessary adjustments to enhance its chances of success.
Feasibility studies and business plans are both important tools in the development and evaluation of a business or project, but they serve different purposes and are created at different stages of the process. Here are the key differences between a feasibility study and a business plan:
In summary, a feasibility study is a preliminary assessment of the potential success of a project, while a business plan is a detailed document that outlines how a business will be run. The feasibility study helps determine whether a business plan should be developed, while the business plan provides a comprehensive strategy for the ongoing operation and growth of the business.
Let's explore now the key differences between a prefeasibility study and a feasibility study:
Purpose and Scope : A prefeasibility study and a feasibility study both play critical roles in project evaluation, but they serve distinct purposes. A prefeasibility study is typically the initial phase in the assessment process. Its primary purpose is to provide a preliminary evaluation of a project's potential viability. It helps stakeholders decide whether it's worth investing further resources into a detailed feasibility study. In contrast, a feasibility study goes into much greater depth and detail, assessing the project's practicality from technical, financial, operational, and market perspectives. It aims to provide a comprehensive understanding of whether the project is feasible and worth pursuing.
Level of Detail : One of the key distinctions between the two studies is the level of detail they encompass. A prefeasibility study offers a broad overview of the project, examining high-level factors like market demand, technical requirements, and rough cost estimates. It provides enough information to make an initial go/no-go decision. In contrast, a feasibility study drills down into finer details, providing precise financial projections, risk assessments, engineering specifics, and a comprehensive business plan. It seeks to leave no stone unturned in assessing the project's practicality.
Resource and Cost Implications : A prefeasibility study is generally less resource-intensive and cheaper to conduct compared to a full feasibility study. It acts as a cost-effective filter to eliminate unviable projects early in the evaluation process. Once a project passes the prefeasibility stage and proceeds to a feasibility study, it implies a commitment of more resources, time, and finances due to the comprehensive nature of the study. A prefeasibility study helps in efficient resource allocation by focusing only on the most promising projects, while a feasibility study is a more intensive process suitable for projects that have demonstrated a higher likelihood of success during the prefeasibility assessment.
Conducting a feasibility study offers numerous benefits, making it an essential step in the decision-making process for any project, business venture, or initiative. Here are the key advantages of performing a feasibility study:
In summary, conducting a feasibility study is a valuable step in the project development process. It provides a structured approach to assess the viability of a project, manage risks, make informed decisions, secure financing, and set the stage for a successful venture. The benefits of a feasibility study extend beyond initial decision-making and contribute to the overall success and sustainability of a project or business.
A feasibility study typically consists of several key components that provide a comprehensive evaluation of a project, business venture, or initiative. These components help stakeholders make informed decisions about the feasibility and viability of the proposed endeavor. The main components of a feasibility study include:
Executive Summary
The executive summary provides a concise overview of the entire feasibility study. It includes a brief description of the project, its objectives, and the key findings and recommendations. It serves as a quick reference for decision-makers.
Project Description
This section outlines the project's goals, objectives, and scope. It defines the problem the project aims to solve or the opportunity it seeks to capture. It also specifies the project's location and the stakeholders involved.
Market Analysis
Market analysis assesses the demand for the product or service within the target market. It includes information on target customers, market size, growth potential, competition, and market trends. This component helps determine whether there is a viable market for the project.
Technical Feasibility
Technical feasibility examines the project's technical requirements. It assesses whether the necessary technology, equipment, and resources are available or can be developed. It also identifies any technical challenges that may need to be addressed.
Operational Feasibility
Operational feasibility evaluates how the project will be implemented and operated. It includes details about project timelines, workflow, personnel requirements, and operational processes. This section helps in understanding how the project will function on a day-to-day basis.
Financial Feasibility
Financial feasibility is a critical component that includes detailed financial projections and analysis. It covers aspects such as startup costs, revenue forecasts, expense estimates, cash flow analysis, and return on investment calculations. It assesses the project's financial viability and potential profitability.
Legal and Regulatory Analysis
This section examines the legal and regulatory requirements that may impact the project. It identifies permits, licenses, or compliance issues that need to be addressed. Understanding and addressing legal and regulatory aspects are essential to avoid potential obstacles.
Risk Assessment
The risk assessment component identifies potential risks and challenges associated with the project. It evaluates the probability and impact of these risks and suggests risk mitigation strategies. Risks can be financial, technical, operational, market-related, or related to external factors.
Recommendations and Conclusion
In this section, the feasibility study summarizes the findings and presents clear recommendations based on the assessment. It often includes a conclusion that states whether the project is feasible and worth pursuing or whether it should be abandoned or modified.
The appendices contain additional supporting documentation and data, such as detailed financial spreadsheets, market research reports, technical specifications, and any other relevant information. These provide a more in-depth reference for stakeholders.
The main components of a feasibility study collectively provide a thorough assessment of a project's viability from multiple angles, ensuring that decision-makers have a comprehensive understanding of the project's potential, risks, and benefits.
Let's look now into some examples of feasibility studies for different types of projects and initiatives:
A real estate developer is considering constructing a residential apartment complex in a growing urban area. A feasibility study would assess factors like market demand, location, zoning regulations, construction costs, potential revenue from rentals, and the financial viability of the project.
A manufacturing company is considering expanding its operations by building a new production facility. The feasibility study would evaluate factors such as available land, infrastructure, equipment requirements, workforce, environmental impact, and the financial feasibility of the expansion.
An entrepreneur is exploring the feasibility of starting a small restaurant in a specific location. The feasibility study would examine the local market, including competitors, target customer demographics, startup costs, regulatory requirements, and financial projections for the first few years of operation.
A renewable energy company is considering the construction of a solar power plant. The feasibility study would assess the site's solar exposure, grid connection feasibility, equipment costs, revenue from energy sales, environmental impact, and the return on investment over the project's lifespan.
A hospital is contemplating an expansion to meet growing patient demands. The feasibility study would include an assessment of the required medical equipment, staffing needs, regulatory compliance, funding sources, and the anticipated patient load.
A tourist destination is considering the construction of a new hotel and recreational facilities. The feasibility study would evaluate the area's appeal to tourists, competition with existing businesses, construction costs, expected occupancy rates, and potential revenue from tourism.
A nonprofit organization is looking to expand its community outreach programs. The feasibility study would assess the need for the programs, funding sources, volunteer availability, operational costs, and the impact of the expansion on the organization's mission and goals.
An entrepreneur plans to launch an e-commerce website. The feasibility study would examine market demand, website development costs, marketing strategies, competitive analysis, and projected sales revenue and profitability.
These examples illustrate how feasibility studies are conducted in various fields and industries to evaluate the potential success and viability of a wide range of projects and initiatives. The specific components and focus areas of a feasibility study will vary depending on the nature of the project and the questions it seeks to address.
