Here’s a business idea: Since everyone prefers to keep a perfect body temperature no matter the weather, why not create clothing that maintains comfort in both hot and cold temperatures? The problem is that it would require built-in heating and cooling mechanisms, adding weight, bulk, and electricity requirements. In other words, it’s an intriguing idea, but it’s not feasible.
Decision makers and project managers must constantly assess whether great ideas are truly feasible in the real world. To do this, they might conduct a feasibility study to determine if there’s a practical way to bring these ideas to life. Feasibility studies consider things like cost, resource availability, technical capacity, and potential risks.
Here’s an overview of feasibility studies, with tips on how to conduct your own feasibility analysis.
What is a feasibility study?
A feasibility study is a preliminary analysis to determine the viability and practicality of a proposed project or new business venture. It can be commissioned by a government, a business organization, or an individual during an analysis phase. Feasibility studies help stakeholders understand potential risks, benefits, costs, and challenges to predict whether a project should be pursued, modified, or simply abandoned.
A typical feasibility study evaluates timelines, budgeting, market research, supply chain information, technological considerations, and legal requirements. Assessing these feasibility factors in the early stages helps determine if the proposed project is a worthwhile investment of your time, money, and resources.
A study usually culminates in a feasibility report that you can present to business owners and project leaders. The report centralizes your findings and makes a declaration about the new project or business’s viability.
Why are feasibility studies important?
Feasibility studies are essential for assessing whether a proposed project is practical, cost-effective, and aligned with broader goals. They help identify potential issues—such as financial risks, logistical roadblocks, or legal complications—before significant resources are committed. By uncovering these early, project teams can avoid wasting time and money on unworkable software, unsuitable land use, or developments that could face regulatory hurdles.
Feasibility studies also help ensure a project serves its intended audience effectively. For example, they can help determine whether a new facility will meet the needs of the community or if a planned use of land will generate a worthwhile return.
Ultimately, these studies guide smarter decision-making and promote responsible investment by clarifying whether a project is both viable and beneficial.
When should you conduct a feasibility study?
Ideally, you will start planning and conducting a feasibility study before you start your business or kick off a big project. Doing so can help you save time and money by helping you identify potential risks, resource requirements, and profitability, allowing for informed decision-making. A feasibility study is a good idea when considering significant financial commitments, new product development, market expansion, or major operational changes.
Benefits of feasibility studies
- Informed decision-making
- Financial viability assessment
- Risk assessment
- Resource management
- Stakeholder confidence
Conducting a feasibility study helps determine how likely your idea or venture is to succeed. Here are the five main benefits of a feasibility assessment:
Informed decision-making
A successful business or project feasibility report helps you make informed decisions based on data and analysis rather than assumptions or guesswork. Your proposed business venture should rely on concrete numbers, not gut instinct or anecdotal evidence.
Does a market survey show there’s a viable customer base? Do your financial projections suggest the project can become profitable? Does your project management team think you have the technical resources to execute your plan? A proper feasibility study report answers these questions with solid data.
Financial viability assessment
Many great business ideas are derailed by a project’s cost. A feasibility study helps you understand if you have the financial resources to see your project through. This can prevent costly investments in projects unlikely to yield expected returns and protect your organization’s financial health.
Risk assessment
A feasibility study can warn your management team of potential risks in a business plan. It can identify potential challenges related to money, market size, technical abilities, and legal risks. Addressing these challenges early can spare you from severe consequences, saving time, money, and resources.
Resource management
Implementing a proposed plan typically requires time, physical resources, human effort, and capital. A full-scale feasibility study takes a holistic look at the resources needed to realize a particular project and determines if your organization has or can allocate and manage these resources effectively.
Stakeholder confidence
A well-conducted feasibility study shows stakeholders like investors, partners, managers, and employees that you’ve thoroughly evaluated your project before diving in. You can show them your project plan, the risks involved, the resources required, and your predicted likelihood of success. Showing your partners what lies under the hood of your project can inspire emotional and capital investment.
6 types of feasibility studies
Different initiatives succeed or fail because of various factors, so feasibility studies address distinct topics.
Here are six of the most commonly commissioned feasibility studies:
1. Market
A market feasibility study assesses the demand for a product or service within a target market. It analyzes the total addressable market (TAM), target customers, competition, market trends, and potential market share. Note that this type of analysis doesn’t involve creating a marketing strategy; it determines whether there’s even a viable market to begin with.
2. Technical
A technical feasibility study examines the technical resources needed to complete a project, including the required technology, equipment, and expertise. It then assesses whether the organization has achieved the technical development required to achieve tactical or business success.
3. Legal
A legal feasibility study aims to identify the legal factors affecting your project, ensuring it complies with relevant laws and regulations, including zoning laws, licensing, permits, and intellectual property.
4. Financial
A financial feasibility study—or economic feasibility study—analyzes a project’s costs, revenues, and profitability to assess its economic viability and funding. This type of study often includes a business plan, projected income statement, and overall financial analysis. Some lending institutions require this study for loan approval.
