The Feasibility Study is the first step in any strategic planning or business development process. I am always amazed at how few people know how to do them and how few businesses really use them to their full potential.

A good Feasibility Study makes every decision easier and helps remove ambiguity from the future. Feasibility Studies, when done correctly, also reveal strategic areas of competitiveness and potential pitfalls that can otherwise be avoided.

Bottlenecks, capacity constraints, key success factors, risks and rewards can all be identified well ahead of time with a Feasibility Study.

Other information offered by a Feasibility Study include:

·
The NPV (net present value) of a venture, project or new product(s). In other words, how much is the activity worth in today’s money.
·
Funding required, or how much it will cost to develop, launch and bring the venture to a positive operational cash flow.
·
The Financial Structure, showing the debt/equity ratio of the activity and the associated cost of financing.
·
The Payback Period, or how long it will take to recoup the investment in a particular activity.
·
Operational Break-Even, or how an activity needs to perform in order to cover its operational costs. This figure is often expressed in units (of product or time) sold, but it can also be expressed in number of customers or contracts depending on the activity.
·
Profitability and Performance Ratios, such as ROI (return on investment), IRR (internal rate of return), ROS (return on sales), Gross Margins, Operating Margins, etc.