Now, let's think we are going to write a feasibility study. Let's check what steps we need to take to develop the final report.
Begin by conducting an initial evaluation of the project's objectives and scope. This step involves defining the problem the project intends to address or the opportunity it aims to seize. Ensure that the project's goals are clear and well-defined.
Examine the technical aspects of the project in detail. Evaluate the availability of required technology, equipment, and resources. Verify that the project's technical requirements can be met effectively.
Perform a comprehensive analysis of the project's commercial aspects. This step involves assessing the market's demand for the product or service, analyzing market size, competition, customer needs, and market trends. Determine if there is a feasible market for the project.
Create a detailed projected income statement for the project. This includes estimating startup costs, revenue forecasts, expense projections, and cash flow analysis. Calculate the return on investment (ROI) to determine the project's financial viability, the Internal Rate of Return (IRR) of the investment and the Net Present Value (NPV) of future cash flows.
Develop a balance sheet that represents the project's financial position at the outset (day zero). This financial snapshot should account for all assets, liabilities, and equity to provide a clear overview of the project's financial situation before it begins.
Explore various alternatives and scenarios for the project's feasibility. Assess different approaches, technologies, or business models to identify the most viable option. Consider the potential impact of these alternatives on the project's success. Make sensibilities to potentila risks.
Based on the findings and analysis conducted throughout the feasibility study, make a well-informed decision on whether to proceed with the project (a "Go" decision) or abandon it (a "No-Go" decision). Ensure that the decision aligns with the project's goals and aligns with the information presented in the study.
These steps provide a structured approach to conducting a feasibility study, ensuring that all relevant aspects of the project are thoroughly assessed and considered before making a decision on its viability.
In conclusion, a feasibility study is an indispensable tool for any project, business venture, or initiative. It serves as the critical bridge between a concept and a well-informed decision. By following a systematic process that includes a preliminary analysis, technical assessment, commercial evaluation, financial projections, and a careful consideration of alternatives, stakeholders can gain a comprehensive understanding of a project's viability.
The feasibility study's ability to assess market demand, technical feasibility, operational requirements, financial viability, and potential risks empowers decision-makers to make informed choices. Whether it's a real estate development, a new product launch, a manufacturing expansion, an IT system upgrade, or any other endeavor, a feasibility study helps in risk management, efficient resource allocation, and, ultimately, the successful realization of the project's goals.
It's important to remember that a well-conducted feasibility study not only serves the purpose of greenlighting a project but also provides a foundation for its long-term success. It gives stakeholders the confidence that the project is based on sound analysis and planning. In a world of complex challenges and opportunities, the feasibility study is a guiding compass for those seeking to turn innovative ideas into reality.
Make sure you hire the right consultants to deliver your feasibility study or business plan. Our firm, Aninver Development Partners, specializes in designing bankable feasibility studies to make sure projects continue to their following phase.
Send us a message on our contact page and we can discuss how we can help you.
Some of our experience conducting feasibility studies can be seen below:
Alvaro de la Maza is one the founding partners of Aninver Development Partners. Alvaro is a Civil Engineer, MS on Infrastructure Management and MBA by IESE Business School.Alvaro has extensive experience in Infrastructure and Public Private Partnerships. Alvaro has worked and led multiple consulting projects for clients such as the World Bank, the African Development Bank and other donors.Alvaro enjoys creating digital products and he has led the development of market intelligence platforms in d...
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Published: June 28, 2024
Years ago, I had an idea to launch a line of region-specific board games. I knew there was a market for games that celebrated local culture and heritage. I was so excited about the concept and couldn't wait to get started.
But my idea never took off. Why? Because I didn‘t have a plan. I lacked direction, missed opportunities, and ultimately, the venture never got off the ground.
And that’s exactly why a business plan is important. It cements your vision, gives you clarity, and outlines your next step.
In this post, I‘ll explain what a business plan is, the reasons why you’d need one, identify different types of business plans, and what you should include in yours.
Table of Contents
What is a business plan used for.
What does a business plan need to include, types of business plans.
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A business plan is a comprehensive document that outlines a company's goals, strategies, and financial projections. It provides a detailed description of the business, including its products or services, target market, competitive landscape, and marketing and sales strategies. The plan also includes a financial section that forecasts revenue, expenses, and cash flow, as well as a funding request if the business is seeking investment.
The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.
The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.
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What are the key elements of a business plan, what are the components of a global business plan.
If you're considering starting a business, you'll need both a feasibility study and a business plan. Both documents should be written after conducting thorough research and critical thinking, and conveyed in formats that others can understand. That way, you can show both to people whose opinions you value as well as to those you hope will invest in your idea. Before you begin, it's important to define and distinguish between a feasibility study and a business plan.
A feasibility study is done before starting a business, when you have the idea for the business but you want to make sure it's feasible, or advisable. Put another way, is it worth your time, effort and money to create this business? Several different professionals may contribute to the study, such as an accountant, entrepreneurs who have opened successful businesses, and Realtors who advise on the worth of the location and pricing, comparing similar businesses in the area.
A business plan details how the business will operate. It assumes your feasibility study has been completed and it was determined the idea is viable. Now you're going to spell out your financial and other objectives, the methods you plan to use to achieve them, and your proposed organizational structure.
Comparing the similarities between feasibility study and business plan is important because both are used in different ways to help you create a profitable business. Similarities between the two documents include:
It's equally important to understand the difference between feasibility study and business plan . They are not the same, and one cannot substitute for the other. Differences include:
If you're doing the feasibility study yourself, conduct a complete competitive analysis considering the following:
Writing a business plan may seem daunting, but if you take it step-by-step, it will come to fruition. The Small Business Administration advises that business plans should include the following:
Barbara Bean-Mellinger is a freelance writer who lives in the Washington, D.C. area. She has written on business topics for bizfluent.com, afkinsider.com, Harbor Style Magazine, the Charlotte Sun and more. Barbara holds a B.S. from the University of Pittsburgh and has won numerous awards in B2B and B2C marketing.
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All businesses have to critically examine the actions they take, whether the business is just starting out or has been in operation for a while. Establishing the viability of an idea or action can ultimately determine whether a business succeeds or not. The best tool for determining this is by conducting a feasibility study.
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In this guide, we will examine what a feasibility study entails and when it should be used . We’ll then outline the five key elements of a feasibility study and provide you with six steps for conducting one within your organization . Lastly, you’ll see some examples of feasibility studies .
A feasibility study is a study, which is performed by an organization in order to evaluate whether a specific action makes sense from an economic or operational standpoint. The objective of the study is to test the feasibility of a specific action and to determine and define any issues that would argue against this action.
