The Benefits of an Outside Review of Your Business Concept: The Case for a Pre-Feasibility Study
Pre-feasibility studies (PFS) can be a vital part of business and strategic planning processes. Yet, they are not discussed or formally produced as often as business plans. Despite the lack of notoriety, feasibility studies play a very important role in ensuring you are pursuing an idea that is likely to lead to success.
A pre-feasibility study is an internal study that examines the viability of an idea. This includes for individual projects as well as full business plans. The study will ensure the project/business idea is advantageous economically, as well as technically and legally sound.
Sometimes pre-feasibility studies look at several options to narrow down potential ideas, especially when it comes to projects. There are those that view pre-feasibility studies as narrowing down several ideas and refer to it as a feasibility study only when it is concentrated on thoroughly investigating the most viable idea(s). However, these terms are typically used interchangeably.
Upon reading the definition, a feasibility study may seem indistinguishable from a business plan but the expected outcome, way they are approached, and resulting document varies significantly. Gary Wright, a management specialist from Iowa State University, explains it this way, “The feasibility study provides an investigating function. It addresses the question of ‘Is this a viable business venture?’ The business plan provides a planning function. The business plan outlines the actions needed to take the proposal from idea to reality.”
In order to illustrate what the final outcome may look like, Joorney’s pre-feasibility studies include the following sections:
- Executive Summary
- Service Description
- Competitors Analysis
- Projected Financials with Indicative Investment Required, IRR, NPV
- Risks and Mitigating Actions
- Market Survey with a Focus on Supply & Demand
- Sales and Marketing Strategy
- Operational Plan
- SWOT Analysis
Often times pre-feasibility studies are done internally, but that doesn’t need to be the case. It is wise to work with outside advisors or business consultants, like Joorney’s, to get a truly objective view of your business idea or development project. We collaborate with our clients to fully evaluate their ideas and produce a final document that thoroughly lays out the results from the study, organized into the sections referred to above.
As it relates to a business plan, conducting a pre-feasibility study, especially one done in conjunction with an outside firm, will strengthen the plan and make a stronger case to potential investors or lenders. It not only shows that you have done your due diligence but that outside, objective business experts have also confirmed the validity of your plan. Through a proper feasibility analysis, it becomes easier to understand and support how much funding is needed and how it will be spent which lays the groundwork for explaining why a capital infusion is required.
Although the pre-feasibility study and business plan are different, you will be able to use a great deal of the research from the PFS to build the foundation of your business plan. This is particularly evident in the market research and financial sections. Both processes and documents stand on their own merits but are even more useful when paired with the other.