In an economic feasibility study, project owners always seek to obtain any information that helps them in making the appropriate decision regarding their business, especially if the project owner is a beginner. In this article, we will learn together what is meant by an economic feasibility study and how to prepare it in a professional manner.
The economic feasibility study is one of the most important branches of the feasibility study, and it is known as a scientific method for estimating the prospects for the success of a project or investment idea before its actual implementation.
Therefore, the economic feasibility study is a practical tool that protects the project from being exposed to risks and bearing losses at the same time, and it is also a means by which the appropriate investment decision is built or taken that achieves the project owner’s desired goals.
This is because it includes a set of tests and estimates that are prepared with the intention of judging the investment decision of the proposed project, in light of the expectations of costs and benefits, whether direct or indirect, as well as the longevity of the project.
The economic feasibility aims to determine the possibility of investing in the project or not, in addition to several other sub-goals, the most important of which are the following:
Determining the reciprocal economic effects of investment proposals, whether internationally or locally.
Understand the basic terminology of the project in-depth, both from the economic and other technical, financial, and technological aspects.
As for the completion of the economic feasibility study, it is possible for you to implement it on your own, or to use a specialist in the field of feasibility studies.
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This is in addition to her superior experience in the field of implementing adequate feasibility studies for various commercial and service projects, where everyone praised her for her professionalism in this field because she is not satisfied with carrying out the feasibility study only, but also develops solutions and alternatives in case the project is exposed to loss.
Feasibility study for small projects
Good preparation for economic feasibility is one of the important success steps for various projects. The success and effectiveness of any project depend primarily on proper planning.
Accurate planning also represents its main basis on total dependence on the expected material return from the project, hence the need for what is known as economic feasibility.
The economic feasibility study consists of several steps that must be taken to ensure the success of the project on the ground. These steps are as follows:
First, choosing the product to be produced from the proposed project, and is done by thinking about the appropriate project idea and analyzing it well, and when the idea owner decides which project, his economic feasibility must be studied and worked.
Second, knowing whether the public will buy the product or not. This is done by identifying the need and demand of real and potential customers, and evaluating whether people will buy what the business owner plans to produce and sell in the potential market.
Third, determining how the project will be implemented and studying its method of operation in full.
Fourth, an estimate of the expected income (profit) of the project or from sales, through an estimated calculation of the quantity expected to be produced during a certain period of time and its expected cost upon sale.
Fifthly, deciding whether the project idea is good or not and making sure that it is useful. This is verified by answering some questions such as:
The benefits generated by the project.
The possibility of calculating the financial flow and profits.
Feasibility Study Criteria
There are foundations that you must take into account when making a feasibility work:
Determining the motives, experiences, and personal characteristics of the project manager, in order to ensure his ability to manage the project efficiently.
Knowing the volume of customers waiting for the services or goods expected to be provided to the market through the project.
Implementation of the technical feasibility study for the project in terms of fixed assets and the stages and requirements of producing the commodity.
Identify different market characteristics.
Determining the type of target market, whether it is a consumer or not, whether it is an industrial market, a new market, a consumer or domestic market, and what is the share of the new product in the commercial market.
Determine the factors that affect the demand for project products.
Determine the competition situation in the market and make estimates of the number of competitors and the size of the supply of similar goods.