When to do feasibility study? Although important, yet feasibility study is a time consuming and expensive task. Therefore, it shall be performed only during certain circumstance. The timing of doing feasibility study is as important as the feasibility study itself.
When to do Feasibility Study?
A feasibility study can be understood as risk assessment and return analysis for a business project. It is done to evaluate whether carrying out a project is feasible or not. It takes into consideration multiple factors which include the cost of running a project and the prospective return on investment. Although a feasibility study is mainly used for determining financial gains, it can also be used to forecast the risk factors and the pros and cons of pursuing a plan of action. Since conducting a feasibility study is an expensive and time-consuming process, one must consider certain factors before deciding to go for a feasibility study. In this article, we will address just that.
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When to do a Feasibility Study?
Feasibility studies are a means to evaluate the practicality of a project. Although they are crucial to any business model, yet they cannot be conducted anytime as they are very expensive and take a lot of time. Therefore, one must take into consideration certain factors before making the decision for a feasibility study.
The executive vice-president of Ketchum, Elliott S. Oshry argues that even though there are no downsides of conducting a pre-campaign study, it should be done only when:
- There is a surrounding air of doubt on whether or not the community will accept the proposed capital project.
- There has been a major transition in the board of directors or the management of a firm.
- The agency is about to launch its “first” campaign. In this scenario, it is best to study the various risk factors from all the different angles.
- No campaign has been conducted for the past ten years or more.
- There has not been any change in the annual profit of the company, it has been stagnant for a considerable amount of time.
- There is no clarity on the potential campaign chair.
- The lead gifts or the financial gifts for a campaign are not clearly distinguished and identified.
Check this comprehensive guide on Development feasibility study: an Overview
When not to do a Feasibility Study
Even though there are no known disadvantages of conducting a feasibility or a risk assessment study, yet they should be avoided on certain occasions because of the huge investment of money and time that they require. It is, therefore, suggested that conducting a study should be avoided during these scenarios:
- The agency has been running successful, faultless, back-to-back campaigns.
- The campaign has been made mandatory by an assessment body.
- The lead gift has been identified and agreed upon.
How to Monitor the Progress of the feasibility study?
Hiring a professional consultant is always advisable when conducting a feasibility study. The more time and effort that you spend on selecting a compatible consultant, the better output you will receive by the study. It is recommended that while picking a consultant, you must first send a request for proposal to a few consultants. The consultants will respond to your request by submitting a rough proposal describing the procedure of the study, the timeline, attached costs, purpose and goals to be achieved by the study. Based upon these proposals, you can select the consultant whose proposal best aligns with your vision.
It must be noted here that although hiring a consultant will save you from most of the work, it does not, however, negate you of all the responsibility in ensuring the proper conduct of the feasibility study is. You must partake active participation in the project as well as the assessment process, understanding all the issues involved in a detailed manner, enquire about any basic assumptions which are used in the study, and challenge the various conclusions made by the study.
To ensure that the study is conducted in a manner as wished by the members of the project committee, you can select a member or a small group from the committee and ask them to work in close association with the consultant. They can act as the bridge between the committee and the consultant. This will ensure that all the work will be carried out in a synchronized manner, satisfying all the stakeholders involved.
Although it must be ensured that the selected individual or group have deep understanding of the project to be able to adequately perform these duties. They must also be well acquainted with the purpose of conducting the study and be well-aware of all the provisions of the consulting contract. They duties will include:
- Representing the needs and interest of the project committee to the consultant
- Reviewing and clarifying the duties that the consultant is expected to deliver
- Monitoring the work to be done by the consultant
- Making and presenting periodic reports on the progress of the study to the project committee.
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How to Accept or Reject a Feasibility study?
When the feasibility study ends, a final report will be presented in front of the project committee in the form of a draft by the consultant. It is important that an organization must review the report of the study and review it to determine its accuracy, competence and relevance to the project before proceeding on to discuss the conclusions made by the study and how they will impact the respective project.
There have been many instances where the project committee has rejected the draft of the study report and asked for further analysis for bringing clarity to certain points. The study is only as strong as its weakest part. It only takes one mistake in a single part of the study to drown the entire business model. Therefore, it becomes necessary that before you accept the draft, you must ensure that:
- The report is easily understandable, and the project committee can comprehend it
- The study addresses all the relevant issues and questions related to the project
- It enlists and discusses in detail all the underlying assumptions made on the project analysis
- It is up to the expectations of the project committee
- The study logically consistent with respect to the various sections and subsections
- All the material in the report is based upon thorough research conducted by employing good research techniques
- It contains all the relevant data and can answer all the related queries
- The report can meet all the conditions set by the consulting contract.
It is to be kept in mind that the investors and any other stake holder can raise questions on the decisions and procedures followed during conducting the study. Therefore, it is important that you meet all the “due diligence” requirements, in case the project fails to do good. In order to ensure that proper safeguards are taken in this respect, you must want to discuss about this with your attorney.
How to use the results of a Feasibility Study?
The aim for conducting the feasibility study is to determine whether, the proposed business venture is viable, which is to be calculated based upon well-researched facts. However, it is not possible to provide a magic answer to this issue. Therefore, careful assessment for the conclusions of the study is to be made. Based upon these conclusions, it will be determined if the proposed business venture possess enough merit to proceed further with it. It requires a lot of analytical, rational, and logical thinking. Mistakes at this point can prove to be very expensive and harm the business for a long period of time. Mistakes that are commonly observed at this stage are:
- It has been found that generally the committee members have already made up their minds and so they try to “rationalize” and mold the study results to fit with their decision.
- Since most project committee members are “action” oriented and are desperate to move forward with the project, they neglect careful deliberations and ignore many important aspects of the study.
- Because of the lack of clear direction from the feasibility analysis, committee members use the report merely for the sake of seeking information and do not base their decisions on it.
Feasibility study plays an important role in determining the viability of a business project. However, it is not a child’s play to conduct these studies. They require a lot of time, money, and efforts and therefore, should only be conducted during certain special circumstances. After the study is completed, its report should be carefully examined and only after determining its accuracy and relevance, any decisions shall be based upon it.
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