What is a Feasibility Study? How to Conduct a Feasibility Study?

Before stepping into the e-commerce sector and while managing your e-commerce site, you need to analyze each step in advance. Preliminary work is essential for both individual and corporate organizations to achieve success. The operational structures of organizations are successful depending on the preparation process of small, medium and large projects. In this process, feasible projects require feasibility study. In order for your e-commerce projects to become successful and enjoyable, you should know the answers to questions such as “What is feasibility study, how is it done, how is it reported?”.

What is Feasibility Study? How is it done?

Feasibility means “feasibility”. A feasibility study is carried out to measure how feasible an idea, operation or project is and its realizability. This study analyzes all processes of the project and directly influences the feasibility decision. It is also conducted to predict risks and consequences. The details taken into account in feasibility studies are as follows:

General dynamics and current situation of the relevant sector

Competitive environment in the sector and competitor analysis

Production/supply planning

Sales and marketing strategies

Management and organization structure

Economic situation and financial analysis

Risk analysis and measures to be taken

Feasibility Study

A feasibility study is a preliminary analysis process that evaluates the feasibility of a project from an economic and technical perspective. This study is essential to ensure that projects are successful and sustainable. In order to accurately and consistently measure the feasibility of an idea, the feasibility study needs to be reported correctly. For this reason, organizations that do not have a body or individuals within their own ecosystem that can carry out such studies get help from companies that conduct feasibility studies. These firms provide services under names such as feasibility consultancy, investment consultancy and financial consultancy. In large-scale consulting firms, there is a separate department dealing with feasibility.

What are the Stages of Feasibility Studies?

The answer to the question “How is the feasibility study done?” can be diversified depending on the scale of the idea or project. Many dynamics, from the sector to the target, from time to operation, can play a role in the conduct of the study. For this reason, feasibility studies are divided into specific phases. Each of the feasibility study stages must be included in the process. The content of the phases should be flexible according to the project that is the subject of the study.

These phases are especially important for developable ideas.

Feasibility Stages

Feasibility studies consist of stages such as market assessment, site analysis, technical, organizational, financial and legal research.

Market Assessment

Market assessment is especially important in areas such as e-commerce where sales-oriented projects are intensive. Market assessment, which can also be considered as market research, can be used for the analysis of different stages such as both organization and product development. The characteristics and shopping potential of the customer base in the market should be compared with the product or service that is the subject of the study.

For example, a product with high production costs is not suitable for a market of low-income customers. If you sell the product at average market value, you cannot sell it to customers in this market. Setting a price according to the income level of the market will also cause you to make a loss. Some of the questions that can be answered during the market assessment phase are as follows:

What is the market value of the product?

What should be the selling price of the product?

In which periods does the product sell more?

What is the production/supply process?

What level of employment does the production/supply process provide?

Evaluation of the Establishment Location

Assessing the location is most useful during the establishment of a physical store. For e-commerce, you can think of it as the platform where the virtual store will be opened. There is a colloquial expression “setting up shop in a good place”. Here, the evaluation of the place of establishment is necessary to meet this expression. Such an analysis is done to establish the project in a location where it can be most efficient. For example, it does not make sense to open a shoe store on a street with little human traffic or an e-commerce store on a platform with few visitors and users. The following examples can be given to the questions that can be asked in the process of evaluating the place of establishment:

Is it close to the target market?

Does it have the necessary natural and environmental conditions for the establishment?

Is the location easy to access?

What is the level of regional labor force?

Does it complicate the raw material and product supply process?

Technical Research

Technical research is the method used in the process of making decisions about production stages. Among the research conducted within the scope of feasibility studies, this is the most decisive stage regarding the production process. All steps, from the technology to be used in production to raw materials, from machinery to installation, are analyzed through technical research. It is a useful feasibility study phase in order to find methods to minimize cost and error rate.

The layout of the production facility can be shown as an example in this regard. If a correct layout is not made, raw materials or products may need to be transported over a longer distance. This would require more manpower, resulting in loss of cash, time and labor. Example questions of the technical research phase are:

Which production technologies should be used?

What are alternative production technologies?

Which machine should be preferred for which raw material/product?

How should the layout of the production facility be planned?

What is the production capacity of the facility, machines and employees?

How many personnel are needed in the production process?

Organizational Research

Organizational research is the people-oriented phase of the feasibility study. The manpower and employee profiles needed in the organizations within the project are determined as a result of this research. It is possible to benefit from this stage when making operational decisions such as how many people will take care of which work and at what level. In addition, the work plan and division of labor should also be based on organizational research.

