The year is 1996, and world-famous American fast food joint McDonald’s wants to open a restaurant in India. 

But how would the management of McDonald’s know for sure that the formula that worked in America will work in India? 

They did a feasibility study to find out. 

A feasibility study analyzes the variables surrounding a business and the best way to manipulate these variables to ensure guaranteed success. 

Read on to understand what a feasibility study is and whether your business needs one! 

What is a Feasibility Study? 

A feasibility study is when the management of a business does extensive research into whether a project will succeed, keeping in mind the different variables that affect the project.

This “project” could be anything – actually starting the business, expanding the business, or launching new products. 

There are many variables that need to be considered: technical considerations, legal support, income, costs, sources of revenue, and more. 

For a start-up founder or a small business owner, a feasibility study is an important way to assure both the founding team and investors that the business will do well in the market. 

How a Feasibility Study Works

How does a feasibility study work? To understand the different dimensions of feasibility, let’s use an example. 

Maya wants to open a gaming arcade in the society she lives in. She loves playing games and dreams of an arcade where people can play both virtual and real games. 

Before she invests money in her business idea, she decides to do some research into the feasibility of her idea. 

Financial Feasibility Study

First, Maya will look at financial feasibility. This is pretty straightforward – she has to be able to fund her business. She will need money to lease a commercial space, to buy computers, desks, internet, and the various furniture she needs for her arcade. 

If she cannot fund her business with her own money, she will need to be able to source investment from outside sources. 

These sources include business loans from banks, investments from individual investors, or government financing schemes. 

Read more: Small Business Loans

Financial feasibility is the first and most important aspect that a founder needs to consider. Without money, the business cannot even begin!

For example, when Razorpay was looking into expanding operations into Southeast Asia, bring new products like Magic Checkout, and scale up RazorpayX, it raised money from investors in a Series-F funding. 

Read more: Announcing Razorpay’s $375 Million Series-F Funding, Valuation Increases to $7.5 Billion

Technical Feasibility Study 

Next, she looks at technical feasibility. Technical feasibility means looking into whether current technology will support your business or not. 

If Maya wants her business to succeed, she will need access to gaming computers, fast internet, and downloadable gaming software. Since her idea also includes real-life games like cards or Monopoly, she will need access to board games, cards, and other analog games. 

If Maya lives in a country where internet speeds are not fast enough for smooth gameplay, her business might not succeed. 

“Technology” doesn’t always have to be computers and software! Any infrastructure that the business needs to thrive is called technology. 

For example, Amazon, in its early days, was a bookshop! Jeff Bezos sold books online from his garage, which would not have been possible without the infrastructural support of the American postal service and other courier companies. These logistics companies provided Amazon with the technological support it needed to succeed. 

Economic and Social Feasibility Study 

Lastly, she will look at economic and social feasibility. Even if Maya is able to source financing and has all the technology to support her, her business will not succeed if society does not support her. 

If the government of her country banned commercial video game playing, her business would be illegal! Maya (and all founders!) need to take a careful look into the law that governs the society that the business will operate. 

If Maya lives in a place mostly populated by older people, her video game segment might not do well because of a lack of demand. An important aspect of economic feasibility is ensuring that there is enough demand for the idea. 

A good example of the importance of Economic and Social Feasibility is how McDonald’s dealt with their expansion into India. 

They did away with their trademark beef Big Mac, and introduced the Chicken Maharaja Mac, since beef and pork are not popular

In the case of big, expensive business plans, it is best to consult with an expert, since there might be nuances that a layman might not know or understand. If the business idea is a small one, founders can conduct a feasibility study on their own with some research. 

meats consumed in Indian society. They also introduced, for the first time, a vegetarian menu, since a sizeable portion of the population are vegetarians. 

Who Needs a Feasibility Study?

If you have an idea, like Maya, that you want to make into a full-fledged business, you should conduct a feasibility study. Investing money into a business that is not feasible in even one of the above-mentioned dimensions would be a drastic and very costly mistake! 

If you already own a business and are looking into expanding or introducing new products or services, a feasibility study would help you determine whether your expansion would be successful. 

If you own a business or are looking to start one, you’ll need a robust bank! Check out RazorpayX, a neobank made for Indian startups. 

 

FAQs

Do business founders need an expert to conduct a feasibility study?

In the case of big, expensive business plans, it is best to consult with an expert, since there might be nuances that a layman might not know or understand. If the business idea is a small one, founders can conduct a feasibility study on their own with some research.

Is it important to conduct a feasibility study?

It is incredibly important to conduct a feasibility study to reduce the risk of failure as much as possible. Simply investing in a business idea without properly researching and analyzing its feasibility almost guarantees failure.

How does a feasibility study work?

There are three main dimensions to a feasibility study: financial feasibility, technical feasibility, and economic and social feasibility. A feasibility study looks into whether all these dimensions support the business idea.

Who needs to conduct a feasibility study?

Anybody who wants to start a business, or a business owner with an existing business who wants to expand, or introduce new products or services.

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    Raghavi Kasa
    Author Raghavi Kasa

    Raghavi likes to think that because she writes for a living, she'd be good at writing a short bio for herself. But she isn't. She is good at binging K-drama, though.

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