The question a feasibility study essentially tries to answer is: “ Should we proceed with the specific action plan? ” On top of determining whether the plan is viable, organizations can use a feasibility study for understanding the risks better and preparing for them.
It’s important to remember that a feasibility study is not the same as a business plan. A business plan provides a planning function and defines the actions needed to take a business idea into reality, whereas a feasibility study provides an investigation into a specific function and whether it’s viable.
While it’s important to conduct both plans before setting up a company, a business plan should only be conducted once the business has been deemed viable by a feasibility study.
While feasibility studies are typically conducted by business organizations, other organizations can naturally benefit from it as well. Since the study aims to discover whether an action is viable, it can help organizations to avoid costly or operationally exhausting ventures.
The study is typically used in situations where an important strategic decision needs to be taken .
This can vary and some of the example situations include:
As mentioned above, a feasibility study is often at the core of launching a business. It can be the key to launching a successful start-up, as it helps to underline the future pain points and to determine whether the plan is viable in the first place.
Overall, a feasibility study is the perfect tool for situations where the impact is likely to be big in terms of operational or economic significance.
David E. Gumpert nailed the essential importance of a feasibility study in his book How to Really Create a Successful Business Plan . When discussing the possible failure of a feasibility study (i.e. the negative result), Gumpert wrote, “ Although [an unsuccessful feasibility study] may appear to be a failure, it’s not. The failure would have been if you had invested your own and others’ money and then lost it due to barriers you failed to research in advance. ”
Finally, you can watch the below video to understand the importance of a feasibility study for business success through a simple example:
You’ll need to study the main elements when conducting a feasibility study. While these are often all required for conducting a study, you might sometimes focus mostly on a single element or a combination of a few of them.
The first element deals with technical feasibility of the proposed action plan. If your organization is introducing a new product or a service, the technical feasibility study will determine if it’s a technically viable action.
This part of the feasibility study should answer the following questions :
Remember the above questions can be used when you are introducing a new product or launching a business, but also if you are implementing a new product or service within your organization. For instance, if you are introducing new software, you must understand the strengths of it, as well as the resources required for implementing it.
The second element focuses on testing the market for the proposed action or idea. It examines issues like whether the product or service can be sold at reasonable prices or if there’s a marketplace for it.
Market feasibility should answer the following questions :
The above essentially points out to the importance of conducting market research as part of your feasibility study. Market feasibility is an important part of a feasibility study when the plan of action deals with issues such as business expansion, new product or service launch, product development and starting up a business.
Commercial feasibility is an element of the study focused on the probability of commercial success. It’s mainly focused on studying the new business or a new product or service, and whether your organization can create enough profit with it.
The questions that require answering as part of the commercial feasibility study include:
Furthermore, if you are conducting a feasibility study as part of launching a business , you also need to answer the following questions:
While the above points are mainly important for new businesses, any organization can benefit from thinking about them when launching a new operation.
For example, if you are adding a new product line to your business, you should use the above questions as a guide to understanding the implications to your other operations and the financial viability of the new product.
The fourth element focuses on the major risks the proposed plan can entail. The overall risk assessment part of a feasibility study examines the different ways your organization can reduce the risk of embarking on the new action.
The overall risk assessment should answer the following questions :
The aim is to try to cover all the possibilities and create a risk assessment map, which deals with the probability of the risk and the impact it would have on the business. It’s aimed at recognizing the risks that can make or break your business from the smaller, more manageable risks.
For instance, consider your business is conducting a feasibility study in order to hire a new employee. One risk might deal with the possibility the hire is an inadequate fit and leaves after six month trial period. But your risk assessment might show that while the risk of this is relatively high, the survivability of your business doesn’t depend on it. For example, the cost of a bad hire could be low due to your recruitment strategy or the position not being essential for operations.
This is how you can create your own risk assessment map .
[slideshare id=1707548&doc=riskmanagementframework-090710200059-phpapp01&w=640&h=330]
In addition, if you are launching a new business, the overall risk assessment should also consider one final question. Answering the question “ When can your business be able to support you and itself without extra financing? ” is an important part of a feasibility study. Self-sufficiency is crucial for business success, as having to borrow can hinder the long-term survivability of your business.
The final essential element of a feasibility study is not necessarily relevant to every business. Nonetheless, it is an important aspect to keep in mind, as it deals with the impact of acquiring a new business. This is not only relevant to new businesses, as your organization might acquire a new business as part of its growth strategy.
The purpose of this final element is to study whether purchasing an existing business is a sound investment to make. It requires your organization to answer questions such as :
Now that we’ve examined the different core elements of a feasibility study, we can look at the steps you need to take in order to conduct a feasibility study.
A feasibility study can be a time-consuming process and it doesn’t come without its costs. It’s therefore auspicious to start by conducting preliminary analysis . This is essentially a pre-screening of the proposed action and it examines whether a proper feasibility assessment is worth the time and money.
For example, before you conduct a feasibility study on the viability of acquiring a business, you want to check quickly the overall attainability of the action. If the acquisition is so risky that it could bankrupt your business, there’s no reason for conducting a proper feasibility study.
Preliminary assessment should consist of the following steps:
Keep in mind the above is just to get an overall feel of the idea. You don’t need to conduct full market research at this point, but simply understand whether there’s any kind of space for the action within the market.
If your preliminary analysis doesn’t find any insurmountable obstacles and the commercial viability is possibly there, you can continue with the proper feasibility study.
Next, you should move on to outlining the project scope by defining the area of study for the feasibility study. Do you need to look at all five elements of the study, for example?
The scope must be detailed and outline the objectives of the feasibility study clearly. It’s a good idea to examine the above five elements in terms of your action or idea and create an action plan for each section that applies to the project.
It’s essential to study the different parts of your business that might be influenced by the proposed action or idea, even when you aren’t proposing something that impacts the whole business directly (i.e. launching a new product, acquiring a business or starting a business). Actions, such as hiring new personnel to a single department, can sometimes have an impact on sectors that might not immediately seem obvious.
The key to outlining the scope is about understanding the different participants and end-users of the proposed idea or action. For instance, if you are moving the business to new premises, you have to understand the impact it’ll have on the workforce (change in commute can an impact on employee morale, etc.) and the customer (will all customers follow your business to a new location, etc.).
Finally, you also need to analyze the current situation prior to the implementation of the idea or action. You can do so by describing the weaknesses and strengths of the business. Once you’ve done this, you can study the savings and the operational benefits you are hoping to achieve with the new proposal.
You’ll also need to research the current competitive landscape in order to understand whether the proposed idea or action is viable. Whether you are implementing a new software or equipment or launching your own new product, you need to compare the proposed product or service with other similar items on the market.
