Your new business cannot succeed by chance. As an entrepreneur, you need a clear roadmap that defines your goals, strategies, financial expectations, and more. This is where the feasibility study and the business plan come into play. But what exactly is a feasibility study? What is a business plan? How do you conduct the former and write the latter? And when do you need each? All of this and more will be covered in the following sections.
What is a Feasibility Study?
A feasibility study is a comprehensive analysis of all possible aspects of a proposed project, aimed at determining its likelihood of success. This study primarily assesses whether the project will yield a return on investment (ROI) that justifies the investment. However, this is not the only indicator—other important factors include how the project will be received by the community and its potential environmental impact.
As part of the feasibility study, project managers must determine whether they have the right people, financial resources, and technology to make the project successful. It also evaluates financial liquidity to ensure that the returns can cover operating costs and justify the risks involved.
How to Conduct a Feasibility Study:
Although the specifics may vary depending on the type of company or industry, certain steps are generally recommended for any feasibility study:
Data Analysis: Review and verify the data obtained during the initial analysis phase to ensure its accuracy.
Market Research: Identify market opportunities, customer demands, and potential barriers to entry or threats in the market.
Work Plan: Draft an operational and organizational plan that includes required tasks, associated costs, and expected duration.
Projected Income Statement: Estimate revenues, operating costs, and profits, along with a balance sheet for the project.
Identifying Obstacles: Recognize potential weaknesses or challenges that could hinder the project’s success and how to address them.
Make an Initial Decision: Based on the findings, decide whether to proceed with the project or temporarily or permanently abandon the idea.
What is a Business Plan?
A business plan is a comprehensive document that outlines a company's goals, strategies, and operations to achieve these goals. It acts as a roadmap for the company's success, and while every company, whether startup or established, needs one, it is particularly crucial for new businesses seeking funding or guidance for their future.
For startups, a business plan is essential for attracting investors and securing funding. For established companies, it provides a tool for staying on course and sustaining growth.
How to Create a Business Plan:
There are various templates and models available for writing a business plan. However, it’s crucial to avoid generic approaches and write a plan that reflects your business’s unique character and needs.
A typical business plan should range between 15 to 25 pages and may include the following sections:
Executive Summary:
This includes your mission statement, leadership information, team structure, and key operations details.
Products and Services:
Provide a detailed description of your products or services, including pricing, lifecycle, customer benefits, and the technology behind them.
Market Analysis:
Outline the current state of the industry, competition, and the customer segment you're targeting. Explain how you plan to capture market share from competitors.
Marketing Strategy:
Define how you plan to attract and retain customers, including advertising campaigns and distribution channels.
Financial Plans and Projections:
For existing businesses, include historical financial data and balance sheets. For startups, outline your financial goals and projections for the first few years.
Differences Between a Feasibility Study and a Business Plan
Meaning:
A feasibility study is conducted in the early stages of a project to assess whether the idea is viable and worth pursuing.A business plan is a detailed document that outlines the company's strategies, goals, operations, and financial projections to guide the business toward success.
Focus:
A feasibility study focuses on evaluating the economic, legal, technical, and operational aspects of a proposed project.A business plan acts as a roadmap for the entire business and is typically used to attract investors or guide internal operations.
Risk Evaluation:
Feasibility studies tend to place a strong emphasis on assessing risks and developing strategies to mitigate them.Business plans acknowledge risks but may not go into the same level of detail regarding risk management as a feasibility study.
Flexibility:
Business plans are generally more flexible and adaptable over time, allowing businesses to adjust their strategies based on changes in the market.Feasibility studies, on the other hand, are more rigid, as they are based on data and assumptions that are harder to change once the study is complete.
Timing:
A feasibility study is typically conducted in the early stages of the business process, before any significant investment is made.A business plan is usually created after completing a feasibility study, once the project is confirmed to be viable.
Target Audience:
A feasibility study is primarily aimed at entrepreneurs and project owners, as well as potential investors evaluating the project’s viability.A business plan is targeted at investors, lenders, partners, employees, and anyone interested in understanding the business’s goals and strategies.
When Do You Need a Feasibility Study or Business Plan?
Feasibility Study:
If you're considering starting a new project or business, a feasibility study should be your first step. It helps you determine if the idea is worth pursuing and whether the project is realistic and sustainable.Before committing substantial resources (financial or human) to the project, ensure that a feasibility study has been conducted to assess potential returns and risks.
Business Plan:
Once you’ve determined that your project is feasible, you will need a business plan to guide the execution of your project.Whether you are starting a new venture or managing an existing business, a business plan is essential for securing funding and ensuring the company remains on track to achieve its objectives.
Conclusion
Both a feasibility study and a business plan are critical to the success of any project or business. A feasibility study ensures that the idea is worth pursuing by assessing its viability, while a business plan serves as a strategic guide to execute and grow the business. Make sure you conduct a thorough feasibility study before investing heavily in your project, and then create a solid business plan to ensure sustainable growth and success
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