What is a feasibility study? In its most general form, this concept implies an assessment of economic profitability, which is based on the calculation and analysis of a number of parameters. Obviously, the set of such characteristics will vary depending on the analyzed object.
If we are talking about business, the feasibility study is interesting not only for the entrepreneur, but also for the investor, whose funds are planned to be raised for the implementation of a specific project. All attention of both the first and second is riveted:
• to the amount of costs associated with the implementation;
• payback periods.
As you know, do not go to the investor empty-handed. In order to convince someone to give up money, you need to provide all the necessary calculations that relate to the two points mentioned above. By the way, businessmen often come up with the necessary funds with a ready-made business plan. And in this regard, the question often arises of how the feasibility study differs from the business plan. It should be noted right away that it’s impossible to call such a statement correct: these two concepts are from the same, as they say, opera. Only a business plan is a broader concept. And with it, attracting an investor is easier. If you characterize the rationale, then it is part of a business plan. After all, it often does not apply to the entire business, but only to its specific component.
The analysis, which is directly related to financial aspects, is the feasibility study of investments. There are no fundamental differences from the basic methodology.
Suppose that company N has long had a need to modernize the production process: competitors using new developments and more modern equipment were able to reduce labor and energy costs, which enabled them to offer products of traditional quality, but at a lower cost.
It is clear that it is unlikely to get information on innovations (the option of industrial espionage is not considered).
Consequently, the feasibility study of your own investment project will need to be done independently. Here is a solid “classic in black”: a multivariate analysis of economic as well as commercial effectiveness, financial sustainability and environmental safety is carried out. And only based on its results, an informed decision is made.
However, one should not think that the actions described above are the prerogative of the directors and specialized specialists of large industrial enterprises. Take at least the feasibility study of a loan. The scheme is similar: data collection, its study and analysis, decision-making on expediency. It should be noted that various banks use their own rationale for issuing loans. It is clear that the wider the list of factors under consideration, the more correctly a decision will be made on the appropriateness of the provision of funds. Yes, and it will be adopted more quickly. The latter circumstance is interesting not only to the borrower, but also to the lender.