This might mean you need to compare the feasibility of your chosen software (for example, accounting platform) with other products on the market. What are the benefits of your proposed choice and what are the weaknesses? Are the risks associated with your chosen software smaller or bigger than those of competitive products?
The same analysis applies when launching a new product. Part of your feasibility study must then focus on understanding what the customers are looking for and whether your proposed idea answers these needs. You should also compare the proposed product with the existing products or services and focus on the advantages, as well as disadvantages, you might have.
Learn more about Porter’s five forces in this video.
You also need to examine the market conditions. There are four specific points when it comes to the analyzing market in terms of feasibility.
The main goal of this part of the feasibility study is to understand the revenue projection for implementing the proposed idea or action. You want to have a realistic understanding of the kind of sale numbers you can expect and the scope of the promotional activities you are required to undertake.
For example, in terms of product or service awareness, you must be able to determine the type of marketing required for potential customers to understand and be able to use the item.
One of the most important steps for concluding a feasibility study involves calculating the financial costs related to the proposal. No matter what type of idea or action your organization is considering, the financial cost of it can be the major point in determining its viability.
The first rule of any successful business is the need to have income or it goes bust. Therefore, any action your organization takes has to examine the impact it’ll have on the income and profit of the business.
The financial costs associated with your proposed idea or action will naturally depend on the proposal. But you have to consider the following points in all instances:
The likelihood of having to use estimates in the above calculations is relatively high. It’s important to conduct proper research and to be as realistic with your figures as possible. After all, positive surprises (for example, exceeding sales figures) are not difficult to manage, unlike overly positive calculations that turn out wrong.
Finally, you need to review your feasibility study carefully and examine the findings with time. A good rule of thumb is to simply take a step back and reflect on the research before jumping into conclusions.
After your study, look around and consider the following questions :
If the conditions have changed, you can review these parts of the feasibility study. Once you’ve reviewed your results, you can go ahead with the final decision. The feasibility study should provide you the answer of either moving ahead with the proposed idea or action, or scrapping the idea and looking for something different.
Use the following examples as inspirations for your own feasibility study.
Feasibility study for setting up a bakery .
[slideshare id=28843825&doc=feasibilitystudy-131203075213-phpapp02&type=d&w=640&h=330]
Feasibility study for setting up a water refilling station .
[slideshare id=40064756&doc=alphaedit-141009073249-conversion-gate02&type=d&w=640&h=330]
Feasibility study for setting up a poultry business .
[slideshare id=41782939&doc=feasibilitystudyaboutchicken-141119201619-conversion-gate02&type=d&w=640&h=330]
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By the end of this section, you will be able to:
As the name suggests, a feasibility analysis is designed to assess whether your entrepreneurial endeavor is, in fact, feasible or possible. By evaluating your management team, assessing the market for your concept, estimating financial viability, and identifying potential pitfalls, you can make an informed choice about the achievability of your entrepreneurial endeavor. A feasibility analysis is largely numbers driven and can be far more in depth than a business plan (discussed in The Business Plan ). It ultimately tests the viability of an idea, a project, or a new business. A feasibility study may become the basis for the business plan, which outlines the action steps necessary to take a proposal from ideation to realization. A feasibility study allows a business to address where and how it will operate, its competition, possible hurdles, and the funding needed to begin. The business plan then provides a framework that sets out a map for following through and executing on the entrepreneurial vision.
Organizational feasibility aims to assess the prowess of management and sufficiency of resources to bring a product or idea to market Figure 11.12 . The company should evaluate the ability of its management team on areas of interest and execution. Typical measures of management prowess include assessing the founders’ passion for the business idea along with industry expertise, educational background, and professional experience. Founders should be honest in their self-assessment of ranking these areas.
Resource sufficiency pertains to nonfinancial resources that the venture will need to move forward successfully and aims to assess whether an entrepreneur has a sufficient amount of such resources. The organization should critically rank its abilities in six to twelve types of such critical nonfinancial resources, such as availability of office space, quality of the labor pool, possibility of obtaining intellectual property protections (if applicable), willingness of high-quality employees to join the company, and likelihood of forming favorable strategic partnerships. If the analysis reveals that critical resources are lacking, the venture may not be possible as currently planned. 47
A financial analysis seeks to project revenue and expenses (forecasts come later in the full business plan); project a financial narrative; and estimate project costs, valuations, and cash flow projections Figure 11.13 .
The financial analysis may typically include these items:
The financial analysis should estimate the sales or revenue that you expect the business to generate. A number of different formulas and methods are available for calculating sales estimates. You can use industry or association data to estimate the sales of your potential new business. You can search for similar businesses in similar locations to gauge how your business might perform compared with similar performances by competitors. One commonly used equation for a sales model multiplies the number of target customers by the average revenue per customer to establish a sales projection:
T×A=ST×A=S
Target(ed) Customers/Users×Average Revenue per Customer=Sales ProjectionTarget(ed) Customers/Users×Average Revenue per Customer=Sales Projection
Another critical part of planning for new business owners is to understand the breakeven point , which is the level of operations that results in exactly enough revenue to cover costs (see Entrepreneurial Finance and Accounting for an in-depth discussion on calculating breakeven points and the breakdown of cost types). It yields neither a profit nor a loss. To calculate the breakeven point, you must first understand the two types of costs: fixed and variable. Fixed costs are expenses that do not vary based on the amount of sales. Rent is one example, but most of a business’s other costs operate in this manner as well. While some costs vary from month to month, costs are described as variable only if they will increase if the company sells even one more item. Costs such as insurance, wages, and office supplies are typically considered fixed costs. Variable costs fluctuate with the level of sales revenue and include items such as raw materials, purchases to be sold, and direct labor. With this information, you can calculate your breakeven point—the sales level at which your business has neither a profit nor a loss. 48 Projections should be more than just numbers: include an explanation of the underlying assumptions used to estimate the venture’s income and expenses.
Projected cash flow outlines preliminary expenses, operating expenses, and reserves—in essence, how much you need before starting your company. You want to determine when you expect to receive cash and when you have to write a check for expenses. Your cash flow is designed to show if your working capital is adequate. A balance sheet shows assets and liabilities, necessary for reporting and financial management. When liabilities are subtracted from assets, the remainder is owners’ equity. The financial concepts and statements introduced here are discussed fully in Entrepreneurial Finance and Accounting .
