Sunday, December 29, 2019

How to do the feasibility study of the project step by step

How to do the feasibility study of the project step by step:

First, the definition of a feasibility study:

In a simple way, the feasibility study is a study carried out by the project owner to know the market conditions and the size of the necessary investments (costs) as well as expected profits, and based on the results of the study the project owner makes his decision to implement the project or not.

Second, the elements of the feasibility study:

The feasibility study consists of three main components, namely,
1. Market study.
2. Technical study.
3. Financial study.

Third, how to do a feasibility study:

1- Market study: -

The stage of studying the market can be considered the most important stage among the three stages. By studying the market, you get to know,

1- The volume of demand for goods or services that the project will provide.

2- The size of the supply of goods or services that the project will provide.

3- Determine the production capacity of the project (sales volume) according to the volume of supply and demand.

4- The target customers for the project products.

5- The needs and desires of the target customers.

6- Activity of competitors, their products and prices in the target market.

7- Gaps and available opportunities that can be exploited for the benefit of the project.

This and how to do a marketing feasibility study, it is possible to rely on one of the methods of marketing research to collect information about the target market and the targeted customers and competitors, and perhaps the best of these methods is the survey and the interview in addition to following up the recent market research that was issued on the same product that you intend to provide in the same The market in which you intend to operate.

2- Technical study:

The aim of this study is to know all the technical matters related to the project, such as,
   1- Determine the location, area, specifications and costs of the project headquarters.
   2- Determine the size, quality, specifications, and costs of labor.
   3- Determine the needs and costs of the project for equipment, tools and supplies.
   4- Determine the needs and costs of the project for services such as energy, water, and others.
   5- Determine the project need and costs of raw materials and production supplies (in the case of production projects).
   6- Determine the stages of production in detail (in the case of production projects).
This is about how to do a technical feasibility study for the project, it can be carried out easily, especially in the case of small projects, where the owner of the project can get to know,
   1- Specifications of the project site from the licensing authority, or even via the Internet, or who have previously implemented the same project.
   2- Rent costs by visiting the region in which he wishes to implement his project or by searching online at real estate sites.
   3- Equipment and machinery costs through contacting companies that sell production lines to know the average prices for equipment or production lines with a targeted production capacity.
   4- Staff salaries through recruitment sites and by asking workers in the same jobs and perhaps from the owners of the projects themselves.
   5- Production stages for production projects can be known online or through consulting engineers and specialists in the field, and perhaps through the company producing the production line.

3- Financial study: -

The financial study is considered the most dangerous stage of the feasibility study, through which the project revenues and profits are recognized, and accordingly the investment decision is made, either by implementing the project, reviewing it or canceling it.
It is worth noting that the results of the financial study of the project largely depend on the results of the market study and the technical study. Through the market study, the expected volume and value of sales are determined, and through the technical study the establishment and operating costs are determined.
This and how to conduct a financial feasibility study for the project in a simple and easy way, it is possible to follow the following steps.

     3-A- Preparing the income statement for the project: -

It is a list in which the value of revenue and the value of costs are set for a specific period in order to determine profits or losses for that period. You can also prepare the income statement by compensating by the numbers for the following data, which you are supposed to have obtained after conducting market and technical studies.
   1- The expected revenue from selling products (from studying the market).
   2- Operating costs such as rents, labor, ores, utilities, marketing, asset depreciation, maintenance, etc. (from technical study).
   3- The net profit, and it is determined by subtracting the operating costs from the revenues. If the value is positive, then this is evidence of the profitability of the project. If the value is negative, then this is a sign of the project’s loss.
Below is a one-year income statement form for the Burger Restaurant project, in which the numbers indicate the loss of the project in the first months as sales decreased, but increased later.

    3-B - Measuring the project's profitability: -

Depending on the results of your project's income statement, you can answer the following questions to determine the profitability of your project,
   1- Do the results obtained indicate that your project is able to achieve high profitability?
   2- Do the results obtained indicate that your project is able to cover its expenses in the short and long term?
   3- Are the results that indicate that the project is able to make a suitable profit from your point of view?

   3-C - Calculating the investment costs of the project: -

Investment costs are fixed capital costs (fixed assets) plus working capital costs (variable assets or operating costs), and are calculated as follows,
The value of capital costs (costs that were spent before production such as licensing, registration, training, construction, etc.) + the value of fixed assets + the value of variable assets.

Conclusion :-

By reading carefully about this article, you have learned how to do a feasibility study for any project, whatever its type or size, but as advice it is best to rely on projects with relatively large investments and medium projects on companies specialized in studying markets and preparing feasibility studies, for those companies have Experiences, cadres and capabilities and have the ability to direct studies in the best possible way, either in the case of small projects such as a sufficient project or a small restaurant or a supermarket or a company in any field with limited capital, you can do a study of the project’s feasibility yourself where there is a lack of required information and the small size of the market and ease of share For information, I learned how to prepare a feasibility study for any project.

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