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Three Steps that Help Assess Project Feasibility

Date: 
Author: 
Compeer Financial
Interests: 
Investing in Rural Communities
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Iowa State University offers a helpful outline for Feasibility Studies. Although it is geared toward a farming project, the information is broad enough to help you get through the process. The outline helps you identify and explore different scenarios for your new project. We’ve taken the 3 most important steps to help conduct the feasibility of your project. When you’ve finished these steps you’ll be equipped to APPLY for the Rural Feasibility Grant Program.

Step 1: Description of the Project

Start by identifying scenarios or business models of your project. Determine how it will be organized and how you will generate revenue. Some of these ideas might come from a previous assessment. Now that you’ve determined the potential for your project, start outlining the economic and social impact on your local community.

Step 2: Market Feasibility

During the Market Feasibility step, you need to describe your industry. This includes the size, scope, market and/or the market segment. Assess whether the industry is stable or rapidly changing. Based on data from the 2014 Census, the population aged 65 and over is projected to be 83.7 million by 2050. Are you structured for the aging population?

Describe and determine your competitors. Complete an analysis of competition prices and services. This will help with your financial projections.

Step 3: Financial Feasibility

At this point, you’ll need to estimate the total capital requirements and budget expected costs and revenue.

  • Estimate capital requirements for facilities, equipment and inventories.
  • Estimate working capital needs.
  • Estimate start-up capital needs until revenues are realized at full capacity.
  • Estimate contingency capital needs due to construction delays, technology malfunction, market access delays, etc.
  • Determine the dollar amount needed to raise with a capital campaign.
  • Identify and assess for credit sources – a combination of USDA, Compeer Financial, your local community bank.
  • Estimate the expected revenue, costs, profit margin and expected net profit.
  • Estimate the sales or usage needed to break-even.
  • Estimate the returns. This may involve identifying “best case”, “typical”, and “worst case” scenarios.
  • Benchmark against industry averages and/or competitors
  • Calculate expected cash flows during the start-up period and when the business reaches capacity.
  • Prepare income statement, balance sheet, and other statements of when the business is fully operating.
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