A market analysis enables you to define competitors and quantify target customers and/or users in the market within your chosen industry by analyzing the overall interest in the product or service within the industry by its target market Figure 11.14 . You can define a market in terms of size, structure, growth prospects, trends, and sales potential. This information allows you to better position your company in competing for market share. After you’ve determined the overall size of the market, you can define your target market, which leads to a total available market (TAM) , that is, the number of potential users within your business’s sphere of influence. This market can be segmented by geography, customer attributes, or product-oriented segments. From the TAM, you can further distill the portion of that target market that will be attracted to your business. This market segment is known as a serviceable available market (SAM) .
Figure 11.14
Projecting market share can be a subjective estimate, based not only on an analysis of the market but also on pricing, promotional, and distribution strategies. As is the case for revenue, you will have a number of different forecasts and tools available at your disposal. Other items you may include in a market analysis are a complete competitive review, historical market performance, changes to supply and demand, and projected growth in demand over time.
You’ve been hired by a leading hotel chain to determine the market and financial potential for the development of a mixed-use property that will include a full-service hotel in downtown Orlando, located at 425 East Central Boulevard, in Orlando, Florida. The specific address is important so you can pinpoint existing competitors and overall suitability of the site. Using the information given, conduct a market analysis that can be part of a larger feasibility study.
Location feasibility.
You’re considering opening a boutique clothing store in downtown Atlanta. You’ve read news reports about how downtown Atlanta and the city itself are growing and undergoing changes from previous decades. With new development taking place there, you’re not sure whether such a venture is viable. Outline what steps you would need to take to conduct a feasibility study to determine whether downtown Atlanta is the right location for your planned clothing store.
After conducting a feasibility analysis, you must determine whether to proceed with the venture. One technique that is commonly used in project management is known as a go-or-no-go decision . This tool allows a team to decide if criteria have been met to move forward on a project. Criteria on which to base a decision are established and tracked over time. You can develop criteria for each section of the feasibility analysis to determine whether to proceed and evaluate those criteria as either “go” or “no go,” using that assessment to make a final determination of the overall concept feasibility. Determine whether you are comfortable proceeding with the present management team, whether you can “go” forward with existing nonfinancial resources, whether the projected financial outlook is worth proceeding, and make a determination on the market and industry. If satisfied that enough “go” criteria are met, you would likely then proceed to developing your strategy in the form of a business plan.
Love beyond walls.
When Terence Lester saw a homeless man living behind an abandoned, dilapidated building, he asked the man if he could take him to a shelter. The man scoffed, replying that Lester should sleep in a shelter. So he did—and he saw the problem through the homeless man’s perspective. The shelter was crowded and smelly. You couldn’t get much sleep, because others would try to steal your meager belongings. The dilapidated building provided isolation away from others, but quiet and security in its own way that the shelter could not. This experience led Lester to voluntarily live as a homeless person for a few weeks. His journey led him to create Love Beyond Walls (www.lovebeyondwalls.org), an organization that aids the homeless, among other causes. Lester didn’t conduct a formal feasibility study, but he did so informally by walking in his intended customers’ shoes—literally. A feasibility study of homelessness in a particular area could yield surprising findings that might lead to social entrepreneurial pursuits.
In this article we will discuss about:- 1. Meaning & Concept of Feasibility Analysis 2. Importance of FSR 3. Steps in Writing a FSR 4. Contents of a Feasibility Report 5. Types of Feasibility Analysis 6. Steps Involved in Conducting a Feasibility Study 7. Objectives of Feasibility Analysis 8. Advantages of Feasibility Analysis.
A feasibility study aims to objectively and rationally uncover the strengths and weaknesses of an existing business or proposed venture, opportunities and threats present in the environment, the resources required to carry through, and ultimately the prospects for success. In its simplest terms, the two criteria to judge feasibility are cost required and value to be attained.
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A well-designed feasibility study should provide a historical background of the business or project, a description of the product or service, accounting statements, details of the operations and management, marketing research and policies, financial data, legal requirements and tax obligations. Generally, feasibility studies precede technical development and project implementation.
A feasibility study evaluates the project’s potential for success; therefore, perceived objectivity is an important factor in the credibility of the study for potential investors and lending institutions. It must, therefore, be conducted with an objective, unbiased approach to provide information upon which decisions can be based.
Investment proposals, involving huge capital outlay are invariably irreversible. Therefore, before starting a project/proposal, it is necessary and imperative to find out whether the same is feasible or not.
Feasibility is an analysis and evaluation of a proposed project to determine if it is :
a. Technically feasible
b. Feasible within the estimated cost
c. Profitable.
Feasibility studies are almost always conducted where large sums are at stake and are also called Feasibility Analysis.
Feasibility study is an assessment of the practicality of a proposed project or system.
Four Test for Feasibility :
a. Operational feasibility is a measure of how well the solution will in the organization. It is also a measure of how people feel about the system/project.
b. Technical feasibility is a measure of the practicality of a specific technical solution and the availability of technical resources and expertise.
c. Schedule feasibility is a measure of how reasonable the project timetable is.
d. Economic feasibility is a measure of the cost effectiveness of a project or solution.
Designing a Feasibility Report :
A feasibility study is one of the key activities within the project initiation phase. It aims to analyze and justify the project in terms of technical feasibility, business viability and cost-effectiveness. The study serves as a way to prove the project’s reasonability and justify the need for launch.
Once the study is done, a feasibility study report (FSR) should be developed to summarize the activity and state if the particular project is realistic and practical.
Let us learn what FSR means and contents of a good feasibility report :
Meaning of Feasibility Study Report (FSR):
It is just a document that aims to identify, explore, and evaluate a project’s solutions to save time and money. The following definition gives a broader understanding of the document: A Feasibility Study Report (FSR) is a formally documented output of feasibility study that summarizes results of the analysis and evaluations conducted to review the proposed solution and investigate project alternatives for the purpose of identifying if the project is really feasible, cost-effective and profitable. It describes and supports the most feasible solution applicable to the project.
The report gives a brief description of the project and some background information. Formally this document is the starting point for running the Pre-Charter Sub-Phase. In practice, it signifies that the sponsor can proceed with deciding on project investment and make necessary assignments to the project manager.
The process to write the report is called feasibility study reporting. Often it is a responsibility of the project manager to control such a process.
The importance of writing the report can be summarised as follows:
(i) It helps in providing legal and technical evidence of the project’s vitality, sustainability and cost-effectiveness.
(ii) The reporting process allows the senior management to get the necessary information required for making key decisions on budgeting and investment planning.
(iii) A well-written feasibility study report template helps in developing solutions for Project Analysis
(iv) FSR helps link project efficiency to budgeted costs.
(v)It helps in Risk Mitigation because it helps with contingency planning and risk treatment strategy development.
(vi) The report can be used by senior management to identify staffing needs as well as acquire and train necessary specialists.
