Secrets To Feasibility Study Of A Commercial Project when you are developing a business plan. An essential aspect of carrying out the feasibility analysis of a new business, which is what will determine whether the company can carry it out.
Generally, specialists and books on business plans consider three types of feasibility, when in reality, they are not the only ones. In this, I will explain practically and simply all the types of feasibility that should consider in the feasibility study of a commercial project of a new business to know if the business is viable or not.
What does feasibility mean?
According to the RAE, the word viable means “which, due to its circumstances, is likely to carry out,” and ” feasibility ” means the quality of viable. In the case of a new business. We consider that “viable” means that the business can start and maintain over time with a high probability of success.
What is the feasibility analysis of a Commercial Project?
The “feasibility analysis” or “feasibility study” of a new business is the study aiming at projecting the success or failure of the business to know if the new business will be viable or not. That is to know if the business can be successful. Or if, on the contrary, it will not be successful or there is no possibility of starting it.
The result of the feasibility study of a commercial project of a new business will be one of two alternatives: the project is viable, or it is not viable.
Importance of Commercial Project feasibility analysis
Let’s imagine that an entrepreneur does not analyze the feasibility of the new business that he wants to start. Instead, as is the case in most cases, the entrepreneur senses that the business is viable. It will have many clients and obtain significant profits, and therefore decides to invest in it.
It implements his business, and after a while, the business does not respond to expectations, his sales are low, and he cannot cover his costs. Every day that passes. he loses money until finally, most entrepreneurs have to close it.
If the entrepreneur carried out the feasibility analysis, obviously in a technical way. Before embarking and starting the business, he would know if it is possible and convenient to start it or not.
Suppose the feasibility study’s result is that it is not viable and is not convenient to start the business. In that case, the entrepreneur will decide not to invest and avoid losing his money and time, energy health, health, health, and other things.
The feasibility study of a commercial new business project is essential for making strategic decisions about a new business or any investment project.
Types of feasibility to study
If we look for information on the feasibility analysis of new businesses and review, first on the Internet and then in the books and other published documents, we will find that the majority refers to financial feasibility. A few other few also refer to commercial and technical feasibility.
Other types of feasibility that are also very important are forgotten or unknown, and by not considering them, they can lead the entrepreneur to make wrong decisions.
Indeed, the experiences of many entrepreneurs show us that by doing the feasibility study analysis considering only the three types of feasibility, they obtained as a result that the business was viable; however, it was not possible to start the business. Why? Simply because they did not take into account other types of feasibility.
There are several types of feasibility, and all of them should consider in the feasibility analysis, without exception.
The types of feasibility are the following:
Feasibility, commercial feasibility, technical Feasibility Study, economic and financial feasibility, legal feasibility, and environmental feasibility.
For the new business to be viable, it is necessary to win each type of feasibility. The result is positive, that is, “it is viable.” Otherwise, it is enough that the result is harmful in any of these types of feasibility so that the business cannot be executed, or it is simply not convenient to do so. Below I briefly describe each of the types of feasibility.
1. Management Feasibility
The feasibility of management seeks to determine if, with the current management, the realization and success of the business are possible; if the business management has the capabilities to achieve the correct implementation and efficient management of the business.
The management or administration in creating a business is of vital importance to make it work successfully. With effective and efficient management, the chances of making a profit are high.
The various studies on new businesses show us that approximately 75% of them fail, and most of them are due to mismanagement.
In other words, if the new business does not have effective and efficient management. The business will not be viable. If it started, the expected results will not be achieved, and the business will fail and have to close.
Management refers not only to the management of the business but also to each of the different functions of the business:
Marketing, sales, operations, finance, human resources, and technology.
The management feasibility analysis should mainly understand the business management team, including the people who will direct the business. With vision, their strategies and decisions will lead to the success or failure of the business.
2. Commercial Feasibility
The Secrets To Feasibility Study Of A Commercial Project analysis tries to check whether the good or service to launch on the market will have the potential for sale and development. That is if you will have a market that accepts the product or service in such a way that it justifies the investment to make Commercial Project.
Therefore, it is not enough to buy the product, but the demand must be in sufficient quantities and grow steadily over time.
