Feasibility Studies vs Business Plans

Be sure you know what you want and what to expect when pursuing a new venture, business or project. A lot of time, resources and money can be saved in knowing what to do and the order in which to do it. A good rule of thumb is to never commission a business plan until a feasibility study has been completed first. A proof of business concept, also known as a feasibility study, is normally less than 20% of the cost of a business plan and although a feasibility study will not be anywhere close to the in-depth “nuts and bolts” view of a business plan, it will do exactly what the name implies. It will show if a project is feasible before any other steps are taken or major financial burden is incurred. There are very big differences between a feasibility study and a business plan.

Feasibility Studies

A feasibility study is designed to discover if a business or project is “feasible” or if it is not: (In short, does the business or project warrant further investment of time, money and further study or is it a non-starter). A feasibility study is a relatively inexpensive way to safeguard any wastage of further investment (will it work or won’t it). If a project is seen to be feasible from the results of the study, the next logical step is to commission a full business plan. Will the investment made in the feasibility study itself then be wasted? No. Because the research and information uncovered in the study will be of good use in the business planning stage and will also reduce the research time and therefore the cost of the business plan. On the other hand a business plan is designed to “plan” in advance how a business or project will be started, implemented and managed. Business plans are commissioned for one of three reasons: Reorganisation, investment/funding or a management blueprint for operation.

If you fail to plan, you plan to fail!

FEASIBILITY STUDIES demonstrate to a prospective project owner or investor that a given concept is financially viable and whether further study and/or a business plan is warranted. For a feasibility study, basic data is obtained through a series of queries, questions and meetings, wherein the client provides
some of the research and other data and facts need to be gained from a variety of sources. The typical feasibility study contains, among other items, notes on financial projections, a general description of the business, general details describing how the company / project will be formed, managed and marketed, statements concerning the competition and a cash-flow projection based on averages. Further notes can be included as to general details of the project and revelations found during the research stage. The study will normally be completed quickly and in very general format compared to that of a business plan.

A feasibility study should answer five questions:

1. Will it work or not?
2. Is it profitable or not?
3. What will it basically cost to fund or start?
4. Is it worth doing?
5. Is it worth commissioning a business plan?