1. 2 DEFINITION OF A FEASIBILITY STUDY
“Man Never Plans to Fail, He Only Fails to Plan.”

2. DEFINITION OF A FEASIBILITY STUDY
THIS CHAPTER CLARIFIES what a feasibility study is by :
Providing an extensive definition,
Explaining why studies are conducted,
Outlining their limitations.

3. DEFINITION OF A FEASIBILITY STUDY
Definition: Feasibility Study
A feasibility study is a controlled process for identifying problems, opportunities; determining objectives, describing current situations and successful outcomes, and assessing the range of costs and benefits associated with several alternatives for solving a problem .In other words, it is the initial justification needed to determine or discover if a project is “ do-able”.

4. DEFINITION OF A FEASIBILITY STUDY
A Feasibility study is an analytical tool used during a business development process to show how a business would operate under a set of assumptions.
These assumptions often include such factors as the technology used (the facilities, equipment, production process, etc.),financing, (capital needs, volume, cost of goods, wages, etc.), marketing (prices, competition, etc.), and so on.

5. WHAT IS FEASIBILITY STUDY
The study is usually the first time in a project development process that many key pieces and information about the project are assembled into one overall analysis.
The study must show how well all of these pieces fit and perform together. The result will be an overall assessment of whether the proposed business concept is technically and economically feasible.

6. WHAT IS FEASIBILITY STUDY
The feasibility study evaluates the project’s potential for success. The perceived objectivity of the evaluation is an important factor in the credibility placed on the study by potential members, lenders, and other interested parties.
Also, the creation of the study requires a strong background both in the financial and technical aspects of the project. For these reasons, outside consultants conduct most studies.

7. WHAT IS FEASIBILITY STUDY
A FEASIBILITY STUDY by a recognized independent consultant may be required by the Agency for start-up businesses or existing businesses when the project will significantly affect the borrower’s financial operations.

8. Types of feasibility studies
An acceptable feasibility study should include, but not be limited to five types of feasibility:
- Economical feasibility studies
- Marketing feasibility studies
- Technical feasibility studies
- Financial feasibility studies
- Legal feasibility studies

9. WHAT IS FEASIBILITY STUDY
(a) Economic feasibility. Information related to the project site; availability of trained labor; utilities; rail, air, and road service to the site; and the overall economic impact of the project.
Economic analysis is the most frequently used method for evaluating the effectiveness of a new system.

10. WHAT IS FEASIBILITY STUDY
Economic feasibility.
More commonly known as cost/benefit analysis, the procedure is to determine the benefits and savings that are expected from a candidate system and compare them with costs. If benefits outweigh costs, then the decision is made to design and implement the system. An entrepreneur must accurately weigh the cost versus benefits before taking an action.

11. WHAT IS FEASIBILITY STUDY
(b) Market feasibility.
Information on the following aspects :
Nature and extent of market.
Market area, and market segment.
Marketing plans for sale of projected output.
Extent of competition.
Commitments from customers or brokers.
the sales organization and management.

12. WHAT IS FEASIBILITY STUDY
(c) Technical feasibility.
Facility needs.
Estimate the size and type of production facilities.
Investigate the need for related buildings, equipment, rolling-stock, etc.
reports shall address the suitability of the selected site for the intended use including an environmental impact analysis (EIA).

13. WHAT IS FEASIBILITY STUDY
(c) Technical feasibility.
Investigate and compare technology providers.
Determine reliability and competitiveness of technology (proven or unproven, state-of-the-art, etc.).
Identify limitations or constraints of the technology.

14. WHAT IS FEASIBILITY STUDY
(c) Technical feasibility.
Investigate access to:
raw materials
transportation
labor
production inputs (electricity, natural gas, water, etc.)
Investigate potential emissions problems.
Analyze other environmental impacts.

15. WHAT IS FEASIBILITY STUDY
(c) Technical feasibility.
The report shall contain sufficient information and analysis so that a determination may be made on the technical feasibility of achieving the levels of production that are projected in the financial statements.
The report shall also identify and estimate project operating and development

16. WHAT IS FEASIBILITY STUDY
(d) Financial feasibility.
Assess the “seed capital” needs of the business project during the investigation process and start-up.
Estimate capital requirements for facilities, equipment and inventories.
Estimate working capital needs.
Estimate start-up capital needs until revenues are realized at full capacity.
Estimate contingency capital needs due to construction delays, technology malfunction, market access delays, etc.
Estimate other capital needs.

