Feasibility Study – A Guide for Critical Decision Making

Sherin , Senior Consultant

image

HLB HAMT - Accounting Firm in UAE

Phone:- +971 4 327 7775
Mobile:- +971 558074568
Email:- dubai@hlbhamt.com

    Get Free Consultation




    INTRODUCTION

    Research has shown that there are two main reasons behind the downfall of new business ventures. The first is that they fail to offer a product or service the market wants at the right time and second, that the business simply ran out of the cash it needed for business continuity either because its product/service did not have the expected success, or it had overlooked certain key assumptions relating to market demand and operating costs.

    If you have a great idea to start a new business or intend to develop an idea within an existing business, thorough research is essential. You need to find out if:

    • There is a market for your idea.
    • Your idea is financially viable.

    Any new business starts with an idea because of certain circumstances or need.

    Let us look at the examples of Airbnb and Uber.  They both started at the right time, i.e., during the 2008 recession, the circumstances demanded it, because people who lost their jobs due to recession needed to survive through making extra cash, where Airbnb allowed homeowners to let out room for travelers while Uber allowed anyone with a car to become a cab driver. Regardless of the origin of the idea, it is necessary to conduct certain market research to ensure the success of the business and the achievement of profits; this means to prepare feasibility study for the project. The decision to conduct a feasibility study should not be taken lightly as it is a time-consuming process. However, not doing a feasibility study can be more expensive in terms of the poor decisions made resulting in failure of the business altogether.

    A feasibility Study is largely number driven and ultimately tests the viability of an idea or a new business opportunity. By assessing the market for your concept, market competition, estimating financial viability, and identifying potential pitfalls, you can make an informed choice about the achievability of your entrepreneurial endeavor.

    To effectively conceptualize the business plan, the entrepreneur must have some initial and promising knowledge before beginning a detailed feasibility report. This is a pre-feasibility stage that can be achieved by brainstorming sessions with friends and family members in a confidential circle. If this is complete, you can move on to the feasibility study once the concept seems to receive a good response.

    The elements to include in a feasibility study vary according to the type of business venture and the kind of market opportunities identified. But the steps listed below are main phase of any feasibility study process:

    1. Market FeasibilityThe first step in the feasibility study is to study the factors affecting supply and demand. The market feasibility study is an important step to complete the next phase. It is necessary to identify the market in which the product will be sold and check whether market is controlled by intense competition. Understand whether the product/service add value for an existing product/service or is it produced for the first time in the market. It is also necessary to identify the consumer for the product/service offered and the income group, target consumer age group, gender, and other consumer characteristics so that the demand for the product/service can be accurately estimated.
    2. Technical FeasibilityIn this phase generally a group of engineers or technical experts study the project’s technical aspects. They assess the technology, machinery and technical equipment required to go forward with the business and fully meet the estimated market demands. An important element in the technical feasibility study is to determine the production capacity to meet the estimated demand i.e., estimation of raw material and labor requirements. The number of employees varies from one business to another depending on the nature of the business. Based on this analysis a decision on whether the technical resources are available to convert the idea into reality shall be arrived.
    3. Financial/Economic FeasibilityThe final phase of the feasibility study is to prepare cash inflow and outflow forecasts based on all the evaluated market and technical details. The financial forecasts will assess the cost of the project, sales & profits, return on investment, investment payback period, etc. Financial viability is a key factor for investors to participate in a new business venture, so invested capital must demonstrate the potential to produce an economic return for investors at least equivalent to that available from other equally risky investments.The precision and reliability of the study of financial feasibility depends on the accuracy of the data used. As the business idea evolves and passes through pre-feasibility, market feasibility and technical feasibility stages accuracy of information being used in financial feasibility stage will be much reliable than during idea inception stage.  Calculations of financial feasibility need to be performed with utmost caution and the complexity of assumptions depends on the number of different variables to be considered relating to revenue, operating & capital costs, structure of financing, etc.

      Once the financial projections are accurately estimated, it also makes it easier to conduct sensitivity analysis on key parameters, which makes it possible for investors to envision different scenarios and possibly mitigate risk associated with these parameters.

