common feasibility study mistakes and how to avoid them
table of contents:
introduction
common feasibility study mistakes
how to avoid mistakes in the feasibility study
introduction:
a feasibility study is one of the most important steps that any business idea or project goes through, as it serves as a roadmap that guides investors towards making informed decisions. however, mistakes in preparing a feasibility study may lead to inaccurate results and expose the project to failure. in this article, we will address the most common mistakes that many entrepreneurs make during the preparation of feasibility studies, and how to avoid them to ensure success and profitability. these tips will help you lay a strong foundation for your business, ensuring sustainable expansion and growth in the future, and thefeasibilitystudy is a crucial step in determining the feasibility of the project and guiding it towards success. however, there are common mistakes that can lead to inaccurate results or ill-considered decisions. in this article, we review the most common mistakes and how to avoid them to ensure an effective feasibility study.
1. common feasibility study mistakes
a) Not sufficiently analysing the market
mistake: using general market data and not conducting a thorough analysis of the target market, supply, and demand.
result: Missing important opportunities or offering a product or service that is not in sufficient demand.
example: launching a new product without thoroughly analysing potential customers or competitors.
b) inaccurate estimation of costs and revenues
error: underestimating or overestimating project costs or projected revenues.
result: Facing funding shortfalls or generating less revenue than expected, jeopardising the viability of the project.
example: failure to calculate shipping and marketing costs in e-projects.
c) neglecting to analyse risks
error: failure to recognise potential challenges and risks that may face the project.
result: Poor preparedness for crises such as market changes or supply issues.
example: a project that relies on a single supplier of raw materials with no contingency plans in place.
d) rushing to make decisions based on insufficient information
mistake: relying on inaccurate information or outdated data when preparing the study.
result: Making ill-considered decisions that lead to project failure.
example: using market data that is more than five years old without updating it.
e) Failure to accurately identify the target audience
mistake: launching a project without an accurate understanding of the target customers and their needs.
result: Difficulty in attracting customers and generating enough sales.
example: creating a luxury product in a market focussed on low prices.
f) overlooking environmental or legal aspects
error: ignoring the environmental impact of the project or the necessary legal requirements.
result: Exposure to fines or objections that could lead to project closure.
example: failure to obtain the necessary licences before starting operations.
g) failure to update the feasibility study over time
mistake: relying on an old feasibility study and not reviewing it when changes occur in the market or economic environment.
result: Failure to adapt to new developments, which may lead to inappropriate decisions that harm the project.
example: a project continues to provide a product with the same specifications despite the emergence of new, more efficient technologies or a change in customer expectations.
h) neglecting to analyse the social and environmental feasibility of the project
mistake: focusing only on the economic aspects and not assessing the social or environmental impact of the project.
result: Losing the support of the local community or getting into legal trouble due to the negative impact of the project on the environment.
example: establishing a factory in a residential area without considering the impact of emissions on residents or adhering to environmental safety standards.
i) overestimating the optimism of the project’s success
mistake: overestimating the success of the project without having a realistic basis to support these expectations, such as relying on inaccurate assumptions about market growth or increased sales.
result: Financial or operational expectations are not met, leading to project failure or loss of investor confidence.
example: expecting high sales for a new product without real market testing or studying consumer behaviour.
2. how to avoid mistakes in the feasibility study
a) Conduct a thorough market analysis
use market research tools such as surveys and interviews with potential customers.
study current competitors and assess their strengths and weaknesses.
follow economic and social trends affecting the target market.
b) accurately estimate costs and revenues
collect financial data from reliable sources.
include all fixed and variable costs, such as operating costs, raw materials, and marketing.
perform a break-even analysis to determine when the project begins to make a profit.
c) analyse risks and develop contingency plans
identify potential risks such as price fluctuations, legal changes, or lack of resources.
develop alternative plans to address each type of risk.
update the risk management plan periodically.
d) rely on accurate and up-to-date data
use reliable and up-to-date data sources to ensure the accuracy of the study.
continuously update the information, especially if the study extends over a long period of time.
e) Define the target audience accurately
segment the target customers into categories based on age, income, geographical location, and interests.
create marketing strategies that suit the needs of different groups.
f) compliance with environmental and legal requirements
consult legal specialists to ensure compliance with all local and international regulations.
conduct an environmental impact assessment of the project and adhere to sustainability standards.
g) test the idea with pilot projects before full implementation
procedure:
launch a pilot or mini version of the project to evaluate the performance of the idea.
gather feedback from potential customers to optimise the project before major investment.
benefit:
minimise risk by making sure the project is feasible.
improve the product or service based on customer feedback.
example: setting up a small online store to sell limited products as a first step before scaling up.
h) involve a multidisciplinary team in preparing the study
action:
collaborate with experts in different areas such as marketing, finance, and human resources to ensure all aspects of the study are covered.
engage stakeholders to provide real-world, on-the-ground insights.
benefit:
improve the accuracy of the study by leveraging diverse expertise.
ensure all technical, operational, and financial aspects are integrated.
example: engage a legal expert to assess legal risks and a marketing expert to analyse the market.
i) test the idea before full implementation
procedure:
launch a prototype or trial version of the product or service to get customer feedback.
use the test to gauge the acceptance of the idea and optimise it before full investment.
benefit:
minimise risk by improving the product based on customer feedback.
validate the viability of the project in the target market.
example: creating a beta version of a web application for a limited group of users before the full launch.
in conclusion, the feasibility study is one of the basic foundations that ensure the success of projects and the success of the investment in them. it is a comprehensive analytical tool that helps entrepreneurs and investors evaluate ideas, identify potential risks and opportunities, and make informed decisions that drive the project towards sustainable success. however, as explained, making common mistakes can lead to unfavourable outcomes that threaten the project and affect its sustainability.
by conducting a thorough feasibility study, by analysing the market, costs, revenues, risks, and target audience, a project can avoid these common mistakes and embark on the road to success with greater confidence. it is also important to update the feasibility study periodically to ensure that it is in line with the rapid changes in the market.
if you are thinking of starting or developing your business, it is essential to make sure that you prepare a solid and reliable feasibility study that takes into account all aspects of the project. we are here to provide you with full support in preparing feasibility studies that will ensure your sustainable success. feel free to contact us via WhatsApp or call us for professional and specialised advice that will help you make the best decisions for the future of your project.
at Value Feasibility Studies, we believe that success begins with a solid plan, and if you are looking for the right guidance to ensure the success of your project, we are here to be your success partners.
read more: small Business Feasibility Study: how to get started