5. Operational
An operational feasibility study aims to assess whether you have the operational capacity to implement the proposed project considering your physical assets, human resources or organizational structure, company culture, and workflows.
6. Environmental
An environmental feasibility study assesses a project’s potential environmental impact and outlines measures to mitigate negative effects. It also ensures alignment with environmental regulations and your organization’s sustainability goals.
Feasibility study template and checklist
Having a well-structured feasibility study on hand can make it easier to make a clear assessment of a project’s practicality, and leads to informed decision making. You have flexibility here, and most feasibility studies follow a similar structure to this template:
- Executive summary: A high-level overview of the project’s viability
- Project description: A detailed explanation of the product or service being developed
- Technical considerations: An analysis of required technology, equipment, and staffing
- Market analysis: A study of the current market landscape and marketing strategy
- Operational feasibility: An evaluation of whether the existing organizational structure can support the initiative
- Project timeline: A roadmap outlining key phases and milestones
- Financial projections: A breakdown of expected costs, revenue, and overall financial feasibility
How to conduct a feasibility study
- Identify who is responsible for conducting a feasibility study
- Define the project and its scope
- Conduct preliminary analysis
- Evaluate market feasibility
- Assess technical and operational feasibility
- Analyze financial feasibility
- Review legal and environmental considerations
- Prepare the final report
Using this feasibility study template to guide your process, here’s how to conduct a comprehensive feasibility study:
1. Identify who is responsible for conducting a feasibility study
The size of your business impacts who is in charge of creating a feasibility study. If you are a solopreneur who hasn’t launched a business yet, you’ll likely tackle this on your own unless you can afford to outsource the work to an expert.
In more established companies, the responsibility for conducting a feasibility study typically falls on project managers, business analysts, or a dedicated feasibility team. In large organizations, consultants or specialized firms may be hired for an objective assessment. Key stakeholders, including executives, financial analysts, and technical experts, can also contribute insights to ensure a thorough evaluation.
2. Define the project and its scope
Clearly outline your project’s objectives, goals, and key deliverables. This includes identifying the problem or opportunity the project aims to address and setting specific criteria for success, including key performance indicators (KPIs).
For example, Gloria Hwang conceived of her idea for a bike helmet company, Thousand, after her friend tragically died in a cycling accident. Her goal: Create a stylish helmet for commuters. As she explains on an episode of Shopify Masters, “If you can make a helmet people actually want to wear, you can help save lives.” Her company’s very name references her mission to save 1,000 bike riders’ lives—a key deliverable she reached in 2023.
3. Conduct preliminary analysis
A preliminary analysis provides a general assessment to determine if your project is worth pursuing. Roughly evaluate the potential market, technical requirements, financial costs, and legal constraints to identify any major obstacles. If the project clears this initial requirements analysis phase, you can dive deeper into all these topics.
When Gloria set out to research her business idea, she found that most bike helmet companies catered to high-tech riders or cycling enthusiasts, not casual riders.
“From my perspective, it was just [about] trying to find and make a product that was driven by consumer insights,” says Gloria. Knowing that the product she wanted didn’t exist inspired her to dig deeper into research and product development.
4. Evaluate market feasibility
Assuming your preliminary analysis suggests the project is viable, proceed with a comprehensive market assessment. Analyze the demand for your product or service. Profile target customers, estimate market size, size up the competition, and identify market trends.
Gloria, for example, sent out 50 surveys to people she knew with an interest in biking or skateboarding and asked what they would like to see in a helmet. In the responses, it became clear there was demand for the type of helmet she wanted to make. People expressed their primary concerns were about safety, convenience, and price—data Gloria used to refine her product’s value proposition.
5. Assess technical and operational feasibility
If a viable market exists, decide whether your organization is equipped to serve it. Examine the technical requirements of your project, including technology, resources, and expertise. Assess your organization’s capacity for implementation and operation, paying special attention to human resources, infrastructure, and company culture.
For example, Gloria knew she needed to design a helmet that had never existed before on a budget that wouldn’t allow her to hire an expensive product development firm.
“Thankfully [my dad] happened to be a former NASA engineer,” Gloria says.
6. Analyze financial feasibility
Take a hard look at whether you have the financial means to execute the project. Develop a detailed financial analysis, including cost estimates, revenue projections, and funding sources.
What will the opening day balance sheet look like? When will the project be profitable? Consider creating financial models to assess the project’s profitability, return on investment (ROI), and break-even point. It’s important to remember to budget for feasibility study costs so you can afford to complete the study properly.
One tip: Gloria recommends finding mid-sized manufacturers to help you make your business a reality, since the largest, most well-known companies may not prioritize your small business’s needs.
“Finding someone who’s in it with you from a partnership perspective, I think, is the best thing to do,” she says.
