Feasibility study of the project - what it is and how to properly arrange it

It often happens that a fairly promising project that can bring investors a good profit is simply not noticed and is not implemented. What comes up between an entrepreneur and an investor? Daydreaming, outdated views of the market and facts that are not supported by arguments, or something else? The answer is very close, ineffective business planning is to blame for everything. To do everything correctly, you need to develop a feasibility study.

Content of the article:

What is a project feasibility study

A feasibility study, abbreviated as a feasibility study, is an analysis, assessment and calculation of the economic feasibility of implementing a project for creating an enterprise, reconstruction and modernization of existing facilities, construction or construction of a new technical facility. It is based on comparing the assessment of results and costs, determining the effectiveness of the application and the period for which the investment is paid off. These can be third-party investments, we wrote about their attraction here.

It is also needed to confirm the advisability of choosing a new production technology, processes, equipment. Most often this is suitable for already operating enterprises.

Feasibility study required for every investor. In the course of its development, a sequence of works is carried out to analyze and study all components of the investment project and calculate the return on investment.

Difference from the business plan

Business plan and feasibility study are often not distinguished. The main difference between their structures is that in the second, there is almost no description of the company and product, market analysis, risk analysis and marketing strategy - the most important aspect in a business plan. You can read more about the marketing strategy in the article "Marketing plan". This abbreviated structure is due to the fact that it is written for projects of introducing new processes, technologies and equipment to existing enterprises. The feasibility study provides information on the reasons for choosing certain solutions, processes and technologies, economic calculations of the effectiveness of their implementation.

So, we can say that the feasibility study is specific in comparison with the business plan, and is more narrow.

What is the feasibility study for

Correctly drafted feasibility study will allow you to see the effectiveness of investments in the development of new or revision of previous types of company activities, the company needs a merger or acquisition, is there a need for lending. The feasibility study also helps to select the necessary equipment, select and implement suitable production technologies, and correctly organize the company's activities.

The package of documents that must be submitted to the bank to approve a loan must include a feasibility study. In this case, the feasibility study shows the profitability of providing a loan, an increase in the level of activity due to lending, and, of course, a guarantee of the return of the loan to the bank. Before taking a loan from a bank, we advise you to read the article Sources of business financing, which describes the advantages of two main types of business financing - lending and finding an investor.

A business plan is being developed for a new business project, it is necessary both for the owners themselves and for attracting funds from investors (banks, investment companies, private investors). The business plan includes a feasibility study (hereinafter feasibility study). In the existing business, the feasibility study is also used for the modernization of production or the introduction of its new direction.

A feasibility study is an official document that contains feasibility studies to determine the degree of feasibility of the implementation of the planned business project.

It provides the calculation and analysis of economic indicators, selects options for the most effective economic and technical solutions, offers organizational methods for their implementation at the enterprise.

Purpose and main tasks of the document Rules of its use

Feasibility study allows you to analyze the external and internal factors that will affect the project during its existence. In practice, a feasibility study is drawn up in the form of a document when applying for bank loans.

A feasibility study allows enterprise managers to solve the following tasks:

  • Choosing a more efficient project;
  • Attracting additional sources of financing for an investment project;
  • Increasing productivity (if a feasibility study is drawn up for an existing business), and, as a consequence, an increase in profitability.

Structure and content

The structure of a feasibility study for an investment project does not imply a strictly established content. The sections that will be included in the feasibility study will depend on the scale of the intended project, the specific goals of the project, the wishes of the managers, or the requirements of creditors or investors. Thus, the structure and content of the technical and economic content are of a recommendatory nature, we will single out those sections that can be included in the feasibility study.

Resume

It indicates the name, participants, goals, total cost, sources of raising funds, the main indicators of the financial feasibility of the investment project. This part is key, as it sets out the main essence of the project. The information presented in the summary should be presented briefly and succinctly.

Description of the enterprise

It is believed that a feasibility study is a reduced copy of a business plan, containing all its main points and characteristics. In reality, this is not the case. Despite the similarity of the two concepts, there are significant differences between them. The article will discuss what constitutes a feasibility study, the procedure and rules for its preparation, as well as the differences between a feasibility study and a business plan.

What is a feasibility study?

Feasibility study (FS) - printed confirmation of the technical viability of the project and the feasibility of its implementation from an economic point of view. In other words, a feasibility study is an idea implemented on paper, the purpose of which is, for example, the creation of a new facility or the modernization of an existing structure.