(i) Write Project Description:
At this step, you need to collect background information on your project to write the description. A brief and candid description will help the reader to know the purpose of the FSR.
(ii) Describe Possible Solutions:
In this step you are required to perform an alternatives analysis and make a description of possible solutions for your project.
(iii) List Evaluation Criteria:
Under this third step, set and define evaluation criteria for possible solutions. This step of feasibility study report writing requires you to investigate the solutions and put them against a set of evaluation criteria.
(iv) Propose the Most Feasible Solution:
The next step for writing a feasibility study report is to determine the most economically reasonable and technically feasible solution which lets the company (1) keep to optimal use of project resources and (2) gain the best possible benefit. The report might include: “After the evaluation of the possible solutions, the most feasible solution for this project is identified and selected, so the project turns to be cost-effective, vital and practical.”
(v) Write Conclusions:
The final step of the feasibility study reporting process requires you to make a conclusion by summarizing the project’s aim and stating the most feasible solution.
The content of sample feasibility report is formatted and structured according to a range of requirements which may vary from organization to organization but there are common suggestions, which are listed below.
(i) Title Page or Front Matter :
To begin with writing a sample feasibility report, first you need to create a title page that provides a descriptive yet concise title, containing the name of the writer, email, job position, and also the organization for which you are writing the report.
Next, you must include an itemized list of contents that provides headings and sub-headings sequenced the same way as they are structured in the report body. Also add a list of all material such as tables, figures, illustrations, annexes etc. which have been used within the document.
Keep in mind that the title page should not be numbered and that no more than 4-5 pages should be dedicated to the front matter.
(ii) Body of the Report :
There are many different styles and requirements for formatting the body of feasibility study report, it may be difficult to select right format.
However, there are several common suggestions which are as follows:
a. Each page of the report body needs to include a descriptive header with an abbreviated title for the report, the author’s name and page number
b. Structure the report by headings and sub-headings and indicate this structure within the document content
c. Make sure headings are properly formatted (i.e., flush left, indented, etc.) on each page
d. Use the same style for headings throughout the entire report template
e. Never use too larger or too small font (font should have a professional look, 10-12 point)
f. Use the same citation style (e.g., CBE, APA, etc.) for formatting sources used in your feasibility study.
(iii) Sections of the Report :
The following list provides an outline of the key sections to be included in report content:
a. Executive Summary – A description of the problem/opportunity highlighted in the study, the purpose of the report, and the importance of the research for your target audience
b. Background – A more detailed description of the feasibility study, who it was carried out, and whether it was implemented elsewhere
c. Analysis – An examination and evaluation method employed in the conducting your feasibility study
d. Alternatives and Options – An overview of any alternative proposals or options and their features in comparison to the main proposal of the study
e. Cost-Benefit Evaluation – A rigorous analysis method that was implemented to examine and evaluate the main proposal for cost-benefit effectiveness and to demonstrate the tech feasibility, economic practicality, social desirability, and eco soundness of the proposal.
f. Conclusion – A summary of the work done and your own conclusions regarding your analysis
g. Recommendations & Suggestions – A series of recommendations practices and follow-up actions based on your conclusions
(iv) Back or End Matter/Last Page :
One last thing you need to consider when writing your feasibility study report is that the report should include a Reference page that lists all reference material such as articles, books, web pages, periodicals, reports, etc. cited in your document. This page should be styled appropriately.
Additionally, you can create an Appendix page that provides detailed discussions of all criteria used in analyzing feasibility and examples of each criterion. This page should also be styled appropriately.
This feasibility can be ascertained on following parameters:
(i) Financial Feasibility
(ii) Commercial Feasibility
(iii)Technical Feasibility
(iv) Economic Feasibility
(v) Social Feasibility
(vi) Environmental feasibility
(vii) Legal feasibility
(viii) Operational feasibility
(ix) Schedule feasibility
(x) Market and real estate feasibility
(xi) Resource feasibility
Each one is being discussed in brief below:
(i) Financial Feasibility:
In order to ascertain financial viability, financial projections are made and on the basis of such projections which need to be objective and realistic, the followings broad parameters are evaluated for determining the feasibility of the project-
a. Return on Investment
b. Payback period of the outlay
c. Internal rate of return
d. Profitability index.
In case of a new project, financial viability can be judged on the following parameters:
a. Total estimated cost of the project
b. Financing of the project in terms of its capital structure, debt to equity ratio and promoter’s share of total cost
c. Existing investment by the promoter in any other business
d. Projected cash flow and profitability
The financial viability of a project should provide the following information:
a. Full details of the assets to be financed and how liquid those assets are
b. Rate of conversion to cash-liquidity
c. Project’s funding potential and repayment terms
d. Sensitivity in the repayments capability to the following factors
e. Mild slowing of sales
f. Acute reduction/slowing of sales
g. Small increase in cost
h. Large increase in cost
i. Adverse economic conditions.
If, on the above mentioned parameters, the project is found suitable, then only further feasibility tests are carried out.
(ii) Commercial Feasibility:
Commercial Feasibility is ascertained by finding out the following:
a. Current and Potential competition
b. Profit margin
c. Size of the market.
d. Degree of demand for the product
e. Future growth of market
(iii) Technical Feasibility:
This assessment is based on an outline design of system requirements, to determine whether the company has the technical expertise to handle completion of the project. When writing a feasibility report, the following should be taken to consideration.
The technical feasibility assessment is focused on gaining an understanding of the present technical resources of the organization and their applicability to the expected needs of the proposed system. It is an evaluation of the hardware and software and how it meets the need of the proposed system.
An in depth and critical study of following parameters is done:
a. Plant location
c. Plant & machinery and equipment
d. Manufacturing process
e. Infrastructure
f. Technology
g. Efficient waste disposal.
(iv) Economic Feasibility:
The purpose of an economic feasibility study (EFS) is to demonstrate the net benefit of a proposed project for accepting or disbursing electronic funds/benefits, taking into consideration the benefits and costs to the agency, other state agencies, and the general public as a whole.
In sync with the phrase “Parity between haves and have not’s”, a social cost-benefit analysis (SCBA) of the project should be carried out. This ensures that the organization is contributing to the GDP of the economy and is also discharging its social obligations, by providing employment opportunities and bringing in improvement in quality of life.
The purpose of business in a capitalist society is to turn a profit, or to earn positive income. While some ideas seem excellent when they are first presented, they are not always economically feasible. That is, that they are not always profitable or even possible within a company’s budget. Since companies often determine their budget’s several months in advance, it is necessary to know how much of the budget needs to be set aside for future projects.
Economic feasibility helps companies determine what that amount is before a project is ultimately approved. This allows companies to carefully manage their money to insure the most profitable projects are undertaken. Economic feasibility also helps companies determine whether or not revisions to a project that at first seems unfeasible will make it feasible.
