Our Views

How to do a feasibility study

Opinion
Infrastructure & PPPs

Last updated on 09 January, 2024

Welcome to our series of articles on feasibility studies.

In this post, we will guide you through the process of conducting a comprehensive feasibility study. A well-executed feasibility study is crucial for assessing the viability and potential success of a project. Let's explore the key steps involved:

Literature Review and Information Gathering

The first step in conducting a feasibility study is to perform a thorough literature review and gather relevant information. This includes reviewing existing studies, reports, market trends, industry publications, and any available data related to similar projects. This step helps establish a foundation of knowledge and understanding of the project's context.

Additionally, conducting interviews and discussions with subject matter experts, stakeholders, and potential end-users can provide valuable insights and perspectives. The information gathered during this phase forms the basis for the subsequent analyses and assessments.

It is essential to identify key success factors, potential risks, and challenges during the literature review and information-gathering stage. This helps ensure that the feasibility study addresses critical aspects and provides a comprehensive evaluation of the project's feasibility.

Market Analysis

The market analysis is a critical component of a feasibility study as it helps evaluate the project's potential demand and market dynamics. During this phase, it is essential to assess the target market's size, growth trends, customer preferences, competition, and potential barriers to entry.

Conducting surveys, interviews, and focus groups with potential customers and industry experts can provide valuable insights into market needs, preferences, and willingness to pay. This information is crucial for projecting the project's revenue potential and developing an effective marketing strategy.

Analyzing market data and trends helps identify market gaps, opportunities, and potential risks. This analysis guides decision-making, ensuring that the project aligns with market demand and has a competitive advantage.

Regulatory Analysis

An analysis of the regulatory environment is vital to understand the legal and compliance requirements associated with the project. This includes identifying permits, licenses, certifications, and any specific regulations or standards applicable to the project's industry or location.

Engaging legal experts or consultants familiar with the regulatory landscape can help navigate through the complexities of compliance. It is crucial to ensure that all legal and regulatory obligations are met to avoid potential delays, penalties, or obstacles during project implementation.

The regulatory analysis also includes assessing any environmental or social impact assessments required for the project. This ensures compliance with environmental regulations and identifies any potential risks or mitigation measures needed.

Technical Analysis: CAPEX, OPEX, and Revenue

The technical analysis assesses the project's technical feasibility, considering factors such as the required infrastructure, equipment, technology, and resources. This analysis helps estimate the capital expenditure (CAPEX) required for project implementation and ongoing operational expenses (OPEX).

Collaborating with engineering experts, architects, or technical consultants can provide insights into the project's design, construction, and operational requirements. Detailed cost estimates, including equipment, construction, maintenance, and operating costs, are essential for accurate financial projections.

During the technical analysis, it is crucial to evaluate the project's scalability, reliability, and any potential technological risks. This assessment ensures that the project's technical aspects are feasible and align with industry standards and best practices.

Revenue projections are also a crucial part of the technical analysis. This involves estimating the project's revenue streams, considering factors such as pricing, sales volumes, and market demand. Market research and financial analysis play a key role in developing realistic revenue projections.

Economic and Financial Analysis

The economic and financial analysis is a core component of a feasibility study. It involves evaluating the project's financial viability, profitability, and return on investment (ROI).

During this phase, it is essential to assess the project's financial indicators, such as net present value (NPV), internal rate of return (IRR), payback period, and profitability ratios. This analysis helps determine whether the project is economically viable and financially sustainable.

Factors such as project financing, cash flow projections, cost-benefit analysis, and sensitivity analysis are considered in the economic and financial analysis. This assessment provides project sponsors and stakeholders with a clear understanding of the project's financial implications and potential risks.

Preparation of Final Report

The final step in conducting a feasibility study is to compile all the findings, analyses, and assessments into a comprehensive report. The report should include a summary of the project's objectives, methodology, key findings, and recommendations.

The report should present the feasibility study in a clear and concise manner, allowing stakeholders to make informed decisions. It should outline the project's strengths, weaknesses, opportunities, and threats, as well as any potential mitigation measures or alternative strategies.

Engaging professionals with expertise in report writing and communication can enhance the effectiveness and readability of the final report. Clear visual representations, such as charts, graphs, and tables, can help present complex information in a user-friendly format.

The final report should be presented to project sponsors, stakeholders, and decision-makers, facilitating discussions and enabling them to make well-informed choices regarding project implementation.

Aninver Development Partners has wide experience conducting feasibility studies in several industry sectors, such as agribusiness, technology, energy, tourism & hotels, infrastructure & PPP projects. Our team of consultants are specialists for PPP Feasibility studies.

Some of our experience conducting feasibility studies can be seen below:

About the author

Alvaro de la Maza

Alvaro de la Maza is one the founding partners of Aninver Development Partners. Alvaro is a Civil Engineer, MS on Infrastructure Management and MBA by IESE Business School.Alvaro has extensive experience in Infrastructure and Public Private Partnerships. Alvaro has worked and led multiple consulting projects for clients such as the World Bank, the African Development Bank and other donors.Alvaro enjoys creating digital products and he has led the development of market intelligence platforms in d...

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