The main purpose of a feasibility analysis report is to help decide whether a given project or a business opportunity is feasible from both technical and financial perspectives. This is crucial for making well-informed business decisions.
A typical feasibility analysis shall be compromised of the following elements:
This defines the nature of the project, its objectives, the business opportunity, and how the project shall address this business opportunity.
This is one of the most important elements of a feasibility analysis. The market research should include the following:
· Analysis of market opportunities and identifying potential customers
· Investigating demand trends for the products to be offered
· Studying the competitive environment and substitutes
· Determining product differentiation factors
· The marketing plan, detailing how to reach for customers, retain them, pricing, and marketing positioning strategy.
These are the essential requirements that are needed for the project to achieve its objectives. Business requirements include:
· Technical Requirements: include the potential locations and space requirements for the project, facilities management, machinery and equipment, sources of supply, and systems and software.
· Organizational requirements: include legal requirements, the manpower plan, and analysis of business processes.
The Financial Plan
This is a very important and critical component of any feasibility analysis. The purpose of the financial plan is to show how profitable the project or the business opportunity is likely to be. The financial plan shall include:
· Startup costs: these are the costs needed for the business to be ready for starting operations. These costs include fixed assets, and information systems.
· Funding details: including funding needs and the suggested sources of funds.
· Operating costs: these are the ongoing costs of doing business. These costs include raw materials, sales and marketing expenses, salaries, rent and facilities, and maintenance costs. A proper cost analysis is required.
· Revenue Projections: These are linked to the market research section.
· Projected financial statements: these shall include financial information projected for at least three years. The main financial statements to be included are: the balance sheet and the profit and loss statement. The statement of cash flows may be included as well.
· Financial and Investment analysis: payback period, breakeven analysis, and IRR are essential to the investment decision making process.
· Future expansion plans: this is linked to the marketing research as well. Funding needs as well as profitability analysis is required.
To conclude, the feasibility analysis helps summarize the major aspects of a project or a business opportunity in a structured and organized form. Moreover, it assists project and business managers plan their business more professionally, and aids investors in their decisions.