Feasibility Study: Steps, Types, Checklist & Examples

It can be exciting to run a large, complex project with the potential to have a significant impact on your organization. On the one hand, you're driving real change. On the other hand, failure is intimidating. That's where a feasibility study comes in. If you've never used a feasibility study for project management before, this article will walk you through everything you need to know to get started.

What is a feasibility study?

A feasibility study is an assessment that evaluates whether a proposed project is practical and likely to succeed before you commit resources. It answers two key questions:

• Does our team have the required tools or resources to complete this project?

• Will there be a high enough return on investment to make the project worth pursuing?

Benefits of conducting a feasibility study

There are several key benefits to conducting a feasibility study before launching a new project:

• Confirms market opportunities and the target market before investing significant resources

• Identifies potential issues and risks early on

• Provides in-depth data for better decision-making on the proposed project's viability

• Creates documentation on expected costs and benefits, including financial analysis

• Obtains stakeholder buy-in by demonstrating due diligence

Feasibility studies are essential for projects that represent significant investments or have a large potential effect on your market presence. As the project manager, you may not drive the study yourself, but understanding its elements helps you support the process and ensure the best outcome.

When should you conduct a feasibility analysis?

Conduct a feasibility study after a project has been pitched but before any work begins. It's part of the project planning process and is often done alongside a SWOT analysis or project risk assessment.

If you're still defining what your team requires to move forward, a needs assessment template can help you gather baseline data and set priorities before committing resources.

Feasibility studies help:

• Confirm market opportunities before committing to a project

• Narrow your business alternatives

• Create documentation about the benefits and disadvantages of your proposed initiative

• Provide more information before making a go-or-no-go decision

You likely don't need a feasibility study if:

• You already know the project is feasible

• You've run a similar project in the past

• Your competitors are succeeding with a similar initiative in the market

• The project is small, straightforward, and has minimal long-term business impact

• Your team ran a similar feasibility analysis within the past three years

Keep in mind that a feasibility study is not a project pitch. A pitch evaluates whether a project is a good idea aligned with your strategic plan. A feasibility study confirms whether that good idea is achievable with your available tools and resources.

Which phase of the project management process involves feasibility studies?

Feasibility studies are a key part of the project initiation and planning phases. They are typically conducted after a project has been conceptualized but before significant resources are invested in detailed planning and execution.

The purpose of a feasibility assessment is to objectively evaluate the viability of a proposed project, considering factors such as technical feasibility, market demand, financial costs and benefits, legal requirements, and organizational readiness. By thoroughly assessing these aspects, a feasibility study helps project stakeholders make an informed go-or-no-go decision.

While feasibility studies are a critical tool in the early stages of project management, they differ from other planning documents. Here's a quick comparison:

A feasibility study should be conducted after the project charter or business case has been approved. It confirms whether the approved project is something your team can actually accomplish with available resources.

Types of feasibility studies

There are five main types of feasibility studies: technical feasibility, financial feasibility, market feasibility (or market fit), operational feasibility, and legal feasibility. Most comprehensive feasibility studies will include an assessment of all five of these areas.

Technical feasibility

A technical feasibility study reviews the technical resources available for your project. This study determines if you have the right equipment, enough equipment, and the right technical knowledge to complete your project objectives. For example, if your project plan proposes creating 50,000 products per month, but your factories can only produce 30,000 per month, the project isn't technically feasible.

Financial feasibility

Financial feasibility refers to whether your project is fiscally viable. A financial feasibility report includes a cost-benefit analysis of the project. It also forecasts an expected return on investment (ROI) and outlines any financial risks.

Market feasibility

The market feasibility study evaluates how your team's deliverables will perform in the market. This part of the report includes a market analysis, a breakdown of market competition, and sales projections.

Operational feasibility

An operational feasibility study evaluates whether your organization can complete this project. This includes staffing requirements, organizational structure, and any applicable legal requirements. At the end of the operational feasibility study, your team will have a sense of whether or not you have the resources, skills, and competencies to complete this work.

Legal feasibility

A legal feasibility analysis assesses whether the proposed project complies with all relevant legal requirements and regulations. This includes examining legal and regulatory barriers, necessary permits, licenses, or certifications, potential legal liabilities or risks, and intellectual property considerations. The legal feasibility study ensures that the project can be completed without running afoul of any laws or incurring undue legal exposure for the organization.

Feasibility assessment checklist

Most feasibility studies are structured similarly. These documents serve as an assessment of the practicality of a proposed business idea. Creating a clear feasibility study helps project stakeholders during the decision-making process.

The essential elements of a feasibility study are:

• An executive summary describing the project's overall viability

• A description of the product or service being developed during this project

• Any technical considerations, including technology, equipment, or staffing

• The market survey, including a study of the current market and the marketing strategy

• The operational feasibility study evaluates whether or not your team's current organizational structure can support this initiative

• The project timeline

• Financial projections based on your financial feasibility report

6 steps to conduct a feasibility study

You likely won't conduct the feasibility study yourself, but you'll provide insight and information. To get started, hire a trained consultant or work with your in-house project management office (PMO). Here are the six steps they'll follow:

1. Run a preliminary analysis

Before diving into a full feasibility study, evaluate the project for obvious roadblocks. Large-scale obstacles that make a project clearly unviable include:

• Budget constraints: The project requires significantly more funding than your organization has available.

