Introduction
We often hear about investments that either did not yield any profit at all or did not bring the expected results. Every investment in a new project or venture carries with it an inherent level of risk. For this reason, before a company commits significant resources into a new project, it should prepare an analytical Feasibility Study.
Definition
A Feasibility Study is a critical assessment tool used by businesses and investors to determine the viability of a project or venture. The essence of the Feasibility Study, is to determine whether the company should undertake the project under consideration.
Benefits
The benefits of a Feasibility Study are the following:
- Informed decision making: It provides analysis of all aspects of a project facilitating decision making
- Risk mitigation: By identifying potential problems early, it allows the company to find solutions in advance in order to avoid problems
- Strategic Planning: It aids in strategic planning by providing a road map and setting realistic expectations
- Cost Effectiveness: It can save money in the long run by avoiding projects which are not viable
Common mistakes
Some common mistakes in Feasibility Studies include:
- Overestimation of income
- Underestimation of expenses
- Underestimation in the time required to complete the project
Conclusion
Many companies consider a Feasibility Study to be an unnecessary expense. We believe that it is an indispensable tool for any serious business venture. It provides a sound foundation for investment decisions while at the same time reducing the risk of failure.