Economic and financial feasibility

Feasibility Study is a common word that is usually heard in the business world. Because every one of us needs to conduct a Feasibility Study if we got a project idea and we need to know if it will be viable or not before wasting money & time.

But, what’s economic and financial feasibility?

Economic and financial feasibility

The feasibility study should outline in-depth the various alternatives examined and the strengths and weaknesses of each. The economic and financial feasibility study is considered the final part of the planning of your business, in which the viability of the business is measured through financial indicators.

Economic Feasibility

Economic feasibility is a project that is technically viable and financially feasible but the chance of it being profitable is very less. This involves the feasibility of the proposed project to generate economic benefits. Benefit-cost analysis and a breakeven analysis are required aspects of evaluating the economic feasibility of a project.

The tangible and intangible outcomes of a project should be translated into economic terms for a consistent basis of evaluation. Even when a project is non-profit in nature, economic feasibility is critical.

The economic feasibility analysis includes

Determine the Target Market

Identify and describe the target market for your intended venture or business activity. Describe how the intended customer base would benefit from your product or service. If your planned activity serves a business customer base, identify the industry your targeted customers are in, and who the key players are. For a consumer base, describe the demographic characteristics and shopping behavior of your intended customers.

Look at Your Competition

Assess the competition in your target market. Identify the major competing firms, their products and services, and their respective shares of the market for your intended activity. Doing this will force you to consider how to distinguish your products or services from those of your competitors.

Make Your Revenue Projections

Project the revenues of your business activity, based on an assumed share of the target market. You can provide revenue projections for a period of one year or longer.

Some analysts suggest providing revenue projections for a three-year period.

As a new entrant into the market, you should keep your projections conservative, estimating only a small market share (usually about 5% to 10%). Using your estimated market share and sale price, estimate your total revenues, breaking them down by month, quarter and year.

Determine Fixed and Variable Costs

Estimate the costs of your business activity, considering fixed and variable costs. Fixed costs are those that remain constant within the time period for which you are projecting revenues. Examples include facilities (such as rental on the factory or office space), interest on capital items, and administrative expenses. Account for fixed costs as a single lump sum, as they are the same regardless of the level of sales or services provided.

 Financial Feasibility

A financial feasibility study projects how much start-up capital is needed, sources of capital, returns on investment, and other financial considerations. Financial feasibility involves the capability of the project organization to raise (expand) the appropriate funds needed to implement the proposed project.

In many instances, project supporter chooses to have additional investors or other sources of funds, including loans, for their projects.

Financial feasibility analysis include

• Production of the business model
• Evaluation of overall construction cost
• Assessment of financial feasibility
• Production of financial statements

SME Consulting can help you with any of the above to start/enhance your business.

You can check some of our case studies from this like:

So, if you’re an entrepreneur, an investor or intent to open your own business, In SME consulting we could help you to invest in Egypt by providing different services to you such as Business plans, Digital marketing, Feasibility studies, and Market research. You can visit our website to read more about our services here