7. Review legal and environmental considerations
Your project will only succeed if it complies with applicable laws, regulations, and environmental standards. Determine what permits and licenses you need and whether an environmental impact assessment is necessary.
For Gloria, this meant making sure her designs met the safety standards set for cycling and skateboarding helmets so her customers could wear her helmets for both use cases.
8. Prepare the final report
Compile your findings into a detailed report covering all aspects of the feasibility study. Start with an executive summary outlining potential business scenarios based on the information you’ve amassed. Present the report to stakeholders, highlighting key insights and recommendations. Your team can then make an informed decision about whether to proceed with the project, pursue business alternatives, or scrap the endeavor altogether.
For Gloria, the time she spent researching and refining her concept paid off. She’s reached her goal of saving lives with her helmets while getting people who never wore helmets before to start prioritizing their safety—without sacrificing style.
“It’s all centered around this idea of, ‘How can products help you express your personal style?’” Gloria says. Because when your bike helmet expresses your style, you’re more likely to wear it.
Feasibility study examples
If you haven’t created a feasibility study before, it can help to review examples. Take a look at some feasibility study examples for three very different industries and projects. These examples can act as a basic feasibility study template for those just getting started.
New product development for a technology company
A technology company is considering launching a new product—a handy smart home device. Before moving forward, they want to conduct a feasibility study to evaluate its potential success since this is a competitive industry with many other smart home devices on the market.
- Market research: Identifies customer demand, competitor offerings, and potential market share
- Technical feasibility: Reviews product design, manufacturing capabilities, and required technological advancements
- Financial analysis: Estimates development costs, projected revenue, and profitability over time
- Operational considerations: Assesses internal expertise and resource availability to support production and marketing
- Legal compliance: Evaluates patent requirements, safety regulations, and potential liability concerns
The feasibility study will help determine if the product has strong market potential but requires additional research and development investment. It also helps identify if the company needs to change any elements of its plan, such as adjusting the budget and timeline, before moving forward with development.
Restaurant expansion
A successful restaurant chain wants to open a new location, but isn’t sure the expansion is viable since they’re unfamiliar with their new desired target market. To test their expansion plans, they conduct a feasibility study that addresses these concerns, as well as other ones, such as financing.
- Demographic and market analysis: Evaluates customer demand, competition, and foot traffic in the target area
- Site assessment: Examines potential locations, lease costs, and accessibility
- Financial projections: Forecasts initial investment costs, expected revenue, and break-even timelines
- Operational feasibility: Assesses staffing needs, supply chain logistics, and kitchen capacity
- Regulatory considerations: Ensures zoning, health, and safety codes are met
The feasibility study might reveal strong market demand, but at the same time, it might identify a need for additional funding. The restaurant ensures investors can proceed with the expansion, using the study as a guide.
Renewable energy project
A city government is exploring the feasibility of a solar farm to power municipal buildings. Because building projects involve a lot of bureaucracy, they commission a feasibility study to analyze key factors.
- Environmental impact assessment: Evaluates land suitability, climate conditions, and sustainability benefits
- Technical feasibility: Reviews infrastructure requirements, grid connectivity, and energy storage options
- Financial viability: Estimates construction costs, long-term energy savings, and potential government incentives
- Legal and regulatory compliance: Ensures adherence to zoning laws, environmental regulations, and permitting requirements
- Risk assessment: Identifies potential challenges such as maintenance costs, weather disruptions, and policy changes
Suppose the study concludes that the project is feasible and will provide significant long-term savings. The city will be able to confidently move forward with grant applications and contractor bids.
Feasibility study FAQ
How do you write a feasibility study?
To write a feasibility study, define your project scope, conduct thorough analyses of market, technical, financial, legal, and operational factors, and compile the findings into a comprehensive report with recommendations for decision-making.
What should a feasibility study include?
A feasibility study should include an assessment of your project’s market potential, technical requirements, financial viability, legal considerations, and operational capacity.
What is the average cost of a feasibility study?
The cost of a feasibility study varies tremendously based on the scope and nature of your project. Some business veterans estimate that a study should be about 1% of your project’s total cost. For example, if you’re planning a $100,000 project, your feasibility study might cost around $1,000 to conduct.
What are the main components of a feasibility study?
A thoughtful feasibility study analyzes key factors to help entrepreneurs decide whether a project is practical and worth pursuing. It includes:
- Market analysis to assess demand, competition, and trends
- Technical evaluation to ensure resource and expertise availability
- Financial feasibility to examine costs, revenue potential, and ROI
- Legal feasibility to ensure regulatory compliance
- Operational feasibility to assess alignment with business goals
- Risk assessment to identify potential challenges
What does feasibility analysis mean?
The term feasibility analysis refers to the process of evaluating a project or business idea to determine its practicality and likelihood of success. It examines key factors such as market demand, technical requirements, financial costs, legal considerations, and potential risks. By assessing these elements, feasibility analysis helps decision-makers understand whether a project is viable, profitable, and sustainable.