The analysis of the Commercial Project feasibility study of a commercial project includes the study of two significant issues.
a) The offer
The offer refers to everything that the company will offer to customers; the main element is the product or service, including customer service, price image of the premises, and other aspects. It is about making the offer attractive to customers, and they are interested and acquire it. Not just once, but multiple times and eventually become loyal customers.
b) Sufficient demand
The new business must have a market with a sufficient demand that justifies making all the investment effort in the new business. There is a sufficient number of customers interested in buying, the decision-making capacity, and the money to buy. In addition, the demand must be increasing over time.
Secrets To Feasibility Study Of A Commercial Project: Since this aspect is vital, it is widespread for entrepreneurs to carry out a good analysis without quantifying the market.” demands. Then, later, when they are already in the market, they do not have a sufficient number of customers. Therefore their sales are insufficient to cover their costs and make a profit, and finally, they are forced to close the business.
The instruments to know the commercial feasibilities are the market study and the marketing plan:
- With the market study, a large amount of data is collected and analyzed about the environment, the sector, the competition, and potential consumers.
- It will be known if many potential customers consume the products.
- If their growth will be necessary.
The marketing plan allows us to know the strategies that will be used and if it will be possible to attract many clients that make the business profitable. Increasing sales will be achieved in the following years.
3. Technical feasibility Commercial Project
The technical feasibility analysis seeks to establish whether it is physically or materially possible to carry out the new business. Therefore, it must have the necessary technical elements to be viable and produced with efficiency and quality. Therefore, the feasibility analysis must consider two aspects:
a) Necessary Resources
The new business must have the equipment and machinery, technology, materials and supplies, and the necessary operational personnel. If not, the business will not function, or if it works, it will do so with serious difficulties.
Let’s look at a real case in the Secrets To Feasibility Study Of A Commercial Project:
A group of entrepreneurs decided to create a fruit jam business based on passion fruit.
They implemented the entire business. However, when they began to operate and wanted to stock up on passion fruit.
So they did not find said input because it was not the season for these fruits, and therefore, the business could not start. They did not take this aspect into account, as simple as it may seem.
b) Efficiency and quality
The operations or production strategy of the business and the designed processes must allow production with efficiency and quality. Therefore, it is not enough that the business has the technical elements and that the processes and resources are designed and organized to produce with efficiency and quality.
In this way, the company will offer high value to customers and solve their problems or satisfy their needs.
1- This is a very neglecting aspect by the vast majority of new businesses.
2- The tool to know the technical feasibility of a new business is the Operations Plan, which is part of the Business Plan.
4. Financial feasibility
The analysis of economic and financial feasibility tries to establish in the monetary form. If a project is suitable or not; it refers to the profitability of the business project. either, to the project’s ability to generate sufficient profits and recover the investment in reasonable times to make a good ECONOMIC FEASIBILITY STUDY which is crucial to your business.
Several indicators used to analyze financial feasibility analysis. The main ones being: IRR, NPV, Cost / Benefit, and Pay-Back.
- The Internal Rate of Return, or internal rate of return (IRR), is the annual average rate of return that the project pays to investors for investing their funds there.
- The NPV. The Present Net Value is a monetary amount. Which shows the value of all the expected cash flows referred to the exact moment in time. In other words, it presents the difference between the present value of the collections minus the updated value of the payments.
- Benefit / Cost Indicator. Measures the relationship between benefits and costs associated with an investment project to assess its profitability.
The payback or recovery investment recovery period when the investment made to run the business will recover.
5. Legal feasibility
The legal feasibility analysis seeks to determine the existence of legal obstacles or legal aspects. This may in some way affect the materialization of the business. Both in the investment stage and in the execution stage of the business project. For this, it is necessary to analyze the existing regulations and those related to the business to create.
- The basic idea is that for the new business to be viable, it must comply with all legal regulations. if it cannot comply with any of them.
- It simply will not be viable. In every country, numerous regulations must take into account when starting a new business.
Some of the legal aspects the new Commercial Project businesses must comply with are the following:
- Secrets To Feasibility Study Of A Commercial Project depends on legislation on the incorporation of companies
- Municipal or regional operating authorization, or from the authority of the sector to which the business belongs.
- Building permit
- Labor standards for hiring staff
- Withholding Tax that the company must consider and also the tax regulations
- Trademark registration
- Rules on advertising or related to products or related to the ownership of land and premises
