How to Conduct a Feasibility Study in the Philippines

Last Updated – Sep 9, 2021 @ 12:17 pm

One of the major challenges faced by business owners is uncertainty. This includes how to drive customers to check your products, and encourage them to spend so you can make a profit. 

Without having a proper insight achieved by thoughtful planning and forecasting, you will never be sure whether or not your business can thrive.

This is where feasibility studies come into play. 

What is a Feasibility Study?

A feasibility study is a report that is done to assess the market factors that decide whether a project is viable or not. This makes it unique from a business plan which mostly describes strategies to grow a business.

Feasibility reports discuss legal requirements, economic factors, technical resources, and scheduling considerations that can contribute to a project’s success or failure. 

These studies are very useful for projects and companies who want to forecast their Return on Investment. It can also serve different industries and goals. 

Feasibility studies offer various benefits to business owners. These studies are vital because even though you know you can finish a project, it doesn’t mean it’s worth it to pursue.

Without this study, you won’t have an insight into your potential risks and rewards. Other benefits of feasibility studies worth noting include:

  • It highlights the reasons to push with an idea
  • It saves money and resources
  • It improves your team focus
  • It can help you understand the opportunities and limitations for growth
  • It narrows down alternatives
  • It increases the chances of success
  • It helps to make clear plans and strategies for future use
  • It adds value to pitches  
  • It helps you have a realistic assumption
  • It enables you to plan your development process well 

What is the Purpose of a Feasibility Study?

Feasibility studies take time and effort, but why should companies go through all the hassle to make one? 

The major reason behind this study is to assess a company’s viability to be successful in its endeavors.

Considering this, a feasibility study is the most effective strategy to validate certain decisions such as buying or selling a business, getting a business loan, or validating a business idea, among many others. 


What an ideal Feasibility Study should look like

A lot of people get intimidated by the idea of making a feasibility study, but once you know its qualities, you can avoid committing mistakes that can affect the feasibility of your venture.

We’ve gathered the characteristics of an ideal feasibility study below.

Easy to read and understand

The best feasibility study is not riddled with complex words and phrases only a few people can understand.

While technical terms cannot be avoided, a proper feasibility study must be written in a simple way that can be understood by its readers. 

When you write a feasibility study, you need to be clear on who its audiences are and whether or not your findings can be easily understood by these people.

If not, your readers will only get frustrated. Make it a habit to use common words in your content. Most importantly, write in a natural way to keep your audience interested.  

Addresses all key questions and underlying assumptions about the project

Before you start your feasibility study, it should have a clear goal. What do you want to find out?

One of the most common reasons why feasibility studies fail is because its makers do not fully understand what the project is created for, and what results readers expect from it. 

For example, if you are making a feasibility study about building a vegan restaurant, your goal is to know whether or not it will be profitable.

At its core, every study answers basic questions that companies or entrepreneurs ask themselves to make sure that the project will be successful.  

Uses the right type of research and methodologies

The amount of research methodologies that can be used to conduct a feasibility study is enough to make your head spin. However, choosing the right type can make or break your study.

This is why you have to take a step back to understand what type of research you want to do. 

Never underestimate the time and effort it takes to properly conduct a feasibility study.

The amount of time to prepare, collect and analyze data could be put to waste if you do not choose the appropriate research methodology. 

Aligns with the project committee’s expectations

You are not the only person who will use your feasibility study. Chances are, it will be reviewed by other people who are part of the project.

This could be your business partner, investor, or stockholders. Make sure that all the deliverables of the feasibility analysis are in place during its evaluation and review stage. If not, it may be rejected.  


Types of Feasibility Studies

Not all feasibility studies are the same. Your methodology will largely depend on the type of feasibility study you need to do. We’ve rounded up four types below. 

Technical Feasibility Study

This type of feasibility study finds out the details of how you can get your service or product to your customers.

It includes the logistical plan of how you will produce, deliver, and track your services, as well as the materials, labor, location, and technology considerations it needs to come to life. 

Operational Feasibility Study

Operational Feasibility Study centers on how well you can implement a project within the organizational business structure you already have.

It must provide solutions to problems, and aim to come up with the perfect organizational structure that will solve all potential staffing issues you will face. 

Financial Feasibility Study

This study centers on the management’s ability to raise the funds needed to implement a project. For example, does it need investors or other fund sources

Aside from that, this feasibility study also discusses the creditworthiness of a business, as well as its loan availability and equity. This type of study is essential for land purchase and leases, and startups

Market Feasibility Study

A market feasibility study will ensure that the business will have customers. The goal of this study is to avoid the mistake of launching a product no one will buy. 


