What Is a Feasibility Study? 6 Types and Practical Tips (2024)

Here’s a business idea: Everyone prefers to keep a perfect body temperature no matter the weather, so why not create clothing that maintains comfort in both hot and cold temperatures? The problem is it would require built-in heating and cooling mechanisms, adding weight, bulk, and electricity needs. In other words, it’s an intriguing idea, but it’s not feasible.

Decision makers and project managers must constantly assess if 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 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.

Benefits of feasibility studies

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 study 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

1. Market
2. Technical
3. Legal
4. Financial
5. Operational
6. Environmental

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 market 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, 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.

How to conduct a feasibility study

1. Define the project and its scope
2. Conduct preliminary analysis
3. Evaluate market feasibility
4. Assess technical and operational feasibility
5. Analyze financial feasibility
6. Review legal and environmental considerations
7. Prepare the final report

Using this feasibility study template to guide your process, here’s how to conduct a comprehensive feasibility study:

1. 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.

2. 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 development.

3. 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.

4. 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.

5. 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.

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.

6. 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.

7. 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.