Economic feasibility study: its importance, criteria, and characteristics – 5 steps to implement it

The economic feasibility study of a project is one of the stages that gives an idea about the results of the project, and whether the project is applicable on the ground or will remain on paper. This study also studies the financial conditions and the proposed capabilities and whether they are compatible with the project requirements or not. The feasibility study is conducted in the initial stages of the project to reveal the strengths and weaknesses of the proposed project. It helps to know the resources required for the success of the project and also evaluate the risks that may exist in the environment surrounding the project. It also means planning before starting the implementation steps, and this planning is the basic pillar on which the expected financial return from the proposed project is built. Follow What is the difference between a pioneering project and a small project?

In short, this study analyzes the material requirements of the project, the amount of progress it may achieve, the likelihood of the project’s continued success, and also studies the factors affecting the project, whether these factors affect the project negatively or positively. It helps identify the problems that your project may face when starting to implement it on the ground and the potential losses resulting from those problems. To ensure that your investment will yield the desired results, you must conduct an organized feasibility study that carries within it foresight about all the problems that your project may face, and how to deal with those problems and solve them with the least possible losses. Follow this article with us to learn more about the successful feasibility study, its steps, and how to apply it in reality.

The importance of economic feasibility study

What is an economic feasibility study? The economic feasibility study will lead to the success of the project, achieving its goals and achieving the desired benefit from it, or the failure of the project and thus a waste of resources and individuals and society in general. More broadly, it gives you an idea about the financial budget that your project needs in exchange for the benefit that you get from it. The importance of the economic feasibility study is clear in general in the following:

• Increase the success rate of projects by avoiding obstacles and problems and solving them with minimal losses.
• Increase investor awareness to choose the best solutions offered and make the best decisions about the project.
• Clarifies the project’s material, human, and intellectual requirements.
• There are new job opportunities and projects that may not have been highlighted before.
• Teamwork is enhanced by having each team member know exactly what they are supposed to do.
• It helps in developing a comprehensive and integrated plan around each axis of the project.

The importance of the economic feasibility study can be divided according to the return on the study as follows:

First: The importance of studying economic feasibility for the individual:

The economic feasibility study brings many benefits to the individual investor, which can be summarized as follows:

• This study is the first guide for the individual, which enables him to know the possible results of the project so that the individual can refer to this study during any step of the project implementation.

• This study presents the results to the investor, enabling him to choose the best investment opportunity.

Second: The importance of studying the economic feasibility of the project:

The importance of studying the economic feasibility of the project is evident in the following:

• It studies the work environment surrounding the project and thus helps in making appropriate decisions regarding the project, such as purchasing real estate or machinery.
• It paints a far-sighted picture of the goals the project might achieve.
• The economic feasibility study helps determine the financial requirements as well as the sources of financing needed for the project.

Third: The importance of studying the economic feasibility of society:

The economic feasibility study helps determine whether or not the project can be implemented successfully, which in turn helps the community in the following:

• The economic feasibility study helps the community to overcome failed projects and thus preserve its resources from waste.
• It also works to avoid wasting money by avoiding useless or unprofitable projects.
• Providing a high level of security for funds invested in the community.Providing a high level of security for funds invested in the community.

Economic feasibility study objectives

It was also explained that the general and basic objective of the feasibility study for a project aims to choose the best in everything, such as choosing the best idea and implementing it in the best way by exploiting the best available resources, in addition to the fact that there are several sub-objectives that it aims to achieve between the economic and financial feasibility study, which are represented in the following:

• Determine the potential outcomes of the project, whether good or bad, before investing money.
• Knowing the economic return to the individual and society resulting from the project.
• Allocate resources and different types of technologies used in the project.
• Knowing the capabilities needed to provide expansion plans and programs for current projects.
• Relying on advanced methods in marketing the project, by focusing on marketing studies.
• It aims to study the concepts of the project and work on deepening them in all aspects of the project.
• Developing effective methods for project evaluation, this article is the main activities of the entrepreneurial project.
• It aims to create new horizons and identify alternative and available investment opportunities.
• Providing qualitative and specialized information that helps decision-makers choose what is appropriate.

