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What is the purpose of a feasibility study?

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Quick Answer

The purpose of a feasibility study is to analyze a business proposal to determine if the project is viable and if it should be followed through with. Determining if a business is feasible prior to establishing it prevents an investor from wasting money and time on a failed business venture.

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Full Answer

Some concerns that are addressed through a feasibility study include:

  • Will the business generate adequate cash flow?
  • Will the business be able to encounter and withstand risks?
  • Will the business meet the goals intended by the founders?

A feasibility study is conducted in the idea stage of planning a business. It is not to be confused with a business plan. A business plan is only created after a feasibility study is conducted and a decision is made to move forward with the business.

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