When starting a new business or project, various things need to be studied and evaluated to delineate what is best according to your needs. In this decision-making process, two essential tools often come up: a feasibility study and a business plan. While they may seem similar, they serve distinct purposes and are used at different stages of business development.
The difference between feasibility study and business plan has many aspects to it, the key one being that a feasibility study determines the viability of a business idea. In contrast, a business plan is a roadmap for executing ideas and achieving business goals. Understanding their differences can help project managers and business leaders determine which one is more important for them in increasing the chances of success of their business journey.
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Understanding Feasibility Study and its Key Components
A feasibility analysis is a preliminary analysis of the potential impact and likelihood of success of a proposed detailed plan. It analyses several operational aspects of a business model, such as market demand, financial projections, operational challenges, and legal considerations, to assess whether the business idea is worth pursuing. The primary purpose of a feasibility analysis is to make informed decisions on whether the proposed business venture is feasible and worth pursuing further. Its key components include:
- Market analysis - Evaluates target market demand through market surveys, target customers, competitive analysis, and market trends for potential success.
- Technical feasibility - Assesses the technical requirements, infrastructure, and resources needed to execute the project.
- Financial feasibility - Estimates costs, potential revenue inflow, break-even analysis, and potential return on investment.
- Operational feasibility - Examines resource requirements like the availability of human resources, supply chain and operational requirements, and logistics.
- Legal and regulatory considerations - Ensures compliance with laws, permits, and industry regulatory requirements.
- Risk assessment - Identifies potential risks and provides mitigation strategies for risk management.
A feasibility study is often done initially, before a business plan, to help determine whether the business is even worth planning for.
Understanding Business Plan and its Key Components
A comprehensive business plan is a strategic document that serves as a roadmap to the potential success of any organization. It is a detailed blueprint outlining the goals, strategies, and financial projections for running a business. The difference between feasibility study and business plan is that, unlike the former, which determines viability, the latter focuses on careful planning and execution, i.e. how the business will operate and grow. Its primary purpose is to provide a comprehensive overview of the planning process. Key components include:
- Executive summary and company description - A brief overview of the business, including its mission statements and objectives, and details about the business, its organizational structure, and ownership.
- Market analysis and research - Insights into the market trends, competition, and target customers.
- Products or services offered - Detailed analysis of offerings and unique selling points with plans for branding, promotion and sales.
- Operational plan - Day-to-day operations, suppliers, staffing, and production processes.
- Financial plan - Revenue forecasts, budgets, funding needs, income statements, and financial projections.
- Appendices and supporting documents - Any additional data, licenses, or legal documents.
A business plan is usually written after a feasibility study confirms that the business idea is viable.
What is the Difference Between Feasibility Study and Business Plan?
A feasibility study differs from a business plan in various aspects. Following are some of the differences between the two:
- Difference in purpose - A feasibility study determines if a business idea is viable, while a business plan details how the business will operate and its growth potential. The former focuses on assessing the potential risks, technical requirements, challenges, and opportunities, while the latter serves as an action plan or a roadmap for the future of business operations and is used to secure financing to realize its potential for success.
- Difference in content - A feasibility study analyzes the project's overall concept, relevant market conditions, financial projections, technical requirements, and regulatory requirements of a business while also identifying potential risks and potential obstacles in an external environment. A business plan defines execution strategy in terms of marketing, operational requirements, and financial forecasts, along with focusing on managing risks and executing the business model.
- Difference in timing - The most basic difference between feasibility study and business plan lies in their timing. Feasibility analysis is conducted at the outset of a range of projects to assess their potential feasibility. Business plans are created after the feasibility study once it has been confirmed that the project is worth pursuing and has growth potential.
- Difference in audience - A feasibility study's users include entrepreneurs, potential investors, business owners, or stakeholders evaluating viability. A business plan is mostly used by or made for investors, lenders, business partners, internal management, and other stakeholders.
Both are critical tools for making informed decisions about a wide range of projects. Where feasibility analysis informs the decision to pursue a project, the business plan guides the implementation and management of the business.
Conclusion
Although there is a difference between feasibility study and business plan, they serve complementary roles for successful businesses in the business development process. A detailed feasibility study validates the idea by determining whether a business plan should be developed, while a business plan guides execution by providing a comprehensive strategy for the ongoing operation, growth, and potential success of the business.
A feasibility study is a preliminary assessment that determines whether an idea is viable by assessing technical feasibility, market demand, financial resources, and potential risks. If the idea proves feasible, a business plan is then created to outline strategies for execution, economic growth, and profitability. Both serve different purposes but are simultaneously necessary for a business's success.
FAQs
What is the difference between a business plan and a feasibility study?
A business plan is a comprehensive document that outlines how the business will operate and grow, its management structure, and how it will achieve its goals after feasibility has been confirmed. A feasibility study provides a concise overview of whether a business idea is viable or feasible by analyzing several aspects of the working of a business.
What is the difference between a feasibility study and a business case?
A feasibility study is a preliminary analysis that evaluates if a business idea is viable, while a business case justifies why a specific project or investment should be pursued by comparing benefits, financial feasibility, and potential returns, often used to gain approval from stakeholders.
What is the difference between feasibility and planning?
Feasibility assesses the potential viability of a project in a business environment by analyzing factors like market demand, financial projections, and potential challenges. On the other hand, the planning function focuses on strategic planning, setting goals, and outlining steps for execution once feasibility has been confirmed.