17. WHAT IS FEASIBILITY STUDY
(d) Financial feasibility.
Estimate the expected revenue, costs, profit margin and expected net profit.
Estimate the sales or usage needed to break-even.
Estimate the returns under various production, price and sales levels. This may involve identifying “best case”, “typical”, and “worst case” scenarios.

18. WHAT IS FEASIBILITY STUDY
(d) Financial feasibility.
Assess the reliability of the underlying assumptions of the analysis (prices,market access, market penetration, etc.)
Benchmark against industry averages and/or competitors (cost, margin, profits, ROI, etc.).
Calculate expected cash flows during the start-up period and when the business reaches capacity.
Prepare pro forma income statement, balance sheet, and other statements of when the business is fully operating.

19. WHAT IS FEASIBILITY STUDY
(d) Financial feasibility.
An opinion on the reliability of the financial projections and the ability of the business to achieve the projected income and cash flow.
An assessment of the cost accounting system, the availability of short-term credit for seasonal business, and the adequacy of raw materials and supplies.

20. WHAT IS FEASIBILITY STUDY
(e) Legal feasibility
Legal Study, includes (Registrations , Contracts, Agreements, …etc)
Identify the proposed legal structure of the business.
Outline the staffing and governance structure of the business along with lines of authority and decision making structure.
Identify any potential joint venture partners, alliances or other important stakeholders.
Determines whether the proposed system conflicts with legal requirements.

21. Feasibility Study Objectives
The feasibility study is so important , It should provide a clear understanding of project risk to help members decide whether to invest in the proposed business.
Assists decision makers whenever they need to consider alternative development opportunities.
Permit planners to outline their ideas on paper before implementing them.
Presents and clarifies the risks and returns associated with the project.

22. Feasibility Study Objectives
Evaluation of whether to start a new business, by either new groups or established businesses, is the most common, but not the only usage.
Help groups decide to expand existing services, build or remodel facilities, change methods of operation, add new products, or even merge with another business.
Answers the basic questions: is it realistic to address the problem or the opportunity under consideration?

23. Feasibility Study Limitations
Although a feasibility study is a useful tool for project deliberation, it has limitations.
A feasibility study is not an academic or research paper, but is a pragmatic information and data analysis document. It is confidential to the group for which it is conducted, and is not for public dissemination.
The study is also not a business plan, which is developed later in the project development process and functions.

24. Feasibility Study Limitations
A feasibility study will not determine if the project will be initiated, since that depends on the potential members, who will invest in and become the owners of the business.
However, the information, data, and facts offered in a study, given realistic assumptions, provide the basis for a decision. Potential members must decide if the benefits justify the risks involved in their continuing the project

25. Feasibility studies failure
Many factors may be involved and probably will play a hand.
Many new projects which have passed countless feasibility studies have been sunk by unexpected events such as :
fire,
changes in legislation,
an inability recruit and/or keep suitable staff,

26. Feasibility studies failure
the failure of a major customer, seasonal demands, health scares,
product recalls due to poor quality,
withdrawal of financial support, weather,
new technology and poor management to list.

27. Key factors of feasibility studies
A key factors in any feasibility study must be ensuring that you are dealing with following factors:
1- With correct facts,
2- Correct assumptions and
3- Up to date financial data.
Many projects fail because assumptions were based on incorrect facts.

28. Review questions Multiple Choice Questions
1- _________ is concerning with the cost/ benefit analysis.
A- Marketing feasibility
B- Economic feasibility
C- Financial feasibility
D- all of these
Answer: B

29. Review questions Multiple Choice Questions
2- _________ is concerning with the environmental impact analysis (EIA).
A- Marketing feasibility
B- Economic feasibility
C- Technical feasibility
D- Legal feasibility
Answer: C

30. Review questions Multiple Choice Questions
3- _________ is one of the key factors in any feasibility study.
A- Correct assumption
B- Capacity
C- Challenge
D- None of these
Answer: A

31. Review questions Brief explain Questions
1- Define the meaning of feasibility study?
2- Briefly explain cost /benefit analysis of the economic feasibility study?
3- State the Key factors of any feasibility studies?
4- State three objectives of Feasibility Study ?
5- Explain the concept of Feasibility studies failure?