In simple terms, a feasibility study involves taking a judgment call on whether a project is achievable. The two criteria to judge feasibility are cost required and value to be delivered. A well-designed study should offer a historic background of the business or project, a description of the product or service, accounting statements, details of operations and management, marketing research and policies, financial data, legal necessities and tax obligations. Generally, such studies precede technical development and project implementation.
A feasibility study evaluates the project’s potential for success; therefore, perceived objectivity is an important factor in the credibility of the study for potential investors and lending institutions.

Feasibility studies allow companies to determine and organize all of the necessary details to make a business work. A feasibility study helps identify logistical problems, and nearly all business-related problems, along with the solutions to alleviate them. Feasibility studies can also lead to the development of marketing strategies that convince investors or a bank that investing in the business is a wise choice.

The most common reason would be to limit one’s losses. For example, suppose a company is considering developing and launching an expensive new product. The research and development expenditures could easily cost millions of dollars, and the launch would cost even more. Two or three years of R&D costs would be sunk into the project before there was any possibility of recouping any expenses through sales. Worse, a business owner or entrepreneur could burn through a sizable amount of funds/ life savings in this new venture. In this case, a feasibility study would be a high priority before substantial resources become invested in R&D. If the feasibility study indicates a very low probability of success, it would be far less expensive to invest in the feasibility study and kill the project, than it would be to go forward without the study and see the project fail.

Conducting a feasibility study is always beneficial to the project as it gives you and other stakeholders a pure picture of your idea. Below are the benefits of conducting a feasibility study:

• Gives project teams more focus and provides an alternative plan.
• Narrows the business substitutes.
• Identifies a valid reason to undertake the project.
• Enhances the success rate by estimating multiple parameters.
• Aids decision-making on the project.

Apart from the approaches to feasibility study listed above, some projects also require for other constraints to be analyzed.