What is a pre feasibility study?

Pre feasibility studies are an early stage analysis of a potential business idea. They are
conducted by a small team and are designed to give company stakeholders the basic
information they need to green light a business idea or choose between potential investments.
These studies typically give an overview of any project’s logistics, capital requirements, key
challenges and other information deemed important to the decision-making process.

When and why do companies undertake them?

Pre feasibility studies act as one of the first explorations of a potential investment, following a
preliminary resource report and the creation of a rough model. Based on the data procured by
various assessments, a pre feasibility study may occur. Companies use these studies to collect
information before investing millions of dollars into tasks like acquiring licenses or proprietary
software.

What information do they include?

In addition to information relating to business models and product design, pre feasibility studies
also take into account factors that may impact or interfere with the final project. That can
involve community issues, operational obstacles, socio-economic challenges and more.

A comprehensive pre feasibility study should include detailed designs and descriptions for
operation, as well as cost estimates, project risks, safety issues and other important
information. There should also be multiple options included in the study for tackling different
issues, as that will provide organizations with more ways to overcome potential challenges.

What happens if results are positive? Negative?

If a pre feasibility study results in a positive base-case scenario, the company will likely move on
to the next stage: a feasibility study. If the study is negative, an organization may head back to
the drawing board or abandon the potential project altogether.

What is a feasibility study?

Feasibility studies are in-depth reports on many of the same topics as pre feasibility studies.
They are meant to be much more accurate and require more resources to conduct.

Feasibility studies should offer estimates that are within 10- to 20-percent accuracy, whereas
pre feasibility studies are allowed to run between 20 and 30 percent. These studies are
intended to evaluate if a particular idea can be implemented effectively and will be profitable.
Detailed feasibility studies are also used as the basis for a project’s capital estimates.

When and why do companies undertake them?

At this point in the process, organizations already have large sums of money at stake and a
drive to see their project through to completion. Feasibility studies are all about reducing risks
and addressing potential issues that may complicate a project. The studies also include
information that is helpful for stakeholders like local governments or textile/fashion/retail
experts.

Feasibility study is usually conducted after producers/entrepreneurs have discussed a series of

business ideas or scenarios.” The number of business alternatives being considered can be
reduced from here.

What information do they include?

Feasibility studies cover many important points, including technical, economic, legal,
operational and scheduling issues. Feasibility studies should be able to address questions across
these topics; they should feature information about whether a project is technically possible,
how much it will cost, whether it’s in accordance with the law, how operations will work and
when it can be completed.

Market analysis research can also be a vital part of the feasibility-study phase. This type of
research is intended to ensure that there is demand for the product or the service that a
project may produce. Market research also helps to zero in on competition in the marketplace.
This type of information on markets and demand is especially valuable for investors.

What happens if results are positive? Negative?

Feasibility studies act as tools that provide the wantapreneurs with as much detailed
information as possible to make intelligent and strategic decisions regarding a project.
Decisions will vary, but can include choices like canceling projects, bringing in partners,
increasing investment or changing schedules.

Why should investors care?

Both pre feasibility and feasibility studies can provide investors with useful updates on the
progress of your project. These studies help create a more concrete picture about your key
milestones and the challenges that you may face as you move forward.

The Purpose of Pre-feasibility Study (Market Research) 

i) To verify that the investment opportunity is promising enough to make a firm decision. 
ii) To confirm that the project is viable from the Marketing, Manufacturing and other points of
views.
iii) To identify any aspects of the project that is critical or crucial enough to call for in depth
analysis.
iv) To acquire comprehensive technical, economic and commercial data for the final investment
decision. 
v) To enable an in-depth study of aspects such as

• Market potential 
• Technical requirements 
• Managerial ability 
• Financial projections and analysis 
• Risks evaluation 
• Business environmental analysis. 

The characteristics of the pre-feasibility study include:

 5% - 15% of the initial tasks are complete 

 Cost estimate accuracy is in the order of ±30%
 Bottom line contingency is in the order of ±20%
 Considerable amount of time needs to be given to the draft report. Report reviews
and final approval can add significant time to the overall project schedule.
 Normal cost range (includes supporting studies and test work – consumer survey,
socio-economic aspects, expert opinion, market trends, political and environmental
aspect, etc., but not in-depth research) will be in the order of 0.5% - 2.0% of the
total project value (INR 1.0 – INR 4.0 lakhs for a INR 2 crore project)