(v) Social Feasibility:
Social feasibility is a detailed study on how one interacts with others within a system or an organization. Social impact analysis is an exercise aimed at identifying and analyzing such impacts in order to understand the scale and reach of the project’s social impacts.
At a minimum, all projects demand a review of project data at the Appraisal Phase, so as to identify if material social impacts exist. Social impact analysis greatly reduces the overall risks of the project, as it helps to reduce resistance, strengthens general support, and allows for a more comprehensive understanding of the costs and benefits of the project.
However, social impact analysis can be expensive and time consuming, so the full analysis process cannot be justified for all projects. At a minimum, all projects demand a review of project data at the Appraisal Phase, so as to identify if material social impacts exist. If they do, a full social impact analysis should be conducted.
(vi) Environmental Feasibility:
The environmental feasibility study considers both human and environmental health factors. The ES is a comparative process that looks at all potential solutions, and then evaluates them against specific criteria to ultimately find the best choice. It is a fact that external environment exerts considerable influence on the organizations. In fact the climatic conditions in a particular area/region have a significant impact on the existence of an enterprise. Therefore, it is necessary to ascertain the environment viability as well.
The parameters considered are:
a. Overall protection of public and environmental health
b. Effective reduction of hazardous waste toxicity, mobility and volume.
c. Long-term and short-term effectiveness of environmental policies of the company
d. Potential consequences of the remedial measures taken for protecting environment
(vii) Legal Feasibility:
It should first be determined whether the proposed project conflicts with legal requirements, and if the proposed venture is acceptable in accordance to the laws of the land. The project team has to make a thorough analysis of the legal issues surrounding the project, across several dimensions.
A detailed legal due diligence should be done to ensure that all foreseeable legal requirements, which have not or will not be dealt with, in other appraisal exercises, are met for the development of the project.
The main objectives of the legal feasibility analysis are as follows :
a. To ensure that the project is legally doable;
b. To facilitate risk management, indicating the risks and obstacles that need to be addressed within the technical analyses, the financial model and/or the Value for Money analysis; and
c. To avoid, to the extent possible, major problems in the project’s development and implementation, specifying the requirements that need to be considered at subsequent stages of the PPP process, [public private partnership]
(viii) Operational Feasibility:
Operational feasibility is the measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development.
The operational feasibility assessment focuses on the degree to which the proposed development projects fits in with the existing business environment and objectives with regard to development schedule, delivery date, corporate culture and existing business processes.
To ensure success, desired operational outcomes must be imparted during design and development. These include such design-dependent parameters as reliability, maintainabili ty, supportability, usability, producibility, disposability, sustainability, affordability and others.
These parameters are required to be considered at the early stages of design if desired operational behaviours are to be realised.
(ix) Schedule Feasibility:
A project will fail if it takes too long to be completed before it is useful. Typically this means estimating how long the system will take to develop, and if it can be completed in a given time period using some methods like payback period. Schedule feasibility is a measure of how reasonable the project timetable is.
Some projects are initiated with specific deadlines. It is necessary to determine whether the deadlines are mandatory or desirable. To do proper scheduling, the versatile techniques like PERT & CPM are adopted.
(x) Market and Real Estate Feasibility:
Market feasibility studies involve testing geographic locations for a real estate development project, and usually involve parcels of real estate land. Developers often conduct market studies to determine the best location within a jurisdiction, and to test alternative land uses for given parcels. Jurisdictions often require developers to complete feasibility studies before they will approve a permit application for retail, commercial, industrial, manufacturing, housing, office or mixed-use project. Market Feasibility takes into account the importance of the business in the selected area.
(xi) Resource Feasibility:
This involves questions such as how much time is available to build the new system, when it can be built, whether it interferes with normal business operations, type and amount of resources required, dependencies, and developmental procedures with company revenue prospects.
There are resources necessary to complete any project. All the important resources like human resource, artificial resources, financial resource etc. are taken care of by indulging in complete research on feasibility of the resources needed to complete the project.
(i) Conduct a Preliminary Analysis:
The primary purpose of the preliminary analysis is to screen project ideas before extensive time, effort, and money are invested. Two sets of activities are involved. In this step the planned services, target markets, and unique characteristics of the services are described or outlined, as specifically as possible by answering following questions-
a. Does the practice serve a currently unserved need?
b. Does the practice serve an existing market in which demand exceeds supply?
c. Can the practice successfully compete with existing practices?
d. Are capital requirements for entry or continuing operations unavailable or unaffordable?
e. Do any factors prevent effective marketing to any or all referral sources?
If the information gathered so far indicates that the idea has potential, then it is continued with a detailed feasibility study.
(ii) Prepare a Projected Income Statement:
Anticipated income must cover direct and indirect costs, taking into account the expected income growth curve. Working backward from the anticipated income, the revenue necessary to generate that income can be derived in order to build a projected income statement. Factors that determine this statement are services provided, fees for services, volume of services, and adjustments to revenues etc.
(iii) Conduct a Market Survey:
A good market survey is crucial. If the planner cannot perform this survey, an outside firm should be hired. The primary objective of a market survey is a realistic projection of revenues.
The major steps include:
a. Defining the geographic influence on the market.
b. Reviewing population trends, demographic features, cultural factors, and purchasing power in the community.
c. Analyzing competing services in the community to determine their major strengths and weaknesses. Factors to consider include pricing, product lines, sources of referral, location, promotional activities, quality of service, consumer loyalty and satisfaction, and sales.
d. Determining total volume in the market area and estimate expected market share.
e. Estimating market expansion opportunities (e.g., responsiveness to new/enhanced services).
(iv) Plan Business Organization and Operations:
At this point, the organization and operations of the business should be planned in sufficient depth to determine the technical feasibility and costs involved in start-up, fixed investment, and operations.
Extensive effort is necessary to develop detailed plans for:
a. Equipment
b. Merchandising methods
c. Facility location and design & layout
d. Availability and cost of personnel
e. Supply availability (e.g., vendors, pricing schedules exclusive or franchised products)
f. Overheads
(v) Prepare an Opening Day Balance Sheet:
The Opening Day Balance Sheet should reflect the practice’s assets and liabilities as accurately as possible at the time the practice begins, before the practice generates income. Prepare a list of assets required for practice operations. The list should include item, source, cost, and available financing methods.
Necessary assets include everything from cash necessary for working capital to buildings and land. Although the resulting list is rather simple, the amount of effort required may be extensive. Liabilities to be incurred and the investment required by the practice must also be clarified.
