How to do the feasibility study of the project step by step:
First, the definition of a feasibility study:
In a simple way, the feasibility study is a
study carried out by the project owner to know the market conditions and the
size of the necessary investments (costs) as well as expected profits, and
based on the results of the study the project owner makes his decision to
implement the project or not.
Second, the elements of the feasibility study:
The feasibility study consists of three main
components, namely,
1. Market study.
2. Technical study.
3. Financial study.
Third, how to do a feasibility study:
1- Market study: -
The stage of studying the market can be
considered the most important stage among the three stages. By studying the
market, you get to know,
1- The volume of demand for goods or services that the project will provide.
2- The size of the supply of goods or services that the project will provide.
3- Determine the production capacity of the project (sales volume) according to the volume of supply and demand.
4- The target customers for the project products.
5- The needs and desires of the target customers.
6- Activity of competitors, their products and prices in the target market.
7- Gaps and available opportunities that can be exploited for the benefit of the project.
This and how to do a marketing feasibility
study, it is possible to rely on one of the methods of marketing research to
collect information about the target market and the targeted customers and
competitors, and perhaps the best of these methods is the survey and the
interview in addition to following up the recent market research that was
issued on the same product that you intend to provide in the same The market in
which you intend to operate.
2- Technical study:
The aim of this study is to know all the
technical matters related to the project, such as,
1- Determine the location, area,
specifications and costs of the project headquarters.
2- Determine the size, quality,
specifications, and costs of labor.
3- Determine the needs and costs of the
project for equipment, tools and supplies.
4- Determine the needs and costs of the project
for services such as energy, water, and others.
5- Determine the project need and costs of raw
materials and production supplies (in the case of production projects).
6- Determine the stages of production in
detail (in the case of production projects).
This is about how to do a technical
feasibility study for the project, it can be carried out easily, especially in
the case of small projects, where the owner of the project can get to know,
1- Specifications of the project site from the
licensing authority, or even via the Internet, or who have previously
implemented the same project.
2- Rent costs by visiting the region in which
he wishes to implement his project or by searching online at real estate sites.
3- Equipment and machinery costs through contacting
companies that sell production lines to know the average prices for equipment
or production lines with a targeted production capacity.
4- Staff salaries through recruitment sites
and by asking workers in the same jobs and perhaps from the owners of the
projects themselves.
5- Production stages for production projects
can be known online or through consulting engineers and specialists in the
field, and perhaps through the company producing the production line.
3- Financial study: -
The financial study is considered the most dangerous stage of the feasibility study, through which the project revenues and profits are recognized, and accordingly the investment decision is made, either by implementing the project, reviewing it or canceling it.
It is worth noting that the results of the
financial study of the project largely depend on the results of the market
study and the technical study. Through the market study, the expected volume
and value of sales are determined, and through the technical study the establishment
and operating costs are determined.
This and how to conduct a financial
feasibility study for the project in a simple and easy way, it is possible to
follow the following steps.
3-A- Preparing the income statement for the project: -
It is a list in which the value of revenue and
the value of costs are set for a specific period in order to determine profits
or losses for that period. You can also prepare the income statement by
compensating by the numbers for the following data, which you are supposed to
have obtained after conducting market and technical studies.
1- The expected revenue from selling products
(from studying the market).
2- Operating costs such as rents, labor, ores,
utilities, marketing, asset depreciation, maintenance, etc. (from technical
study).
3- The net profit, and it is determined by
subtracting the operating costs from the revenues. If the value is positive,
then this is evidence of the profitability of the project. If the value is
negative, then this is a sign of the project’s loss.
Below is a one-year income statement form for
the Burger Restaurant project, in which the numbers indicate the loss of the
project in the first months as sales decreased, but increased later.
3-B - Measuring the project's profitability: -
Depending on the results of your project's
income statement, you can answer the following questions to determine the
profitability of your project,
1- Do the results obtained indicate that your
project is able to achieve high profitability?
2- Do the results obtained indicate that your
project is able to cover its expenses in the short and long term?
3- Are the results that indicate that the
project is able to make a suitable profit from your point of view?
3-C - Calculating the investment costs of the project: -
Investment costs are fixed capital costs
(fixed assets) plus working capital costs (variable assets or operating costs),
and are calculated as follows,
The value of capital
costs (costs that were spent before production such as licensing, registration,
training, construction, etc.) + the value of fixed assets + the value of
variable assets.