Many people don’t know that there is a difference between a business plan and a feasibility study.
Many a time when people contacting me, they ask for a feasibility study instead of asking for a business plan. That is why I always interview them to know exactly what they want to use it for and in the course interacting with them, I get to understand that what they need is actually a business plan and not a feasibility study. In this article, I will explain more for your understanding.
Table of Content:
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- What is a Business Plan and a Feasibility Study?
- Main Purpose of a Business Plan and a Feasibility Study
- Outline of a Business Plan and a Feasibility Study
- Challenges of a Business Plan and a Feasibility Study
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 a Business Plan and a Feasibility Study?
Business plans and feasibility studies are vital business tools for analysis and also for making decisions in a business. But a feasibility study is not the same thing as a business plan because a feasibility study gives a conclusion or recommendation 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.”
There can also be used to make decisions about whether to launch a new product in 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.
Business plans are blueprints for implementing actions that have already been deemed feasible by the company’s management. 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 says negative, then there will be no need to venture into the business. Then if the feasibility study says the business will be feasible, then 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 use or external use. The internal use of a business plan is for the management and staff of the company while the external is for shareholders, investors, for bank loan and customers.
2. 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 the 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 study 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/strategies to achieve your business goal because a business plan assumes a business is going to 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 the business plan. Some investors might request for a feasibility study first before the business plan
3. 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
4. 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, risk among others, any poorly done feasibility study can lead to a costly mistake. If a business is not viable and the recommendation says the business 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, environment 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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