What is a feasibility analysis?

Definition of Feasibility Analysis

A feasibility analysis is used to determine whether or not a project is achievable or profitable. The analysis will include factors such as cost, economy and estimated income. Prior to approaching lenders or investors, developers will conduct a feasibility analysis to decide whether or not the proposal is worthwhile.

Why is this term important?

Completion of a feasibility analysis ensures a company is aware of the workload that will come from a projected assignment. The analysis will determine what potential problem areas could be, including financial complications or business concerns. A feasibility analysis can also be used to convince potential investors or lenders that a particular project is worth pursuing.

The key points typically included in a feasibility analysis are a business description, details about the current market, how each step of the project will be worked through, the overall cost and potential income and details about the people that will be working on the project.

Examples of term

Say you work for a large retail corporation in Toronto. After doing some research, you and your team decide it might be a good time to expand to another city, such as Vancouver. Prior to making the decision to determine if Vancouver is the best location and whether or not this market is cost-effective for your needs, you and your team complete a feasibility analysis.

Once you begin to move forward with the analysis, you discover that the market is currently very hot for new real estate locations. You also determine that you can afford to open a new store there and that you will likely bring in a good amount of income. After the feasibility analysis is completed, you approach the company owner and present your ideas.