    CONCLUSION

    The decision to go/no-go is one of the most important in a new business concept. Once you have decided to pursue a business idea, then a feasibility study will be a major information source in making this decision.  The findings of the feasibility study should outline the several different scenarios which will allow you to carefully analyze the financial results and challenge the underlying assumptions so that you are convinced about the business concept. This is the reason why a properly developed feasibility study is critical in business decision making.

     

    Would you like to rate us on Google?         

     

    Varun R Chandra
    Varun R Chandra
    07:38 25 Apr 21
    HLB Hamt is highly recommended! They have the quality of services that would satisfy your needs. I'm glad I found them.
    Giuseppe Assi
    Giuseppe Assi
    06:20 31 Jan 21
    I HAD A GOOD EXPERIENCE WITH HLB HAMT DUBAI. THEY HAVE A VERY PROFESSIONAL TEAM, GOOD QUALITY OF SERVICES, GOOD VALUE... FOR PRICE.I RECOMMEND THIS COMPANY.read more
    Mohamed Sheriff
    Mohamed Sheriff
    16:16 28 Jun 20
    Experience with HLB Hamt in audit experience is great pleasure. They deploy well qualified accounts team for audits.... And the amount of checking they perform give the management of the company confidence that internal controls are well in place. We are glad to see they have high standard of audit practices.read more
    218141 JOSEPH THOMAS
    218141 JOSEPH THOMAS
    16:20 23 Jun 20
    Professionally managed firm with commitment to the engagements taken. My company and its group are assigning our... requirements for last 12 years to HLB and we don’t have any negative remarks on any assignments.read more
    PMI
    PMI
    07:14 23 Jun 20
    In my opinion, HLB Hamt is one of the best professional firms in UAE after big4. Excellent client service, professional... and competent staff and timely delivery are their strength. Over the years they have developed the infrastructure and skill set to handle multiple verticals ie, audit, tax services, consulting, IT support etc.Wishing HLB Hamt team all the very best.read more
    RAVI CHOKSI
    RAVI CHOKSI
    08:28 21 Jun 20
    Thank you Team HLB hamt...Your internal auditing team put the good amount of time and inputs in helping the... organisation making considerable improvements throughout the organisational working structure and helps in building the better business.Thanks.read more
    Maharajan Subramaniam
    Maharajan Subramaniam
    18:17 06 Jun 20
    High-Performing IT Teams, I'm impressed with the knowledge level of their deputed staff, audit procedures, and... checklist adopted. Mr. Vimal especially understand the requirement and provide solution not only technical feasibility and also considered budgeting. We’re confident in their abilities.read more
    Mohammed L
    Mohammed L
    08:07 05 Jun 20
    We have been working closely with them on payroll services for quite sometime.They provide very professional... services,experts in domain and excellent support. Would recommend them.Cheers.read more
    ROY ROSHAN VIVIAN
    ROY ROSHAN VIVIAN
    06:32 04 Jun 20
    Very professional team. Vimal has always given us good solution advice for various Software and IT Infra projects. We... are very Extremely satisfied working with him and his team. Wishing them success.read more
    Basil Daniells
    Basil Daniells
    05:55 03 Jun 20
    I have worked with HLB as a partner of Sage for about 2 years, they were dedicated to the success of the partnership... and kept aligned with the business plan that was agreed between our two companies. They are always ready to go the extra mile for a customer and don’t shy away from challenging circumstances. Keep up the good work and wish you all the success in the future.read more
    Amar Kashyap
    Amar Kashyap
    19:28 02 Jun 20
    Team of well qualified and organised professionals. Their reports are not based on numbers first they will understand... their client and their business. They are highly recommended and trust worthy.read more
    Radz de Jesus
    Radz de Jesus
    16:03 02 Jun 20
    We're glad to have found HLB Hamt to conduct the IT audit and risk assessment for our organization. We have learned a... lot from their team during that first project. And since then, we've continued to be in touch with them. Mr. Vimal especially is very good at presenting technical concepts in simple yet interesting ways that non-IT and business people alike would easily catch. We are very happy with the professionalism and quality of service they provide. They leave their clients nothing short of satisfied. Highly recommended.read more
    Next Reviews

    Get in touch

    Whatever your question our team will point you in the right direction

    Start the conversation
    Get in touch
    x
    x

    Share to:

    Copy link:

    Copied to clipboard Copy