The Importance of Conducting Feasibility Studies

Abstract

Before investing, it is vital to examine every aspect of the

investment carefully. Agricultural projects are highly sensitive,

and project initiators often prefer to move forward with a plan

without a thorough and critical review of the investment.

Agripura argues that conducting a feasibility study before

investing is critical. Companies that attempt to save money by

not doing so may not only fail to achieve their desired goal, but

may also incur very significant financial losses.

What is a feasibility study?

A feasibility study is a comprehensive evaluation of a proposed

project that considers all critical factors in order to establish its

probability of success. In this context, success refers in large

part to return on investment (ROI), which is the total profit to be

generated by the project.

In a feasibility study, a proposed project is evaluated to

determine whether its implementation and operation are viable

and can be successful. The project will be analyzed to determine

whether it is legally and technically feasible as well as

economically viable. The results of this analysis show whether a

project is worth the investment or will simply not deliver the

desired outcome. A major reason for this is that the project may

be too resource intensive, preventing the resources from be used

to promote more beneficial and profitable tasks. The bottom line

is that the project will not deliver an ROI that justifies the

investment.

Benefits of a feasibility study

Conducting a feasibility study provides information that can

assist project managers in making informed decisions about

whether or not to spend time and money on a proposed project.

Feasibility studies may also prevent a company's management

from entering a questionable business initiative by providing

them with critical information.

An additional advantage of conducting a feasibility study is that

it helps drive new ventures by shedding light on issues such as

how a company will work, the difficulties it could face, the

competitors operating in the same space, and from the required

funding and sources of funding. The results of the feasibility

study, will ultimately be used to persuade banks or other sources

of financing that investment in the venture makes sense and will

deliver a return on investment.

Summary

Feasibility studies should be a critical component of

investment decisions as they require the prospective

project to undergo a 360° analysis to illuminate the big

picture. This, in turn, enables the potential investor to

determine whether or not they can successfully face all the

challenges and if the project will be profitable and the

return on the investment will be reached in the desired

time range. It is also beneficial in terms of planning, as the

better the planning, the fewer unforeseen problems will

disturb the project down the line, saving time and money.

Agripura strongly recommends not omitting this stage.

Conducting a feasibility study as the first step in a

substantial project will help the project initiator decide

whether to implement the project and what challenges they

will face. The relatively small expense of the feasibility

study will pay off tenfold.