The correct distribution of authority and responsibility ensures that the organization runs smoothly. For the project to be successful, the profile, authorities and responsibilities of each employee, from managers to workers, should be determined in line with the organizational research report. For example, a staff member in charge of a production facility who is responsible for the machines should know how to produce a solution in case of a possible machine breakdown. Otherwise, production stops.

Financial Research

One of the most important stages of the feasibility study is financial research. Because no matter how good an idea is, it cannot be realized unless it is financially feasible. Ideas that are implemented without adequate financial research cause economic losses. Financial details should be researched and analyzed for all dynamics such as establishment, production, marketing, logistics and so on.

For example, if there is enough capital for the organization, but there are no resources to start production, the project remains unfinished. An incomplete project is considered to have never been realized. Therefore, the capital spent for the organization is wasted. Particular attention should also be paid to the amortization period of the cost, especially in new organizations. Even if sales exceed expectations, it may not be possible to raise new funds for some time. This stage is also very important in determining the time to reach financial relief. Some of the questions that can be asked are as follows:

What is the total investment (establishment, production, logistics, etc.) cost?

What is the amount of capital required on a sectoral and legal basis?

What are the fixed, variable and extraordinary expense items?

How long will it take to become profitable after starting operations?

Through which channels and at what level will the cash flow be?

Legal Research

All steps that need to be taken from the very beginning to the very end of the project must remain within the legal framework. The legal research phase of the feasibility study is conducted to ensure that the project can be implemented without any legal obstacles. From the central organization to the production facility, from raw material procurement to the shipment process, from sales strategy to marketing efforts, there are laws that must be followed. Legal research identifies the laws, legislation, circulars, regulations and by-laws to which the company is subject.

What is the Importance of Feasibility Studies?

Feasibility studies are important for the realistic evaluation of projects. The excitement of a new idea can negatively affect the ability to act rationally. Focusing on the positive aspects of the idea can be useful in terms of motivation and mobilization. But without a realistic approach, the idea may end in frustration. This is where the importance of feasibility studies comes into play.

Growing newborn ideas in a healthy way is one of the most basic feasibility study objectives. First of all, it must be accepted that not every idea is feasible. Therefore, one of the first things to do is to evaluate the idea itself. The importance of the feasibility study is also evident when determining that the idea is open to development and implementation. When a noteworthy project idea matures, these studies are also needed to put it into practice and take firm steps forward.

Importance of Feasibility Study

Feasibility studies provide a realistic assessment of projects, identify risks and opportunities, and enable strategic planning and efficient use of resources.

When things that are going well go off track at some point, it shows the lack of a feasibility study. Therefore, these studies are also important to ensure that things continue to go well. Actions that are vital to the project, such as anticipating and avoiding situations that may pose risks, taking precautions against possible risks in advance, taking action in case of sudden developments, and creating resources in case of financial imbalance, are only possible with an efficient feasibility study.

What are the Advantages of Conducting a Feasibility Study?

To be able to measure the realization potential of projects

To be able to see the lack of dynamics required for the development of the idea

To be able to estimate the financial burden of the project to be realized

Identify the advantages and disadvantages of the project

To prepare the ground for future steps to be taken

To be able to use resources in a way that provides optimum benefit

To be able to utilize the workforce in the most efficient way

Anticipate risks and potential problems

Taking precautions against possible risks

To be able to produce solutions to possible problems

What are the Types of Feasibility?

It is possible to categorize feasibility studies under some groups. The idea that is the subject of the study and needs to be investigated should be reported in line with the field it is related to. For example, you should benefit from all types of feasibility for the idea of setting up an e-commerce site. However, if there is an idea that requires you to invest in a specific subject, an economic feasibility study may be more efficient.

Feasibility Types

Feasibility studies are divided into types such as technical, economic, legal, operational and timing feasibility.

It should be kept in mind that such studies are not only carried out at the start-up phase. In order to ensure the continuity of projects in operation, every step needs to be analyzed in advance. Different types of feasibility studies exist for this purpose. Whichever direction is to be taken, a report should be made on the type of feasibility related to that subject. The more specific the subject of the study, the more consistent the data obtained.

Technical Feasibility

Technical feasibility is a study that focuses on the available resources of the organization. It can be used to measure the capacity of the technical resources in the project and whether they meet the needs. The ability to adapt the ideas presented by the technical team to the working process is determined by technical feasibility. A technical feasibility study is also conducted for the process of transforming the ideas deemed appropriate into a working system. In addition, this type of research can be applied for all technical details such as technology, software, hardware, energy and so on.