These items need to be considered:
a. Whether to lease or buy land, buildings, and equipment
b. Method to finance asset purchases
c. Way to finance accounts receivable
(vi) Review and Analyze All Data:
The planner should determine if any data or analysis performed should change any of the preceding analyses. Basically, this step means is based on the principle “Step back and reflect one more time.” Re-examine the Projected Income Statement and compare with the list of desired assets and the Opening Day Balance Sheet.
It is good to find out that all expenses and liabilities, in the Income Statement are reflecting realistic expectations. Risk and contingencies are analyzed for Considering the likelihood of significant changes in the current market that could alter projections.
(vii) Make “Go/No Go” Decision or Green/Red Signal Decisions :
All the preceding steps have been aimed at providing data and analysis for the “go/no go” decision. If the analysis indicates that the business should yield at least the desired minimum income and has growth potential, a “go” decision is appropriate. Anything less, than the desired result, will imply a “no go” decision.
Additional considerations include answers to following questions:
a. Is there a commitment to make the necessary sacrifices in time, effort and money?
b. Will the activity satisfy long-term aspirations?
Businesses undertake feasibility studies to determine if a proposed strategic action is operationally viable and will produce the desired results. The studies enable company leaders to understand both positive and negative impacts before making a change.
The main objectives of carrying out a feasibility analysis are:
(i) To determine the outcome of the proposed action.
(ii) To ascertain whether it will work as anticipated and generate the projected revenue or anticipated cost savings.
(iii) To identify the customers in the current and potential market
(iv) To learn more about customers’ current and future needs,
(v) To gauge interest of the customer in the product or service that is being offered.
(vi) To determine whether the primary customers will need the new product or service and how much they can and will pay.
(vii ) To determine if the product will be satisfactory.
(viii) To ascertain company’s strengths, weaknesses and position in the marketplace
(ix) To determine the financial benefits of the action vs. its costs.
(x) To gauge the competitor’s strengths and weakness and take corrective actions while carrying out the feasibility analysis.
Effective feasibility studies can do more than just help executives choose which projects to green light. Managers involved in a feasibility study can actually use much of the same data to shape the project planning process.
Four main advantages to feasibility studies can generate crucial insight for approved projects:
(i) Helps in Understanding Demand:
Feasibility studies always analyze whether a real demand exists for a product or a service. This holds true for internal projects as well as for potential consumer offerings. This way, project managers can avoid spending resources on features or projects with low impact and low demand among end users.
(ii) Helps in Assessing Resources:
Another of the advantages of feasibility studies is the opportunity to catalogue the current resources available for a project and to estimate the need for additional resources. Feasibility studies that recommend against projects often cite a lack of human resources or financial capital.
(iii) Helps in Ascertaining Marketing Feasibility:
Even for products and services with measurable demand, companies must examine their ability to spread the word about a new offering. During the evaluation process, project managers learn whether the market is already over saturated with stronger competitors. Company leaders can also discover any potential legal roadblocks involving trademarks, patents, or other intellectual property rights.
(iv) Helps in Marking a Timeline:
One of the biggest advantages of a feasibility study is the validation of a prospective timeline. When moving into a formal project planning phase, a project manager can use data generated by the study to help set milestones and deadlines. A quality feasibility study examines the timetable suggested by project sponsors for potential delays or breakdowns.
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COMMENTS
The operational feasibility study evaluates whether or not your team's current organizational structure can support this initiative. The project timeline. ... Feasibility study vs. business plan. A business plan is a formal document outlining your organization's goals. You typically write a business plan when founding your company or when ...
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An operational feasibility study will ensure that your endeavor can be implemented with your existing processes. By evaluating resources, technology, and processes, you can identify roadblocks early, thus saving time and money and setting your endeavor up for success. Fahad Usmani, PMP. I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP.
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A feasibility study is a crucial step to take before diving into any project and is generally performed during the project initiation phase of project management. It helps identify potential roadblocks, assess risks, and estimate resource allocation; skipping this step can lead to project failure, wasted resources, and financial losses.
Financial Feasibility Analysis. A financial analysis seeks to project revenue and expenses (forecasts come later in the full business plan); project a financial narrative; and estimate project costs, valuations, and cash flow projections Figure 11.13. Figure 11.3.2 11.3. 2: An analysis of financial feasibility focuses on expenses, cash flow ...
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A feasibility study is a systematic and comprehensive analysis of a proposed project or business idea to assess its viability and potential for success. It involves evaluating various aspects such as market demand, technical feasibility, financial viability, and operational capabilities.
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The business plan then provides a framework that sets out a map for following through and executing on the entrepreneurial vision. Organizational Feasibility Analysis Organizational feasibility aims to assess the prowess of management and sufficiency of resources to bring a product or idea to market Figure 11.12 .
A feasibility study analyzes all of the critical aspects of a project to determine the probability of completing it successfully. ... Write an organizational, operational, or business plan ...
The business plan should be thought of in terms of growth and sustainability, whereas the feasibility study should be thought of in terms of concept viability. This is all you need to know and understand about feasibility study and business plan. Get ready to apply your knowledge in the real words with lots of success.
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Create a business plan conduct market research, and financial forecasts in minutes using ProAI's business plan generator. Here are the steps to conducting a feasibility study. Perform a ...
7. Make a Go/No-Go Decision. It is important to know when to cut your losses when starting a business. The go/no-go decision in a feasibility study comes in. The go/no-go decision is a key part of a feasibility study, and it can help you determine whether or not your business idea is worth pursuing.
It provides a high-level overview of the project's feasibility. Business Plan: A business plan is a detailed document that outlines the company's mission, vision, goals, organizational structure, market strategy, marketing and sales plans, financial forecasts, and operational details. It delves into the specifics of how the business will operate.
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Methodology: Essentially, feasibility studies are research projects, whereas business plans are projections for the future. Risks: Feasibility studies determine the risks associated with the idea ...
Step 6: Reviewing and analysing data. Finally, you need to review your feasibility study carefully and examine the findings with time. A good rule of thumb is to simply take a step back and reflect on the research before jumping into conclusions. After your study, look around and consider the following questions:
In other words, feasibility analysis involves an examination of the operations, financial, HR, and marketing aspects of a business on an ex ante (before the venture comes into existence) basis [4]. A feasibility study involves the process through which the viability of a business can be assessed. Since it involves a process, various steps are ...
Financial Feasibility Analysis. A financial analysis seeks to project revenue and expenses (forecasts come later in the full business plan); project a financial narrative; and estimate project costs, valuations, and cash flow projections Figure 11.13.. Figure \(\PageIndex{2}\): An analysis of financial feasibility focuses on expenses, cash flow, and projected revenue.
Operational feasibility is the measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development. ... Plan Business Organization and Operations: At this point, the ...