Feasibility study

Feasibility study is a systematic assessment conducted before major business or project decisions to evaluate whether a proposed venture is practical, viable and worth pursuing ^[1]. The study examines technical, economic, legal, operational and scheduling factors to determine if the project can succeed. Organizations use feasibility studies to avoid committing resources to ventures that carry unacceptable risks or insufficient potential returns. A well-conducted feasibility study provides decision makers with objective analysis rather than relying on intuition or incomplete information.

Historical development

The formal practice of conducting feasibility studies became widespread during the mid-twentieth century as project management evolved into a recognized discipline. Early infrastructure projects such as dam construction and railway expansion during the 1930s and 1940s required systematic analysis of costs, engineering challenges and expected benefits ^[2]. The Tennessee Valley Authority in the United States pioneered comprehensive project evaluation methods during this period.

Computer technology projects of the 1960s and 1970s brought renewed attention to feasibility assessment. Many information technology initiatives exceeded their budgets by factors of three to ten times original estimates. PROMPTII, a project management methodology developed by Simpact Systems Limited in the 1970s, established the feasibility study as a mandatory first stage before committing to system development ^[3]. The methodology later evolved into PRINCE and subsequently PRINCE2, which remains widely used in government and private sector projects.

Peter Checkland introduced Soft Systems Methodology in 1981 following research into complex projects including the Concorde supersonic aircraft development. His approach provided frameworks for examining feasibility in situations where problems and objectives were not clearly defined ^[4]. This represented a significant advance over earlier methods that assumed requirements could be specified with precision at project outset.

Types of feasibility analysis

Organizations typically examine multiple dimensions of feasibility before reaching a final decision. The TELOS framework provides a useful structure for organizing this assessment ^[5].

Technical feasibility

Technical feasibility addresses whether the organization possesses or can acquire the technology, equipment and expertise needed to complete the project. This analysis considers current technical capabilities, availability of required hardware and software, staff skills and training requirements, and technical risks associated with new or unproven technologies. A project may be economically attractive but technically impossible given current knowledge or available resources.

Economic feasibility

Economic feasibility examines the financial aspects of the proposed venture. Analysts calculate expected costs including initial investment, ongoing operational expenses and potential cost overruns. They compare these against projected revenues, cost savings or other benefits to determine return on investment. The analysis often includes payback period calculations, net present value assessment and sensitivity analysis showing how results change under different assumptions ^[6].

Legal feasibility

Legal feasibility considers whether the proposed project complies with applicable laws, regulations and contractual obligations. Certain activities may require permits, licenses or regulatory approvals that could delay implementation or prove impossible to obtain. Environmental regulations, zoning restrictions, labor laws and industry-specific requirements all warrant examination. Intellectual property considerations including patents and trademarks may also affect project viability.

Operational feasibility

Operational feasibility evaluates how well the proposed solution fits within existing business processes and organizational culture. A technically sound and economically attractive project may still fail if staff resist adoption or if implementation disrupts critical operations. This assessment considers change management requirements, training needs, impacts on current workflows and alignment with organizational objectives ^[7].

Scheduling feasibility

Scheduling feasibility determines whether the project can be completed within an acceptable timeframe. Some opportunities have limited windows during which action must be taken. Regulatory deadlines, competitive pressures or contractual commitments may impose constraints that make otherwise viable projects impractical. The analysis considers resource availability, dependencies between tasks and realistic estimates of activity durations.

Methodology and process

Conducting a feasibility study follows a structured process that balances thoroughness against the cost and time required for analysis ^[8].

Preliminary analysis

Before investing significant effort in detailed study, organizations often conduct preliminary screening to identify obvious obstacles. This initial review examines whether the concept aligns with strategic objectives, whether fundamental resources are available, and whether any insurmountable barriers exist. Projects that cannot pass this initial screen proceed no further. Those showing promise advance to comprehensive assessment.

Scope definition

Successful feasibility studies require clear boundaries. Analysts must understand what problem the project addresses, what outcomes constitute success, and what constraints apply. Engaging stakeholders early helps ensure the study examines relevant concerns and that key perspectives receive consideration ^[9].

Current state assessment

Understanding existing conditions provides a baseline for evaluating proposed changes. This assessment examines current processes, systems, capabilities and costs. Documenting the present situation helps identify improvement opportunities and ensures proposed solutions address actual rather than imagined problems.

Requirements definition

Feasibility studies must specify what the proposed project needs to accomplish. Requirements may address functionality, performance, capacity, reliability, security and other factors. Clear requirements enable accurate estimation of costs and benefits. Vague or unstated requirements frequently lead to later disputes and cost overruns.

Alternative evaluation

Most business problems admit multiple solutions. A thorough feasibility study examines several approaches rather than focusing exclusively on a single preferred option. Comparing alternatives helps ensure the organization selects the most appropriate path forward and provides fallback positions if the primary choice proves unworkable ^[10].

Data collection and analysis

Gathering relevant information requires market research, technical investigation, financial modeling and consultation with experts. Sources may include industry reports, vendor quotations, comparable project histories and internal organizational data. Analysts must assess information quality and acknowledge limitations in available data.

Report preparation

The feasibility study culminates in a report presenting findings and recommendations. Effective reports state conclusions clearly, support them with evidence, and acknowledge uncertainties. Decision makers require sufficient information to evaluate the proposal without drowning in excessive detail.