Criteria to be met when studying economic feasibility

The process of studying the feasibility of a specific project, which largely includes accurate predictions about the project’s results, is not a simple process that can be implemented in just a few steps. Rather, there are quite a few criteria and foundations that must be available when you conduct an economic feasibility study for a project. These criteria are as follows:

• Verify the experience of the person conducting the feasibility study, to ensure that the project is managed successfully.
• The category and size of customers waiting for the goods or services that will be provided to the market through the project being studied.
• Identify different market characteristics. Analyze your business’s competitors and study the business’s superiority over the top 4 competitors .
• Determine the type of product accurately to determine the type of market in which it will be introduced.
• Put a basic item in the study that is concerned with competitors or workers in the same field and try to innovate something different and distinctive from others.
• Determine the degree of competition in the market and estimate the size of the offers of the same product.
• Identify the factors that affect the demand for a product or goods.
• Study the environment surrounding the project and ensure its suitability and the availability of its resources.
• Technical feasibility study of the project, which includes the requirements and different stages of production of goods.

Elements of economic feasibility study

To ensure the success of the economic feasibility study and to more accurately predict the results of the project, several basic elements must be available, which are as follows:

1- Determine the objectives of the project subject to the feasibility study.

You must define your goals before starting to implement the project. To define the goals accurately, you must study the market be keen on renewal and innovation, and not imitate previously set goals. You can learn about the opportunities of the entrepreneurial project and the privileges it provides (the most prominent 5 opportunities).

2- Design a comprehensive market study.

Your market study should include offers for the quantities you need for your project and choosing the cheapest places that sell the best supplies for the project. Also, study the nature of competitors and investors in the same field.

3- Design a technical study for the project.

This study must include everything related to the project, starting with the tools or equipment you may need, all the way to the appropriate place to implement the project.

4- Determine an appropriate financial budget.

This is the most important element of the economic feasibility study for your project, as it expresses the tangible result through which the extent to which the project has achieved its desired goals can be measured. Therefore, this study must include determining the budget for everything related to the project, including tools and supplies, as well as bills (water, electricity, gas, and other requirements).

5- Choosing a suitable work team

The more positive the work environment is, the more you will be able to see the amazing results of your project. The first step to improving the work environment is to form the right team that works in a spirit of cooperation, not competition. You must also study the number of workers you need for the project and the required expertise, and determine the wages of these workers.

6- Determine the expected profits from the project.

The feasibility study should include anticipating the results and benefits that may accrue from that project and trying to work on improving the business plan to reach the best profits and results.

7- Identify expected problems or losses.

One of the most important steps that greatly depends on achieving the project results or not is identifying the problems that the project may face during its implementation and trying to avoid those problems or solve them with the least possible losses. We are pleased to have you read the article on the 2 most famous tools for analyzing the entrepreneurial project. Learn about them in detail.

8- Deciding on implementing the project on the ground

After determining all the previous elements, the complete vision of the project becomes clear whether it will achieve the desired goals or not, as well as whether the problems that may be encountered are solvable or hinder the implementation of the project. Here comes the decision regarding the actual start of implementing the project on the ground or not.

Characteristics of Economic Feasibility Study

The economic feasibility study of the project has several characteristics, which are as follows:

• The economic feasibility study consists of several stages or steps that are linked to each other.
• The results of each stage of the feasibility study represent an introduction to the next stage.
• The feasibility study works to balance the project’s objectives with the goals of the community.
• The feasibility study must be conducted by a specialized expert such as a financial expert or marketing expert.
• The results and estimates of the feasibility study may match reality or may differ from it, so the study must be conducted by experts qualified in this field.
• A feasibility study is concerned with future and long-term investment ideas that may extend to a year or more.

Types of economic feasibility study

There are many types of feasibility studies for the project, including the following:

First, the initial feasibility study

This study includes the broad outlines of the proposed project and the resulting products and goods, such as the extent of the market’s need for these products, sources of financing for the project, its total costs, expected returns and benefits, expected local or global demand for the products, and other basic points.

