What Are Business Feasibility Studies and Why Are They Important?
When your business is in the process of a transition, such as a leadership or ownership transition, you’ll likely be taking on risk. One of the best ways you can evaluate whether the potential benefits of a transition outweigh the risks is with a feasibility study. Before you begin a transition, make sure you know what a feasibility study is, why these studies are so important, and how you can perform one.
What Is a Feasibility Study?
A feasibility study is a detailed analysis that outlines the risk and return of pursuing a plan of action. In a transition, a feasibility study can allow you to determine how much risk a potential transition would entail. A transition feasibility study can also give you the information you need to better predict the likely success of a transition and the potential return on investment.
Why Do a Feasibility Study?
A business feasibility study is essential in evaluating whether or not a transition is likely to succeed. When you conduct a feasibility study for an ownership transition, leadership transition, generational transition, or any other business transition, you’ll need to ask yourself five main feasibility study questions. These questions include:
- What are the viable options? Each plan has multiple courses of action. What is the best option for the company and its key stakeholders? The study will sort through all the options and may even help you identify a hybrid approach.
- What resources are required? The study identifies the resources required of the firm and its shareholders. These resources typically include:
- Intellectual Property
- Responsible stakeholders – Identify who has accountability and for what part of the plan
- Special considerations
- What is the expected shareholder return for each viable option?
- What is the viability of success?
- What are the risks?
Once you’ve asked yourself the above feasibility study questions and completed the study, you’ll be prepared to decide on the path forward. The decisions will be aligned because the study will give your entire team the data, analysis, and forecasts to help see all your options clearly. The study also allows you to plan for alternatives.
How to Conduct a Feasibility Study
Conducting a feasibility study involves rigor and brutal honesty about where your business is today. To conduct a comprehensive study:
- Gather information: Various types of information should be gathered based on the purpose of the planned transition. This information gathering should include the collection of financial, operational, and market data.
- Assess the business: During your business assessment, be brutally honest about your company. Some key areas you’ll want to focus on in your assessment include:
- Stock value
- Weaknesses – define and then develop a plan to overcome
- Opportunities – define and develop a plan of action to take advantage of opportunities
- Threats – define who, what, why, and when. Define how to turn threats into opportunities.
- Are we (am I) willing to do what it takes to achieve the end goal?
- Align with key stakeholders: Once you’ve gathered and analyzed the information, the key stakeholders should meet to align on the next steps and final decisions. In this meeting, make sure everyone understands expectations and the role they play. A team that is aligned will eliminate unwanted surprises down the road and experience a smoother ownership transition process.
Choose Thinc Strategy for Advisory Services
If you’re looking for help conducting a feasibility study, Thinc Strategy’s certified advisors can help. Our team will work with you to create, implement and evaluate a feasibility study that helps you determine whether a transition meets your company’s overall goals and capabilities. Alongside assisting with feasibility studies, our transitional services include external transitions, internal transitions, employee stock ownership plans, and valuations.
Find out more about our feasibility studies and ownership transition planning services today. If you have any questions or want to schedule a free consultation, please contact us.