The main task in developing a feasibility study is to assess the costs of implementing an investment project, forecasting results, and determining the payback period of investments.

Differences between Feasibility Study and Business Plan

In some ways, both concepts are identical to each other. The main difference is that the task of the feasibility study is to justify the project already implemented at the enterprise, and the business plan is to justify the existence of the company as a whole. Therefore, when drawing up a feasibility study, the document does not take into account the research of the marketing department, market competition, production technology from beginning to end, the process of selling finished products. That is, a feasibility study is a shorter, but capacious, meaningful document.

When preparing a feasibility study, the following points are taken into account:

  • features of the production process;
  • basic requirements for equipment, technical equipment of the enterprise, the state of communications;
  • personnel, costs associated with the organization of the workflow;
  • free price for manufactured products;
  • terms of project implementation;
  • economic result;
  • environmental component.

The business plan includes four main information blocks:

  • marketing research, which most fully reflects all the components that are supposed to influence the market during the implementation of the project;
  • production and technological planning, which reflects all the points, starting with production technology, raw material base, ending with the range of products, cost, timing, quality of goods;
  • the management section, which describes the procedure for managing the enterprise, draws up an investment development plan, other parameters with which it is planned to attract labor resources, manage them;
  • the financial and economic block contains the basic calculations, efficiency ratios, the final decision on the feasibility of the project.

The feasibility study does not have a marketing block, but the production and technological section pays more attention to justifying the technology and methods of organizing production.

When an enterprise invests in a specific project, a feasibility study is drawn up, which confirms the feasibility of the investment. A similar document is drawn up in any company when making important business financial decisions. A sample feasibility study depends on the direction of use of funds. Let's consider the most common situations when it is necessary to develop this document.

Feasibility study for the purchase of equipment

Organizations often donate funds to modernize production. To achieve this goal, funds are allocated from the investment fund of the enterprise for the purchase of new equipment. It is important to clearly write the benefits of the investment. Calculations are carried out that show the payback period and efficiency of new equipment in production.

Feasibility study for writing off fixed assets

Organizations often write off funds for various reasons. These can be unsuccessful investments, unexpected costs, failure of valuable equipment that can no longer be accounted for in the capital of the company. In such situations, it is necessary to prove the economic benefit of the write-off. The feasibility study for the write-off of fixed assets is more relevant for budgetary organizations, where the write-off of state property often occurs.

Feasibility study of obtaining a loan from a bank

From time to time, firms need to raise additional funds for business development. In such a situation, entrepreneurs turn to the bank for a loan. So that the economy of the enterprise does not suffer, it is important to prove the advisability of concluding credit agreements. To carry out the feasibility study, it is necessary to assess the company's ability to repay the loan funds. Calculations include:

the amount of the monthly loan payment;

the company's ability to pay the debt without taking into account the possible profit from the project;

the size of the expected profit and its ratio to the amount of overpayments at the interest rate.

Feasibility study for purchasing a car

A sample for writing is also required when replenishing the vehicle fleet. The reason for buying the car and its further purpose are indicated. It is important in the document to indicate the benefits that the organization will receive from the operation of the new transport. In the process of creation, the optimal transport model is also selected in terms of price / quality / financial capabilities of the company.

Feasibility study of the feasibility of creating an enterprise

The feasibility study of the project is one of the main planning documents confirming the economic profitability of the enterprise. It contains both the initial design data and the analysis of the feasibility of certain organizational and technical goals, financial indicators (estimates, income, investment estimates, and others) that determine the effectiveness of activities.

Unlike a business plan, a feasibility study is applicable for planning medium and large industrial projects, therefore, the documents pay special attention to the production and technical side of the enterprise, but do not disclose commercial, advertising and market issues. The strategy for drawing up a feasibility study is much stricter, and the scope is narrower, so we can say that a business plan for running an enterprise can completely replace and displace rationale from the scope.

Construction Project Feasibility Study

On the basis of the feasibility study for the construction project, all stages of the contract are organized, financing agreements are concluded, and documentation is drawn up for holding tenders and carrying out work activities.

The main decisions to be disclosed in the feasibility study are:

Such documentation is intended to attract such types of financing in cash:

from state and local regional budgets of the Russian Federation;

own and on-farm resources of business investors;

attracted and borrowed funds from customers;

from business associations;

investors from other countries.

The design must contain the following sections:

We use cookies
We Use Cookies to Ensure That We Give You The Best Experience on Our Website. By Using The Website You Agree to Our Use of Cookies.
ALLOW COOKIES.