Components of a feasibility report

A well-structured feasibility report contains several standard elements ^[11]:

• Executive summary providing a concise overview of findings and recommendations suitable for senior management review
• Background explaining the context that prompted the study and objectives the project would address
• Methodology describing how the study was conducted including information sources and analytical techniques employed
• Market analysis examining customer needs, competitive landscape and demand projections for products or services
• Technical assessment evaluating technology requirements, infrastructure needs and implementation approaches
• Financial projections including cost estimates, revenue forecasts, cash flow analysis and investment returns
• Risk assessment identifying potential obstacles and mitigation strategies
• Implementation considerations addressing organizational, legal and operational factors
• Recommendations stating whether to proceed, modify or abandon the proposal

Distinction from business plans

Feasibility studies and business plans serve different purposes and occur at different stages of project development. The feasibility study precedes and informs the business plan. It asks whether an opportunity should be pursued at all. The business plan assumes a positive feasibility determination and details how the venture will be executed ^[12].

A feasibility study may conclude that a project should not proceed. Such a finding represents success rather than failure since it prevents wasted resources. Business plans do not contemplate abandonment; they commit to a course of action. Treating these documents as interchangeable leads to poor decisions and inadequate preparation.

Applications across industries

Construction and real estate

Property developers commission feasibility studies before acquiring land or commencing building projects. These assessments examine site conditions, zoning regulations, construction costs, market demand and projected selling prices or rental income. Given the large capital requirements and long time horizons involved, thorough feasibility analysis proves essential ^[13].

Information technology

Software development projects and system implementations benefit from feasibility assessment that evaluates technical complexity, resource requirements, integration challenges and user acceptance factors. Technology projects carry significant risk of scope creep and cost escalation, making upfront analysis particularly valuable.

Healthcare

Hospitals and medical facilities conduct feasibility studies before adding services, constructing new buildings or acquiring expensive equipment. These assessments must consider regulatory requirements, reimbursement policies, community health needs and competitive dynamics alongside conventional financial and operational factors.

Manufacturing

Industrial enterprises use feasibility studies when evaluating new product lines, factory expansions, process improvements or equipment purchases. Analysis addresses production capacity, supply chain implications, quality considerations and market demand in addition to capital costs and operating expenses.

Common mistakes in feasibility analysis

Several pitfalls undermine the value of feasibility studies ^[14]:

Confirmation bias occurs when analysts or sponsors approach the study with predetermined conclusions and selectively gather evidence supporting their preferred outcome. Effective studies require willingness to discover that a favored proposal should not proceed.

Optimistic assumptions lead to understating costs, overstating benefits and underestimating implementation timelines. Comparing estimates against actual results from similar past projects helps maintain realism.

Inadequate scope results when studies examine some factors thoroughly while neglecting others. A technically focused assessment that ignores market demand or organizational readiness provides incomplete guidance.

Excessive complexity can make reports impenetrable to decision makers and consume resources disproportionate to the value of information gained. Studies should be detailed enough to inform decisions but not so elaborate that they become ends in themselves.

Ignoring alternatives by focusing exclusively on a single approach prevents comparison and may lead to suboptimal choices. Even when one option appears obviously superior, examining alternatives tests that assumption.

Role in due diligence

When organizations consider mergers, acquisitions or major investments, feasibility assessment forms part of comprehensive due diligence. Buyers examine target company operations, finances, legal compliance and market position to verify that expected benefits justify the proposed transaction price. Sellers may commission feasibility studies to support asking prices or identify improvements that enhance value before sale ^[15].

Feasibility study — recommended articles

Project management — Business plan — Decision making — Risk management — Strategic planning — Return on investment — Due diligence — Market research — Investment

References

• Georgakellos D.A., Marcis A.M. (2009), Application of the semantic learning approach in the feasibility studies preparation training process, Energy Policy, Vol. 37, No. 5, pp. 1895-1903.
• Hoagland H., Williamson L. (2000), Feasibility Studies, University of Kentucky Cooperative Extension Service Publication, AEC-75.
• Justis R.T., Kreigsmann B. (1979), The Feasibility Study as a Tool for Venture Analysis, Business Journal of Small Business Management, Vol. 17, No. 1, pp. 35-42.
• Kerzner H. (2017), Project Management: A Systems Approach to Planning, Scheduling, and Controlling, 12th Edition, Wiley.
• Thompson A.A. (2003), Feasibility Studies: An Essential First Step, Journal of Agricultural Business Management, Vol. 4, No. 2, pp. 1-7.
• Turner J.R. (2014), The Handbook of Project-Based Management, 4th Edition, McGraw-Hill.
• Young T.L. (2013), Successful Project Management, 4th Edition, Kogan Page.

Footnotes

1. Justis R.T., Kreigsmann B. (1979), pp. 35-42
2. Kerzner H. (2017), Chapter 2
3. Turner J.R. (2014), pp. 45-67
4. Checkland P. (1981), Systems Thinking, Systems Practice, Wiley, pp. 154-178
5. Thompson A.A. (2003), pp. 1-7
6. Georgakellos D.A., Marcis A.M. (2009), pp. 1895-1903
7. Young T.L. (2013), pp. 34-56
8. Hoagland H., Williamson L. (2000), pp. 4-12
9. Turner J.R. (2014), pp. 89-102
10. Kerzner H. (2017), Chapter 4
11. Justis R.T., Kreigsmann B. (1979), pp. 35-42
12. Thompson A.A. (2003), pp. 1-7
13. Hoagland H., Williamson L. (2000), pp. 15-23
14. Young T.L. (2013), pp. 78-95
15. Turner J.R. (2014), pp. 156-178

Author: Sławomir Wawak