• Timeline conflicts: The project deliverables can't be completed by the required deadline.

If these deal-breakers exist, a full feasibility study is unnecessary.

2. Evaluate financial feasibility

Think of the financial feasibility study as the projected income statement for the project. This part of the feasibility study clarifies the expected project income and outlines what your organization needs to invest, in terms of time and money, to meet the project objectives.

During the financial feasibility study, take into account whether or not the project will affect your business's cash flow. Depending on the initiative's complexity, your internal PMO or external consultant may want to work with your financial team to conduct a cost-benefit analysis of the project.

3. Run a market assessment

The market assessment, or market feasibility study, is an opportunity to identify market demand. This study provides an estimate of expected project revenue and potential market risks you may encounter.

The market assessment is an opportunity to evaluate whether there's an opportunity in the market. During this study, it's critical to evaluate your competitors' positions and analyze demographics to gauge how the project will unfold.

4. Consider technical and operational feasibility

Even if the financials are looking good and the market is ready, this initiative may not be something your organization can support. To evaluate operational feasibility, consider any staffing or equipment requirements this project needs. What organizational resources, including time, money, and skills, are necessary in order for this project to succeed?

Depending on the project, it may also be necessary to consider the initiative's legal effect. For example, if the project involves developing a new patent for your product, you will need to involve your legal team and incorporate that requirement into the project plan.

5. Review project points of vulnerability

At this stage, your PMO team or consultant reviews all four elements of your feasibility study for inconsistencies. They'll ensure the income statement aligns with your market analysis and flag any liabilities that are too risky. If major red flags emerge, create a contingency plan.

A feasibility analysis won't always provide a clear-cut answer for complex projects. Instead, it equips you with the right questions and data to make the best decision for your team.

6. Propose a decision

The final step of the feasibility study is an executive summary that touches on the main points and proposes a solution. Depending on the complexity and scope of the project, your internal PMO or external consultant may share the feasibility study with stakeholders or present it to the group in order to field any questions live. Either way, with the study in hand, your team now has the information you need to make an informed decision.

Feasibility study examples

To better understand the concepts behind feasibility assessments, here are two hypothetical examples demonstrating how these studies can be applied in real-world scenarios.

Example 1: New product development

A consumer goods company is considering launching a new product line. Before investing in new product development, they conduct a feasibility study to assess the proposed project.

The feasibility study includes:

• Market research to gauge consumer interest, assess competitor offerings, and estimate potential market share for the target market.

• Technological considerations, including R&D requirements, production processes, and any necessary patents or certifications.

• In-depth financial analysis projects sales volumes, revenue, costs, and profitability over a multi-year period.

• Evaluation of organizational readiness, including the skills of the current management team and staff to bring the new product to market.

• Assessment of legal feasibility to ensure compliance with regulations and identify any potential liability issues.

The comprehensive feasibility study identifies a promising market opportunity for the new business venture. The company decides to proceed with the new project, using the feasibility report as a template for their business development process. The study helps secure funding from key decision-makers, setting this start-up product initiative up for success.

Example 2: Real estate development deal

A property developer is evaluating the feasibility of purchasing land for a new residential community. They commissioned a feasibility study to determine the viability of this real estate development project.

The feasibility assessment covers:

• Detailed analysis of the local housing market, including demand drivers, comparable properties, pricing, and absorption rates.

• Site planning to assess the property's capacity, constraints, and technological considerations.

• In-depth review of legal feasibility, including zoning, permitting, environmental regulations, and other potential legal hurdles.

• Financial analysis modeling various development scenarios and estimating returns on investment.

• Creation of an opening day balance sheet projecting the assets, liabilities, and equity for the proposed project.

• Sensitivity analysis to evaluate the effect of changes in key assumptions on the project's scope and profitability.

The feasibility study concludes that while the real estate start-up is viable, it carries significant risk. Based on these findings, the developer makes an informed decision to move forward, but with a revised project scope and a phased approach to mitigate risk. The comprehensive feasibility analysis proves critical in guiding this major investment decision.

Best practices for conducting a feasibility study

A great feasibility study provides the clarity your team needs to make confident decisions. To get the most out of your analysis, keep a few best practices in mind.

• Assemble the right team. Involve experts from different departments, such as finance, product, and legal. Their diverse perspectives help ensure a comprehensive and accurate assessment.

• Use reliable data. Your study is only as good as the information it's built on. Base your analysis on up-to-date market research, accurate financial data, and realistic internal assessments to support data-driven decision making.

• Connect your study to your work. A feasibility study shouldn't live in isolation. Add the findings into your project plan using a work management tool to give everyone a clear view of the project's foundation and direction.

• Present findings clearly. Focus on delivering a clear, concise summary for stakeholders. A well-presented report helps leaders quickly understand the recommendation and make an informed go-or-no-go decision.

Achieve project success with Asana

Are you done with your feasibility study? You're ready to run a project! Set your project up for success by tracking your progress with a work management tool like Asana. From the small stuff to the big picture, Asana organizes work so teams know what to do, why it matters, and how to get it done.

Frequently asked questions about feasibility studies