Do the feasibility study in four parts: market, operations, financials and legal requirements, then decide clearly to start, adjust or stop. The aim is not a long document but knowing whether the project deserves your money and time before you spend them.
Step by step
- 1
Market study
Who the customer is, how many of them you can actually reach, what competitors charge, and what evidence of demand you have from interviews or advance orders.
- 2
Technical and operating study
Location, equipment, suppliers, number of staff, and the maximum capacity per day or per month.
- 3
Costs
One-time setup costs, fixed monthly expenses, variable cost per unit, and the working capital that covers the period until collections start.
- 4
Financial indicators
Break-even point, monthly cash flow for at least a year, and payback period = investment ÷ monthly net cash flow. An investment of 300,000 that returns a net 15,000 a month pays back in 20 months.
- 5
Test the worst case
Recalculate with sales 20% lower and costs 10% higher. If the project loses money in that case, it needs changes before you start.
- 6
Legal requirements and the decision
Licenses, commercial registration and the requirements specific to your activity in your country, then a written decision: start, adjust or stop.
The most dangerous thing in a feasibility study is assuming full sales from the first month. Calculate sales from the number of customers you can actually reach, month by month.
- feasibility study steps for a small project
- how to do a feasibility study yourself