Feasibility Study (FS) is an analysis of the viability of an idea. It focuses on answering the question whether the proposed idea/project should be continued. FS primarily focuses on proposed business ventures or large-scale development initiatives and interventions. It should be conducted before proceeding with the development of a business or project. Determining early that an idea will not work saves time, money and other resources later.
A feasible business or idea is one where the business will generate adequate cash-flow and profits, withstand the risks it will encounter, remain viable in the long-term and meet the goals and objectives assigned. A FS is not a Business Plan. FS addresses the viability of business or project idea, while the business plan outlines the actions needed to take the proposal from “idea” to “reality.” Also, chronologically, FS usually stands before the business plan. The structure of an FS implementation suggested by AM Partners is rather standard and does not depend on the nature, concept, and sphere of the business or project idea. Differences appear on deeper levels when the features of each FS aspect become obvious. AM Partners offers the following structure for FS:
- Assessment of business or project implementation scenarios (“Evaluate alternatives” approach): a) development and discussion of different scenarios; b) selection of the most viable scenarios and project definition; c) relevance to the local context.
- Market feasibility: a) (sub-)sector description (aggregated); b) market segments and players, competition; c) market potential and development pre-conditions; d) factors affecting (most sensitive to) the business or project; e) projections of sales.
- Technical feasibility: a) availability (current status) of technical facilities (main site and infrastructure, machinery and equipment, etc.) and needs for expansion; b) availability of necessary human (professional) resources and needs for attraction of new resources; c) access to necessary inputs (materials, supplies, services, etc.) and needs for expansion.
- Financial feasibility: a) assessment of the sufficiency of allocated financial resources; b) preparation of projections of cash flow statement; c) preparation of projections of income statement; d) preparation of projections of balance sheet; e) development of financial coefficients and analysis.
The methods applied for the FSs are quite different and largely depend on specificities of each assignment. However, AM Partners usually applies the general methodological approaches below:
- Information collection (direct observations, desk review of secondary information, surveying, attraction of narrow experts, etc.);
- Standardization, justification and verification of collected information;
- Collected information processing: cross-checking, segregation and aggregation, extrapolation, compilation;
- Analysis of processed information and reporting.