Secondly, a detailed feasibility study

As it is clear that this study is concerned with studying the details of the project from all aspects, this study is the initial step in the project implementation steps. After a detailed study of the various aspects of the project, the decision is made regarding whether or not to implement the project.

Third: Environmental feasibility study

This study means studying the environmental conditions surrounding the project and the availability of raw materials and supplies necessary to start implementing the project, as well as whether the environment is suitable and appropriate for displaying the services or products that the project provides to consumers.

Fourth: Economic feasibility study

This study is represented in the analytical and evaluation studies that are conducted on the project. This study aims to calculate the capital for the project and the expected percentage of sales of the project’s products. Then calculate the expected period of recovery of the money. By comparing the return on investment with the costs paid, we arrive at whether the project is economically feasible and thus start implementing it, or whether the financial return is not commensurate with the costs of the project, and thus not implementing it. From here, you know the difference between the economic feasibility study and other feasibility studies.

Fifth: Financial feasibility study

The basic pillar on which any project depends is trying to balance its costs and returns. This is done through the financial study, as it specializes in studying all the material matters of the costs required for the project and trying to balance them with the material returns and benefits of the project. It is considered an important and decisive point regarding the final decision to start implementing the project or not. You can benefit from services such as MElRahim.

Sixth: Technical feasibility study

This study is based on social, economic, and environmental studies, and also relies heavily on marketing studies. This study is conducted by a number of specialists in technical aspects and includes the size of the project, the cost of supplies and raw materials needed for the project, and their availability.

Seventh: Marketing feasibility study

This study represents the market study, which is an essential part of the feasibility study for any project. Through this study, the extent of success or failure of providing the product or commodity to the consumer is verified, as well as the project’s ability to continue working and leading in the field among competitors by determining the degree of competition and pricing policies.

Eighth: Legal feasibility study

This study includes taking legal measures related to the project, such as determining the legal validity of establishing the project and whether there are incentives provided by the state for such a project, such as tax exemptions for a limited period or exemption from customs procedures related to importing and exporting goods.

Ninth: Technological feasibility study

This study aims to achieve the needs of the proposed project as well as provide and develop its software in a timely manner.

Tenth: Organizational feasibility study

This study aims to support the proposed project in terms of the strategies required for the work as well as the extent of the changes that this project may bring about.

Steps or stages of conducting an economic feasibility study

The importance of the economic feasibility study for any project has also been explained. Therefore, this process must be carried out with careful planning and great accuracy. To ensure this, several successive steps or stages must be followed, each stage being the gateway to the next stage. Also, seeking the help of experts and specialists in this field will greatly help you complete these steps successfully. Here are now the necessary steps to conduct a feasibility study that guarantees the success of your project and gives you the accuracy to predict the desired results from it.

Step 1: Do a preliminary study of the project

The study aims to study the proposed project ideas before starting to implement them realistically and exhausting the investor’s time and effort, as well as before wasting money and consuming resources. Through this study, the services expected to be provided by the project are determined, and the question is answered: What are the identity and features of these services? Anhowch these services can be provided to the consumer public in a new and innovative way that has not been used before, in addition to studying the markets and levels of supply and demand for the offered services, and whether this project can be presented in a competitive manner that can overcome and appear among competitors in the same field. This study also includes identifying the problems and challenges that the project is likely to face and the best ways to solve them. And trying to estimate the losses resulting from these problems, and whether they can be avoided or will their impact on the project lead to its failure.

Step 2: Calculate the material costs of the project.

As is well known, the basic rule on which the success or failure of any project is built is achieving financial profits and seeing the results of the project on the ground. Therefore, this step is considered the most important for the feasibility study of the project, and through it, the capital costs required by the project are calculated, as well as the resources or raw supplies that the project may need to provide its services.

