Many people don’t know that there is a difference between a business plan and a feasibility study.
Frequently, clients reach out seeking a feasibility study, but after an in-depth conversation, it becomes evident that what they truly require is a comprehensive business plan. In this article, I’ll clarify this common misconception and provide a clearer understanding of the distinction.
So let us start with the first one, which will give us a brief overview of what a business plan and a feasibility study is all about
What is the Difference Between Feasibility Study and Business Plan
Business plans and feasibility studies are vital business tools for analysis and for making business decisions. However, a feasibility study is not the same thing as a business plan because a feasibility study gives a conclusion or recommendation that would be completed prior to developing the business plan.
A feasibility study is done to determine whether a proposed business has a high enough probability of success that it should be undertaken. A feasibility study is carried out first in order to know if the business will be viable before venturing into it. Before a company can invest in a business or launch a new product, a feasibility study is done to determine if there will be a return on investment.
According to Rochester.edu, a feasibility study can be defined as “a controlled process for identifying problems and opportunities, determining objectives, describing situations, defining successful outcomes, and assessing the range of costs and benefits associated with several alternatives for solving a problem.”
It can also be used to make decisions about whether to launch a new product for an existing company or enter a new market. Feasibility studies are sometimes termed cost-benefit analyses because the projected costs of the project are compared to the expected benefits to yield a conclusion.
For instance, imagine that you have been an instructor in a company that provides IT training and certifications in the USA and you want to come to Africa to impact the knowledge by starting a new business and even adding training like IT Certification Practice Test Dumps, but you are faced with the big question, “Would my business fly?”. Is there a market for my services?
In this situation, the best decision is to conduct a feasibility study to determine if those IT programmes have an established market. If they are a company that needs interns trained by your company.
Business plans are guidelines for carrying out actions that the company’s management has already determined to be feasible. So a business plan is like a roadmap for your business that outlines goals and details how you plan to achieve those goals.
Business plans map out the direction a company intends to take to reach its revenue and profit objectives in the future. They are a compilation of numerous decisions made by the management team about how the company should be run. A business plan is done after a feasibility study has been carried out. If the recommendation of the feasibility study is negative, then there will be no need to venture into the business. Then, if the feasibility study says the business will be feasible, a business plan is developed, which will then map out plans and strategies to adopt in order to achieve business goals, including revenue generation, market penetration, customer acquisition, marketing, and sales strategies, among others.
A business plan can be done for internal or external use. The internal use of a business plan is for the management and staff of the company, while the external use is for shareholders, investors, bank loans, and customers.
Main Purpose of a Business Plan and a Feasibility Study
In short, a feasibility study gives a conclusion or recommendations, while a business plan gives a roadmap.
The feasibility study helps determine whether an idea or business is a viable option. Therefore, a feasibility study is done first before investing a dime in the business. Before considering approaching investors, you must have done your research to know that the business is feasible before taking any decision. That is why a feasibility study gives a conclusion or recommendations.
A business plan will map out the roadmap and strategies to achieve your business goal because a business plan assumes a business is viable and presents the steps necessary to achieve success. If you are looking forward to approaching an investor or trying to get a bank loan, what you need is a business plan. Some investors might request for a feasibility study before the business plan
Outline of a Business Plan and a Feasibility Study
Below is the outline of a business plan:
- Executive Summary
- Business/Company Overview
- Market/Industry Analysis
- Operation Plan
- Management/Personal plan
- Sales Forcast
- Financial Plan
- Appendices and Exhibits
A good outline for a feasibility study includes:
- Product or Service
- Market Environment
- Business Model
- Market and Sales Strategy
- Production Operations Requirements
- Management and Personnel Requirements
- Regulations and Environmental Issues
- Critical Risk Factors
- Financial Predictions Including: Balance Sheet, Income Statement, Cash Flow Statement, Break Even Analysis, and Capital Requirements
Challenges of a Business Plan and a Feasibility Study
Looking at both the business plan and feasibility study, you will discover that both attempt to predict future outcomes using assumptions about what is likely to happen in the business and the business environment, which include government policies, the market, competition, and risk, among others. Any poorly done feasibility study can lead to a costly mistake. If a business is not viable and the recommendation says it will be viable, the end result will not be palatable. This will affect the business plan and the operation of the business adversely.
A poorly done business plan—poor projections, strategies, analysis, business model, and environmental factors, among others—can easily be adjusted in the course of running the business, but the same cannot be said of a feasibility study because, in a feasibility study, an incorrect conclusion can be costly—it could mean launching a venture that has very little chance of surviving or approving a project that wastes the company’s human and financial resources.
If you need a standard business plan, check out the list of Business Plan we have
Do you want us to develop a unique business plan for you, Check out our business plan service page
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