The economic feasibility study is defined as the study that is prepared in the first phase of the project and in which the surrounding environment is analyzed in detail, so that the necessary data is collected through which the feasibility of the success of the project or not is known, what is the expected profitability, and whether the project has the necessary ability to survive and bear potential risks or not.
That is, the economic feasibility study is more like a detailed analysis of all aspects critical to the success of the project, in which the focus is on the economic aspects, both positive and negative, so that the impact resulting from the establishment of this project is known and whether it has a real chance of success and growth or not, by determining the expected costs and benefits as well as losses and profits.
Benefits of feasibility studies
Feasibility studies are used for financial analysis of projects before the project implementation process, since they help in understanding all the following:
- Provide a detailed and comprehensive view of all aspects of the project.
- Distinguish the strengths and excellence of the project as well as weaknesses.
- Saving a lot of time, effort and capital in the subsequent stages of project implementation.
- Provide the project management with enough information to make them decide whether to continue implementing the project or not?
- Determine the expected risk ratio at the start of the project and provide alternative plans to be resorted to when crises occur.
- Helping the company know its path to growth and what are the potential obstacles along this path?
- Collect the necessary information about the target market, its competitors and the marketing strategies followed.
- Know the technical, economic, operational, legal, temporal, and technological feasibility of the project.
- Estimate the time it will take to implement the project in an approximate manner close to reality.
- Find out if the project meets the legal and factual requirements of the target market.
- Business alternatives are narrowed down to the best, most abundant, and most impactful for the future of the project.
- Determine whether the organization has the capacity, technical resources, and expertise required to implement the project.
- Convincing investors of the feasibility of the project and their ability to invest in it.
Impelemntation Methodology
Feasibility studies have a working methodology through which the study is prepared in an integrated manner. The following are the steps for preparing this study:
- Compilation of all financial statements of the project, especially special statements such as income statement, cash flow statement, profit and loss statement, balance sheet, and others.
- Studying and evaluating the target market by analyzing the purchasing behavior of the consumer, his motives, purchasing power, competitors in the market, and the demographics of the target segment as well.
- Strategic analysis of the project in the short and long term
- Determine the business model through which the project will be managed and apply the elements of the feasibility study to it.
- View similar economic feasibility studies for the same field to find out the best way to present a comprehensive summary of the project in a professional and convincing manner.
- If the feasibility study is prepared to obtain financial financing, the nature of the investor or business incubator to which this feasibility study is sent must be studied, so that the process of preparing it corresponds to the requirements of the target segment.
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