This step must be based on accuracy and credibility to ensure achieving the desired results because any error that may occur in this step is enough to fail the entire project and drain its resources to no avail. The expected period for determining the profits that are proportional to the costs of the project must also be accurately determined. If there is no ratio and proportion between the profits and returns from the project and the costs necessary to implement it, the inevitable fate of the project will be a failure.

Step 3: Conduct a market study or survey.

The main objective of this step is to determine the possibility of the project’s continuity and stability in light of market competition, as well as to determine the expected financial return from the project. This step includes evaluating the requirements of the area in which the project is proposed, and the extent to which consumers in that area need the goods and products resulting from the project. In addition to accurately identifying and evaluating the ideas and services provided by competitors to reach their strengths and weaknesses, monitoring the production lines of goods and verifying the extent of customer satisfaction with them. At this stage, supply and demand for the product must also be taken into account and the appropriate budget must be determined according to its capabilities and ability to meet the needs of consumers. Having all of this within the feasibility study for your project ensures that the results are as you want them and that your services are well-received and in demand by consumers.

Step 4: Set timelines for project tasks.

A successful feasibility study for any project includes determining the time it will take to achieve the results, and initially confirming whether those results are worth completing the study, and thus checking the timelines for completing each step and avoiding procrastination or ineffective results, and thus changing the proposed plans. The project schedule must be made with a visual chart that includes the project tasks arranged according to their importance to the project, and those tasks are scheduled at specific dates on a specific day and date. It is necessary to estimate the obstacles that may face the project and that may affect the specific dates for implementing the tasks, so always take into account more time during the implementation of the project to avoid delays and failure to implement it on time. Submitting the project in a ready form in advance of the specified time will be much better than delaying it.

Step 5: Evaluate and review the project data.

The fifth and final stage of the feasibility study for a project involves reviewing and discussing all previous steps and determining the final result of each stage. The importance of this step becomes clear through thinking before drawing any conclusions for the project, thus evaluating the potential risks that the project may face, market variables, and reviewing all project conditions and the economic situation before starting to implement it. You can follow the article Customer Segments – The Basis of Any 100% Successful Business Project and a Strong Competitive Plan.

In brief, the steps that must be followed to ensure the success of the feasibility study for your project can be identified as follows:

1. Determine the product, commodity, or service that your project will provide by thinking about the appropriate project and ensuring its suitability for the environment and the consumer.

2. Identifying consumers, studying the category to which the service is directed, and ensuring whether people will buy the product or not.

3. Estimating the expected return or income from the proposed project. Is this return logically proportional to the costs or not? And thus making the final decision to implement the project or not.

4. Setting fixed and logical deadlines for completing each project task and achieving its desired results, is the key to the next step.

5. Making the final decision about whether the project is suitable for implementation or not and whether the project is beneficial to society or not. To complete this step accurately, the feasibility study must answer several questions.

Developing a detailed strategic plan and conducting an economic feasibility study for your project is not an easy matter or something you can do without if you want. Rather, it is the basic pillar on which the success of your project depends and protects you from the expected losses if you start implementing the project without a feasibility study. It also ensures that your project remains solid and competitive in the market in light of the rapid developments occurring in it.

From an economic perspective, the feasibility study helps you avoid wasting money and resources without achieving a balanced result. Therefore, you must choose specialists in the field and those with experience to take this step before starting to implement your project on the ground and do not hesitate to pay attention to this step. Our team, the Khutana Office for Feasibility Studies, is ready to provide all the assistance you need, such as audience analyses, feasibility studies, marketing plans, and others, by clicking here.

The most important questions that a feasibility study must answer

As previously explained, the steps or stages that you must go through to conduct a successful feasibility study for your project to avoid losses and expect the best results, here are now the most important points that you should find in the feasibility study for the project. These points are represented in several common questions, and neglecting to answer any of them will cost you huge losses or even the failure of your project in general. These five questions represent the most important questions that you should find answers to through the feasibility study for your project, and these questions are represented in the following:

Is this project operationally viable?

