Business Plan vs Feasibility Plan: Which One Should I Use

Business Plan vs Feasibility Plan Which One Should I Use

Which one should you use, a business plan or a feasibility plan?

In order to make wise investments in a marketplace experiencing increasing levels of risk, companies are turning to feasibility studies to determine if they should offer new products, services or undertake a new business endeavor.

The purpose of a feasibility study is to determine if a business opportunity is possible, practical and viable.

When faced with a business opportunity, many optimistic people tend to focus on just the positive aspects.

A feasibility study enables a realistic view at both the positive and negative aspects of the opportunity.

A feasibility study is an important tool for making the right decisions.

A wrong decision often leads to business failure.

Such as, only 50% of start-ups are still in business after 18 months and only 20% are in business after 5 years.

Feasibility studies are useful when starting a new business or identifying a new opportunity for an existing business.

Ideally, the feasibility study process involves making rational decisions about a number of enduring characteristics of a project, including:

  • Definition and nature of the project;
    .
  • Current market segmentation;
    .
  • Projected growth in each market segment;
    .
  • Current market offerings;
    ,
  • Customer profile(s);
    ,
  • Estimation of customers/revenues;
    .
  • Determination of competitive differentiation and advantage(s);
    .
  • Vision/mission statement;
    .
  • Definition of proposed operations/management structure and management methods; and Financing and projected cash flows.

prefeasibility study

Pre Feasibility Studies: 

In large and usually joint venture or multinational projects, a preliminary study undertaken to determine if it would be worthwhile to proceed to the feasibility study stage.

A pre-feasibility study may be conducted first to help sort out relevant scenarios.

Before proceeding with a full-blown feasibility study, you may want to do some pre-feasibility analysis of your own.

If you find out early-on that the proposed business idea is not feasible, it will save you time and money.

If the findings lead you to proceed with the feasibility study, your work may have resolved some basic issues.

A consultant may help you with the pre-feasibility study, but you should be involved. 

This is an opportunity for you to understand the issues of business development.

Business Plan: is a document that summarizes the operational and financial objectives of a business and contains the detailed plans and budgets showing how the objectives are to be realized.

Because the business plan contains detailed financial projections, forecasts about your business’s performance, and a marketing plan, it’s an incredibly useful tool for business planning.

For anyone starting a business, it’s a vital first step.

business plan vs feasibility plan

The Feasibility Study vs. the Business Plan

Groups often confuse the role of two tools used in project development process; the feasibility study and the business plan.

Various components are common to both the feasibility study and the business plan.

Assuming positive feasibility study results, some but not all of the information developed in the feasibility study will be incorporated into the business plan.

The business plan also contains aspects that were not included in the feasibility study.

It would, therefore, be useful to clarify the differences between the two.

The feasibility study is conducted during the deliberation phase of the project development cycle prior to obtaining project financing.

It is an analytical tool that includes several scenarios for the decision-makers of the group to utilize in determining if they should continue the project.

If, after completion of the feasibility study, the group decides to not proceed, there is no need to undertake the process of creating a business plan.

If the group decides to proceed, they construct a business plan.

The business plan is the design for project implementation and, as its name implies, presents the guideline for the project plan.

Its purpose is to serve as a blueprint for the group’s responses during project operations.

Usually, the business plan contains less emphasis on differing scenarios than the feasibility study.

Typically, it elaborates the scenario shown by the feasibility study to be most promising.

Since the concept has been shown to be viable in the feasibility study, the business plan is much more focused on what action steps will be taken during and after project implementation.

The business plan is created later in the development process than the feasibility study.

By this time project details, which required assumptions for the feasibility study, have been decided.

Standard business plans include details such as key management personnel, business location, the financial package, product flow, and possible customers.

Since the feasibility study presents an independent review of the project, persons from outside of the group normally complete it.

In contrast, the group typically develops their business plan internally.

The group may revise the plan with input from bankers and investors, as the financial situation of the project becomes clearer.

Another difference between the two, although not as important for project development considerations, is that while the feasibility study is only applicable for the developmental stage of a project, businesses continue to use, and revise their business plans after a project has been implemented.

A business plan shows the group’s intended response to the critical issues revealed in the feasibility study.

As the feasibility study refines the group’s initial ideas, the business plan uses information from the study to further prepare the project for operation.

feasibility study

Reasons Given Not to Do a Feasibility Study

Project leaders may find themselves under pressure to skip the “feasibility analysis” step and go directly to building a business.

Individuals from within and outside of the project may push to skip this step.

Reasons given for not doing a feasibility analysis include:

  • We know it’s feasible. 

An existing business is already doing it.

  • Why do another feasibility study when one was done just a few years ago?
    .
  • Feasibility studies are just a way for consultants to make money.
    .
  • The market analysis has already been done by the business that is going to sell us the equipment.
    .
  • Why not just hire a general manager who can do the study?
    .
  • Feasibility studies are a waste of time. 

We need to buy the building, tie up the site and bid on the equipment.

The reasons given above should not dissuade you from conducting a meaningful and accurate feasibility study.

Once decisions have been made about proceeding with a proposed business, they are often very difficult to change.

You may need to live with these decisions for a long time.

Reasons to Do a Feasibility Study

Conducting a feasibility study is a good business practice.

If you examine successful businesses, you will find that they did not go into a new business venture without first thoroughly examining all of the issues and assessing the probability of business success.

Below are other reasons to conduct a feasibility study.

  • Gives focus to the project and outline alternatives.
    .
  • Narrows business alternatives
    .
  • Identifies new opportunities through the investigative process.
    .
  • Identifies reasons not to proceed.
    .
  • Enhances the probability of success by addressing and mitigating factors early on that could affect the project. 
    .
  • Provides quality information for decision making.
    .
  • Provides documentation that the business venture was thoroughly investigated.
    .
  • Helps in securing funding from lending institutions and other monetary sources.
    .
  • Helps to attract equity investment.

The feasibility study is a critical step in the business assessment process.

If properly conducted, it may be the best investment you ever made.

Market Feasibility Study: More Important Than a Business Plan
Have you had to write a business plan or a feasibility plan before?

Tell us which which one did you needed to write?

Comment and share with us below.

Here is another good blog to read: Business Plan vs. Feasibility Study

Read my latest blog on: Business Plan vs Business Proposal: Which One Should I Use

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About Maria Barina

Maria Barina is a mother and grandmother who worked for the NYC Board of Education as Laboratory Specialist Bio/GS for 26yrs till the age of 56. Her husband, after 37 of marriage, passed away from Lung Cancer. She came to myEmpirePRO to seek guidance on how to get freedom that an online business can provide. Freedom to her is being able to do what she wants, when she wants to and to show others they can do the same to. Since she done that she is able to do this by working anywhere she goes and became a mobile-prenuer

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