Understanding the Difference Between Feasibility Study and Viability Study

Business owners and entrepreneurs often face critical decisions that require careful analysis before moving forward. To ensure success, two types of studies are essential: feasibility studies and viability studies.

However, many entrepreneurs experience confusion regarding their differences, which can impact decision-making and business outcomes.

This article aims to clarify the distinction between these two types of studies and address common challenges entrepreneurs face in applying them to their businesses.

What Is a Feasibility Study?

A feasibility study is an in-depth investigation that evaluates whether a proposed business idea, project, or plan is practically possible. Its main goal is to determine if the idea can work in real-world conditions by examining technical, financial, legal, and operational aspects. Essentially, a feasibility study helps answer the question: “Can this project be done?”

Components of a Feasibility Study:

1. Technical Feasibility: Assesses whether the technology or resources needed to execute the project are available and can perform as required.
2. Financial Feasibility: Evaluates the costs involved and the potential financial returns to ensure the project is affordable and capable of delivering profit.
3. Legal Feasibility: Considers legal regulations, licenses, and other compliance-related issues that could affect the project’s success.
4. Operational Feasibility: Looks at whether the company has the human resources, processes, and infrastructure to carry out the project effectively.

Feasibility studies are especially useful when starting a new business, launching a new product, or expanding operations. The goal is to avoid costly mistakes by evaluating whether the proposed project is technically and financially feasible before significant resources are invested.

What Is a Viability Study?

A viability study, on the other hand, goes a step further by determining whether the proposed project or business idea is not only feasible but also sustainable and profitable in the long term. While feasibility studies focus on whether the project can be done, viability studies explore whether the project should be done, considering long-term factors like market demand, competition, and profitability.

Components of a Viability Study:

1. Market Viability: Analyzes the market to ensure that there is enough demand for the product or service. It also looks at competition and how the business can differentiate itself.
2. Profitability: Estimates the potential return on investment (ROI) and determines whether the project will be profitable enough to justify the costs involved.
3. Sustainability: Examines whether the business model can thrive over time by continuously attracting customers and adapting to changing market conditions.
4. Risk Assessment: Identifies potential risks and challenges that could affect the business’s success and explores strategies for mitigating them.

A viability study helps entrepreneurs understand whether the business idea is worth pursuing from a long-term perspective and provides insight into how to structure the business for ongoing success.

Key Differences Between Feasibility and Viability Studies

Despite their similarities, feasibility and viability studies serve distinct purposes. Understanding their differences is crucial for business owners to make informed decisions. Here are some key distinctions:

1. Focus:

A feasibility study focuses on whether the business idea can be implemented successfully.

A viability study focuses on whether the business idea should be implemented, considering profitability and sustainability.

2. Timeframe:

Feasibility studies typically analyze short-term factors, such as the resources needed to launch a project and immediate costs.

Viability studies take a long-term approach, assessing whether the business will remain profitable and sustainable in the future.

3. Purpose:

A feasibility study answers the question, “Is this project possible?”

A viability study answers the question, “Is this project worth it?”

4. Components:

Feasibility studies focus on technical, financial, legal, and operational feasibility.

Viability studies focus on market demand, profitability, sustainability, and risks.

Common Challenges Entrepreneurs Face with Feasibility and Viability Studies

Many entrepreneurs struggle with these studies due to several common pain points. These challenges can prevent them from making confident, informed decisions for their businesses.

1. Doubts About the Accuracy of Feasibility Studies

One significant challenge business owners face is doubting the accuracy and reliability of feasibility studies. They may question whether the study provides a true reflection of what will happen once the project is launched. These doubts often stem from incomplete data, biased assumptions, or lack of expert input, which can lead to hesitation in making decisions based on the study’s findings.

2. Difficulty Finding Suitable Products or Ideas

Another major issue is identifying the right product or business idea for a feasibility study. Entrepreneurs may struggle to determine which idea to evaluate, especially when faced with multiple options. This difficulty can delay the decision-making process, leaving entrepreneurs unsure of their business’s direction.

3. Confusion About the Difference Between Feasibility and Viability Studies

A widespread challenge is the confusion between feasibility and viability studies. Business owners often assume that completing one study is enough to make a decision. However, neglecting to conduct both studies can lead to misinterpretation of results, improper allocation of resources, and ultimately, poor decision-making.

For example, a project may be feasible in terms of technology and resources, but if the market demand is weak or the competition is too strong, the project may not be viable in the long term. Without understanding the difference between feasibility and viability, entrepreneurs risk focusing too much on short-term goals and overlooking long-term sustainability.

How to Overcome These Challenges.

To address these challenges, entrepreneurs can take several practical steps:

1. Seek Expert Guidance: Working with consultants or industry experts can help ensure that feasibility studies are thorough and reliable. These experts can provide valuable insights, reduce biases, and help entrepreneurs interpret study results accurately.
2. Conduct Both Studies: Entrepreneurs should conduct both feasibility and viability studies before making major decisions. By focusing on both short-term and long-term factors, business owners can make more balanced and well-informed choices.
3. Start with Clear Objectives: Before conducting either study, it’s important to have clear objectives in mind. Entrepreneurs should be specific about what they want to achieve and which questions they need answered. This focus helps ensure that the studies provide useful and actionable insights.
4. Use Appropriate Tools and Data: Access to the right tools and accurate data is critical. Entrepreneurs should invest in quality market research tools, financial modeling software, and expert analysis to improve the reliability of their studies.

Conclusion

Understanding the difference between a feasibility study and a viability study is essential for making informed business decisions. While feasibility studies determine if a project can be done, viability studies go further to assess whether the project should be pursued in the long term.

Overcoming common challenges, such as doubts about accuracy, difficulty finding suitable ideas, and confusion between the two studies, will help entrepreneurs make better decisions, leading to more successful business ventures.