Meaning, that will this project be able to withstand and face the problems that you hope to solve by implementing it? It is illogical to waste effort, time, and money on a project whose results cannot be seen on the ground or do not achieve fruitful results balanced with the costs required to implement it. Therefore, you must find a clear and explicit answer to this question within the feasibility study for your project. If you cannot find a logical answer to it, meaning that you notice the results of the project and see its returns clearly on paper, then not implementing the project will be more beneficial than implementing it. Be honest while studying this step to avoid unwanted losses.

Is this project feasible within a certain time frame?

This is the most important question that you should find answers to through the feasibility study. Do you have enough time to complete the project and verify its results? It is important to set a realistic timetable with an appreciation of the obstacles that you may face while completing the tasks. Otherwise, you will find yourself procrastinating and falling behind the specified output dates or you will have to reduce the quality of services. Which is the first step to the collapse of your project. Always consider the seasons when the demand for your services is greater than at any other time. During that period, try to invest the best of your time and effort. To be able to provide services in an appropriate manner that puts your product at the forefront. In light of the competition that occurs for the same product provided by competitors.

Is this project economically feasible?

By answering this question, you will determine whether the project will bring you the benefits you expect from it or not, and you will make the final decision about whether to implement the project or not. If you can see the expected returns and profits from the project written on paper, and that the obstacles or problems that the project may face can be solved without huge losses, then your desire to implement the project on the ground will be logical, and your enthusiasm to provide your best will increase. But if the opposite appears, no matter how great your project or the services you provide are, not implementing it will be more beneficial than implementing it. You can read the article How to Find a Pioneering Project That Opens Horizons for a Bright Future and 6 Points for Managing Pioneering Projects.

This step includes several factors, including the following:

• Project profitability.
• Total costs of the project.
• Estimated investments in the project from external parties.

Before you conduct a feasibility study for your project

Always try to seek the help of experienced specialists to do specialized matters. The feasibility study is the main pillar through which the results of the project become clear. Therefore, it is preferable to seek the help of experts, especially if the investment is large and worth it. Or if you want to start implementing a small project with a capital that is not large compared to other projects. We offer you the most important useful tips that greatly help you to conduct the feasibility study successfully. And achieve the desired goals. For more details, you can read the article Your comprehensive guide to finding a successful entrepreneurial project idea and more than 5 ways to generate innovative ideas.

Notes needed to conduct an economic feasibility study and important tips:

• Always remember that losses on paper are much better than losses in reality. So be objective when doing your feasibility study.
• Make sure the prices and figures on the paper are consistent with today’s prices.
• Design a feasibility study that is clear, easy to understand, and organized so that you can refer to it at any time.
• Benefiting from previous experiences and consulting experts will save you a lot of effort and time.
• Make sure to do preliminary and detailed studies for the project.
• Make sure to study the environment surrounding the project well and ensure that it is suitable for it.
• Study carefully the consumer category of your project’s products and services and consider the supply and demand policy.
• Take the time to think logically about each point of the study, until you reach the meaning of a successful feasibility study for your project.
• Do not rush to start implementing the project steps on the ground.
• No matter how great your project is or what results you hope for, if the study is not feasible and clearly shows the balance between the material and moral costs of the project and the return or benefit from it, then abandon the project.
• Ensure that your project will meet all legal requirements.
• Scrutinizing the smallest details of the project without leaving any point to circumstances helps and even ensures the success of your project.
• Taking into account environmental changes that may occur around the project and that may have a direct or indirect impact on it.
• Seek the help of specialists and experts in the field of feasibility study. To ensure that it will be comprehensive and integrated, especially if the project is worth it or the financial investment will be large.

By reading this article, you have taken a shortcut to your excellence. By obtaining everything you need to conduct a successful feasibility study for your project. And ensuring that the desired results of your project are clear and working on those results to suit your capabilities and the environmental conditions surrounding the project. As well as working on changing what is inappropriate to avoid expected losses. And preventing problems or obstacles that you may face while implementing your project on the ground. Don’t forget to return to Khutana to take you by the hand towards launching the project you dream of.

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