What is a Feasibility Study? File C5-65 October 2009 www.extension.iastate.edu/agdm Don Hofstrand , co-director Ag Marketing Resource Center 641-423-0844, dhof@iastate.edu Mary Holz-Clause, co-director Ag Marketing Resource Center mclause@iastate.edu A s the name implies, a feasibility study is an analysis of the viability of an idea. The fea- sibility study focuses on helping answer the essential question of “should we proceed with the proposed project idea?” All activities of the study are directed toward helping answer this question. Feasibility studies can be used in many ways but pri- marily focus on proposed business ventures. Farm- ers and others with a business idea should conduct a feasibility study to determine the viability of their idea before proceeding with the development of a business. Determining early that a business idea will not work saves time, money and heartache later. A feasible business venture is one where the busi- ness will generate adequate cash-flow and profits, withstand the risks it will encounter, remain viable in the long-term and meet the goals of the found- ers. The venture can be either a start-up business, the purchase of an existing business, an expansion of current business operations or a new enterprise for an existing business. Information File C5-66, Feasibility Study Outline is provided to give you guidance on how to proceed with the study and what to include. Also, Information File C5-64, How to Use and When to Do a Feasibility Study will help you through the process and help you get the most out of your study. A feasibility study is only one step in the business idea assessment and business development process (Information File C5-02). Reviewing this process and reading the information below will help put the role of the feasibility study in perspective. Evaluate Alternatives A feasibility study is usually conducted after pro- ducers have discussed a series of business ideas or scenarios. The feasibility study helps to “frame” and “flesh-out” specific business scenarios so they can be studied in-depth. During this process the number of business alternatives under consideration is usually quickly reduced. During the feasibility process you may investigate a variety of ways of organizing the business and positioning your product in the marketplace. It is like an exploratory journey and you may take several paths before you reach your destination. Just because the initial analysis is negative does not mean that the proposal does not have merit. Sometimes limitations or flaws in the proposal can be corrected. Pre-Feasibility Study A pre-feasibility study may be conducted first to help sort out relevant scenarios. Before proceeding with a full-blown feasibility study, you may want to do some pre-feasibility analysis of your own. If you find out early-on that the proposed business idea is not feasible, it will save you time and money. If the findings lead you to proceed with the feasi- bility study, your work may have resolved some basic issues. A consultant (http://www.agmrc.org/ directories__state_resources/agmrc_directories/con- sultants_and_businesses.cfm/valueadded_agricultur- al_consultants_and_service_providers_2) may help you with the pre-feasibility study, but you should be involved. This is an opportunity for you to under- stand the issues of business development. Market Assessment Also, a market assessment (Information File C5-30) may be conducted that will help determine the vi- ability of a proposed product in the marketplace. The market assessment will help to identify opportunities in a market or market segment. If no opportunities are found, there may be no reason to proceed with a feasibility study. If opportunities are found, the market assessment can give focus and direction to the construction of business scenarios to investigate in the feasibility study. A market assessment will provide much of the information for the marketing feasibility section of the feasibility study.