Contents of a Feasibility Study

Although feasibility studies can be performed using different methodologies, it still follows the same content structure. We’ve listed the key parts of the study below.  

Title page

This is the first thing your reader sees.

The title should be clear enough to give your readers a clue on what the study is all about.

It should also include the names of those who conducted the study.

Table of contents

If readers want to access a specific section without browsing through the whole document, this part can help them.

The table of contents must list all the section titles with their corresponding page number.

Executive summary

The executive summary includes the introduction of the project, its purpose, and an overview of the sources that support its legitimacy. 

Market feasibility

This part gives information about the past, present, and future of the company.

It includes history, current trends, and forecasted developments of the industry.

Make sure you narrow down your focus and discuss how your project can fit into the narrative.

This way, readers can gain a better understanding of what you have to offer. 

Technical feasibility

This section discusses the factors that could make or break your business such as the location, materials for your products, and quality assurance facilities, among others. 

Financial feasibility

Financial feasibility centers on information about your present and previous accounting statements, assets and liabilities, and information about investors. 

Organizational feasibility

This part demonstrates the organizational structure and staffing requirements of your company.

If you have branches and various locations, specify that here. 


Steps for Conducting a Feasibility Study

Conducting a feasibility study is not a walk in the park. You need to follow various steps to ensure you arrive at an accurate conclusion.

Keep on reading to know the important steps you need to undertake to make a feasibility study.

Step 1: Conduct your preliminary analysis

The first step in making a feasibility study is to outline your plan. Feasibility studies are very labor-intensive and this part will determine whether or not your study is justified.

The goal of this step is to look for potential roadblocks that would make your study useless.

Step 2: Make a projected income statement

Now that you have made your preliminary analysis, it’s time to work backwards and uncover the expected income of the project.

This also includes the investment needed to achieve the said income. Some of the things you need to take into account include sales, revenue adjustments, and cost of services.

Step 3: Perform research

This is the most important step of your feasibility study, and it is where you will do proper market research. This will give you an idea of whether or not people will buy your product or service.

Make sure to consider factors such as other competitors, audience demographics, and geographic influence on your audience. 

Step 4: Review and analyze data

After finding out the results of your research, it’s time to review and analyze everything to ensure its accuracy.

Reexamine all the steps you made, and compare them with your liabilities and expenses.

Now, think about the risk and come up with a contingency plan if things don’t work out.

Step 5: Make a decision

After you have laid out all the research needed for the project, you are finally ready to make a decision.

Do you think the project will be feasible or not?

Consider all the results to make an informed decision


Feasibility Study Outline

Here are the typical factors that are often included in feasibility studies. We’ve also included general guidelines for writing each section.

Executive Summary

This section provides a summary of the critical segments of the report. This allows the readers and reviewers to get a sense of the paper’s information and findings before reading the study.

All parts of the report must be clearly summarized, and key information like findings and conclusions should be provided.

It must include the following:

  • Problem analyzed in the study
  • Expected costs and benefits, and anticipated risks
  • Organizational impact
  • Business objective supported by the study

Guidelines:

  • This part is meant to be written after you’ve completed the study
  • It must include a clear summarization of the study’s content
  • Try to fit the executive summary in a single page
  • This is not a required section for short feasibility studies

Introduction

This part of your feasibility study allows you to show your reviewers and readers why your work warrants their attention.

It must include the following:

  • The product/service description provides a high-level description of the services or products that are part of your study.
  • The purpose of the study states your motivation for creating the study, as well as its desired outcome
  • The target audience states the group of people who are the intended readers of the documents

Guidelines:

  • This section must give outline the factors that prove the study is worth making
  • It must clearly identify the readers of the feasibility study
  • It must summarize all topics that are part of the introduction

Justification

The project justification’s goal is to explain why there is a need to implement the solution to the problem mentioned in the study.

In this section, you need to convey to the readers a more detailed version of the purpose sub-section in your Introduction and contextualize it in the organization’s day-to-day activities.  

It must include the following:

  • The problem statement which is the description of the problem in the document
  • Reiterate the organizational and business impact of the study. This should include how the problem will affect the organization, as well as parts of the business like the workforce, and particular divisions
  • The solution objective which shares the benefits expected to be felt when the problem is solved

Guidelines:

  • This section should be no more than 3-4 paragraphs
  • It must focus more on the characteristics of the justification process, instead of how the process is performed
  • Before writing this section, you must understand the business activities of the organization concerned

Solutions

This part contains the summary of the proposed solution and reiterates its benefits and costs. It must highlight how the solution can do wonders for the organization.

This part can also have the same sub-sections as the Justification section, but the focus should be on how the solution can impact the organization.