Economic Feasibility

Economic feasibility, as the name suggests, is a type of study that includes financial details. For financial stability, a cost/benefit analysis of each project must be carried out. This analysis is only possible with an economic feasibility report. The size of the resource needed for the project and how logical it is to transfer resources are also determined by this method. It is also the job of economic feasibility to determine the costs and benefits of this cost. It also makes it possible to make an independent and objective assessment of the project idea from an economic point of view only. Thus, possible benefits and losses can be estimated consistently.

Legal Feasibility

Legal feasibility studies are conducted to determine whether the project to be realized is in violation of any legal regulations. All details that are directly or indirectly related to the project are investigated and evaluated within the relevant legal framework. Points that contradict legal requirements are revised, developed and brought into compliance with the legislation. For example, when you want to market a campaign on your e-commerce site via e-mail, you are obliged to implement this project in accordance with the laws on personal data protection, marketing, communication and similar issues. The ways to fulfill this obligation are determined by legal feasibility.

Operational Feasibility

Operational feasibility is a study to analyze the project after its completion. The possible outcomes of the project to be completed are evaluated with this method. The most basic evaluation criterion is whether the project will meet business needs. The degree to which the project’s objective and the projected transportation point intersect can be estimated through operational feasibility.

Timing Feasibility

Timing feasibility is considered one of the most important types of study. Because it is a study that helps to evaluate and analyze the project in terms of success. The first result of this feasibility study is when the project will be completed. It is important to know in advance the time in which the organization will reach the target in order to achieve maximum benefit. As a result of the timing feasibility, the project must be completed before the predicted deadline expires.

A project is considered successful only if it is completed within the specified time frame. For this reason, time estimates are made with a margin of error in the plus and minus direction. For projects where completion alone is not an indicator of success, a break-even point is set. The break-even point is mostly important for financial-based projects. It refers to the period during which the cost and return of the project will reach the same point. Investments start generating profit after the break-even point. Just like the completion time of the project, the time when the project will start generating profit is also determined by timing feasibility.

What is a Feasibility Study? How is it done?

The concept of feasibility study actually means the same as feasibility study. Study; It means preliminary study, research and examination on any subject. At the same time, the texts in which these researches and examinations are reported are also characterized as studies. Therefore, the concept of feasibility study is mostly used in academic language. It can refer to both the feasibility study and the reports related to the studies. To give an example, the reports showing which product, to whom, how and how much you should sell on your e-commerce site and how much revenue you can earn from these sales are called “feasibility studies”.

What is a Feasibility Report? How is it prepared?

The feasibility report preparation stage involves translating the data obtained as a result of the study into project-based language within the institution and presenting it to the competent authorities. The prepared report must be extremely detailed. All feasibility study stages must be completed before proceeding to report preparation. Feasibility reports can be prepared in various formats. At this point, the preference of the competent authority is important. If the study is not carried out in-house, the companies that receive support and prepare feasibility reports should also be informed about the format.

Feasibility Report

The feasibility report presents the results of the study in a detailed and understandable way, providing decision makers with a comprehensive perspective.

The feasibility report should include every detail from the market situation to the financial situation. This is very important to make an efficient analysis and make the right decision. A detailed report should provide substantially consistent answers to the following questions. These questions can be customized and diversified on a sector and project basis.

Has the most suitable location for the investment been selected?

Have inputs and outputs been analyzed?

What are the fixed and variable costs?

In which term is the investment profitable?

What is the total amount of capital required for the project?

What is the likely cost of the product or service?

Is a location plan required and, if so, is it included in the report?

What are the technologies that need to be utilized during production?

How does the cash flow process continue after production?

Are there sales periods, and if so, which periods?

What is the number of personnel needed?

Which legal regulations and laws will need to be complied with for the investment?

What should be considered in sector research when preparing a feasibility report?

Sector research plays a major role in the preparation of the feasibility report. The relevant research should be conducted separately for the product and service. The report should include very clear and concrete data about the service to be provided or the product to be sold/produced. Especially numerical data must be included. Raw materials, machinery, facilities, labor force and similar details should be listed in the light of sectoral data. Strategies such as supply, shipment, sales, marketing and most importantly profit-making should be included in the report together with alternatives. The headings that must be included in the sector research section of the feasibility report are as follows

Description of the product or service

Supply situation

Demand status

Sectoral analysis

Input markets

Sales and marketing strategies

Incentives, grants and loans suitable for the project

What Benefits Do Feasibility Studies Provide to Organizations?

Feasibility studies provide different benefits depending on the subject of the study. Projects and ideas analyzed in line with the policies followed by the institutions are evaluated according to the questions to be answered. Therefore, the benefit that each organization wants to provide may be different.