It must include the following:

  • The findings and recommendations and why it is or is not recommended
  • It should include the advantages and drawbacks of the initiative considered, and state the possibility of success for the idea being studied.

Guidelines:

  • This section must be brief because most of its specifics can be found in other sections
  • It must highlight the proposed solution, as well as its characteristics
  • The narrative of this section must be comprehensive and informative

Alternatives

The focus of this section is to state the alternative solutions that are considered instead of the proposed solution. It outlines how these options can impact the problem positively despite not being selected as the main solution.

It must include:

  • A cost-benefit analysis of the alternatives
  • A matrix of how the alternative solutions compare to each other

Guidelines:

  • It should outline how these options can impact the problem positively despite not being selected as the main solution

Cost-Benefit Analysis

In this section, you need to compare the estimated costs and benefits that are associated with the project solution. This will determine whether or not it’s sensible from a business point of view.

It must include the following:

  • Net Present Value or NPV1
  • Return on Investment or ROI 2
  • Payback Period or PP 3

Guidelines:

  • The section must calculate the cost-benefit ratio and determine whether it is worth it
  • This must define and select the values including NPV, ROI, and PP that will justify the proposed solution
  • You must state the tools or approach needed to carry out the cost-benefit analysis for both the proposed and alternative solutions

Financial Projections & Economic Feasibility

There are numerous techniques you can use to approach the financial feasibility of your study.

This includes:

  • The top-down approach where the senior management and business analysts list their expectations on the project expenses. It also discusses how to come up with the estimated funds to cover the project’s expenses
  • The bottom-up approach highlights small and measurable tasks that are pieced together to get the cost estimate.

The financial projections must estimate the following:

  • Seed capital for the project
  • Equity needs
  • Credit needs
  • Expected revenue, profit margin, costs, and net profit
  • Sales to break-even

Technical Feasibility

The technical feasibility’s purpose is to understand whether proposed technical considerations like software, IT security measures, and logistics, that are needed for a project, and the effort it needs to be built.

It also outlines whether or not a business has enough expertise to realize these technical aspects.

This covers the following:

  • The availability of raw materials, labor, transportation, wage rates, and access to qualified professionals
  • Potential environmental impacts
  • Regulatory requirements
  • Economic incentives

Technical feasibility also includes technology considerations like:

  • The suitability of the production technology and how reliable and competitive it is, as well as its limitations
  • How to manage and monitor business functions
  • The new technology that needs to be developed or contracted through a provider

Market Feasibility

The goal of market feasibility is to find out the potential opportunities and pitfalls before the project is actualized. This can be based on the market assessment you have completed.

The market feasibility must cover strategies like:

  • Determining the size and scope of the industry
  • Market forecasting and profiling
  • Demographic studies
  • Life-cycle of the industry

Guidelines:

  • State the industry concentration, including the competition and amount of producers
  • Give an analysis of the barriers to the entry of new competitors
  • Describe the price competitiveness of your service or product
  • Show your unique market potential

Operational Feasibility

Finding out the operational feasibility will allow your readers to understand if the project will solve the current business problem. This also explores how the project can be contextualized in the daily operations of the organization.

Organization and staffing

With the addition of new services or products, there may be a need to have more staff or restructure the current workforce. This can lead to increased costs or a change in the current processes of the organization.

This can include:

  • A list of the new staff positions an organization needs, including their duties
  • The changes to the current practices and processes of the organization to accommodate the change

Organization Structure & Management

Organizational structure and managerial feasibility are also key parts of operational feasibility.

This can include:

  • Outline of the governance structure of the organization to know the decision-making structure
  • The considerations and requirements for the new staff
  • Identify access to skilled staff needed to realize processes like accounting, legal, and many others

Schedule Feasibility

This outlines the duration of the project and finds out whether it will take a long time before it can be successful.

This can include:

  • Exactly how much time the team needs to deliver the project
  • All the deadlines and timeframes that need to be met
  • The desired schedules and potential additional time needed to meet project requirements

Contractual Feasibility

Contractual feasibility explores if a project compiles with legal and contractual requirements.

This can include:

  • Security of sensitive information like credit card details
  • System for employee monitoring
  • The expectation of privacy on company laptops and desktops

Free Feasibility Study Templates

Below are some of our highly recommended feasibility study templates that you can use for free to draft your own.


Final Thoughts

Whether you are launching a new product or building a new business venture, a feasibility study will give you a look at your potential revenue flow, and financial risks.

Now that you know how important this document is, use everything you have learned to make sure your study is perfectly tailored to your needs. 

Sources

  1. Investopedia – NPV
  2. Investopedia – ROI
  3. Investopedia – PP

About MJ de Castro

Mary Joy de Castro writes in between surf sessions.

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