How to do a feasibility study for a successful project
A feasibility study of a project is a study of the process of collecting information and data on a proposed project and then analyzing it from the financial, economic and technical aspects in addition to analyzing the sensitivity of the project in order to know the extent of the success of studying this project in light of the prevailing situation in the market, and thus decide to take the appropriate decision whether to continue the project Or expand it or stop the project.
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Preparing a feasibility study for a commercial, investment, production or service project is one of the most important steps for the success of a feasibility study for a project, as proper planning for it ensures the success and effectiveness of this project, and ensures the achievement of a feasibility study for a project that will yield an expected financial return from this project. Therefore, before starting any commercial or investment project, a project feasibility study must be done.
The importance of a project feasibility study
The importance of a project feasibility study stems from several points, namely:
1. It is a means of clarifying all the details and information related to a specific project, which helps in determining the nature of activities and capabilities required for its implementation.
2. It is an important means of obtaining the necessary funding for the proposed project; Whether through personal financing, bank loans, or entering into partnerships with local or external investors.
3. Its results can be relied upon in following up the project implementation phases, if established.
4. It determines the sources and methods of generating the income that the project will achieve and invest it later.
5. It can be used as a guide to determine the objectives of the project and the expected benefits for the project owners.
Aspects of a project feasibility study
The feasibility study for a project consists of three main aspects, namely:
First. Marketing aspect: This aspect deals with many important details, which include the following elements:
1. Supply: It is related to the market size in terms of the available quantities of the commodities to be produced and their internal and external sources. This includes identifying local producers and their productive capacity on the one hand, and quantities imported from abroad on the other hand.
2. Demand: It expresses the size of the demand in the target market. It can be found by adding the sales of local producers with imports minus exports and re-exports. This element should also include expectations of growth or decline in the volume of demand during the next five years in order to determine the quantities of production during the same period.
3. Marketing mix: It consists of commodity, price, distribution and promotion. Where the nature and characteristics of the product to be produced, the benefits expected to be provided to the target markets, and the extent of its superiority over competing products, must be determined. The price should be determined based on the cost, competition and profit target. The means of distribution and promotion to be used, their costs, their extent of spread, and the possibility of reaching the intended consumers through them must also be clarified.
4. Marketing strategy: It deals with identifying the target markets and the marketing means that will be used to reach them and achieve the set goals. The marketing strategy must also include the strengths and weaknesses of the proposed project, and the competitive advantages it enjoys compared to competitors.
5. Expected sales and market share: This element shows the details of the quantities expected to be sold annually for a period of not less than five years, and the annual share expected to be acquired by the project in the market, based on sales estimates and the volume of expected demand.
Secondly. Technical aspect: This aspect covers all the details related to the technical aspect of the project; from where:
1. Fixed assets that must be provided: such as machinery, equipment, buildings, means of transportation, furniture and equipment.
2. The commodity production requirements, including the raw materials and skills that must be provided to produce the commodity.
3. The production stages of the commodity.
4. Production capacity, which expresses the expected production volume for the next five years.
5. The location of the project and its proximity to the raw materials, which plays an important role in controlling costs in the long run.
6. The required infrastructure, such as electricity, water, roads and means of communication.
7. The labor required, in terms of skill level and specialization in producing the commodity. It also includes the technical and administrative staff necessary to carry out the project.
8. Raw materials and sources of obtaining them, and this includes all the materials that must be provided to facilitate the conduct of production work in the project and the extent of their availability locally or the need to import them from abroad
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Third. Financial aspect: It consists of the following elements
1. The total cost of the project with all its components, whether fixed or variable, which depends mainly on the available capital, and the financial plan that will be applied to implement the project phases, which contributes to knowing the value of expenditures and revenues.
2. Project funding sources; Whether through loans, self-financing, etc., and a comparison between them in terms of cost.
3. Estimate project revenue; It includes balance sheets, profit and loss accounts, and cash flow accounts for the next five years.
4. Financial indicators; Such as financial ratios, break-even point calculations, calculation of the internal rate of return and value added.
A person or a group of people may have an idea to set up a specific project. However, and based on experience and logic, it is not permissible to start implementing this idea before reaching the indications and evidence about the likelihood of its success or failure. In other words, This idea must be studied before taking any practical step to implement it.
These are the most prominent features and components of a project feasibility study for any proposed idea that can be transformed into a project that brings returns to its owners and contributes to creating multiple jobs, thus helping to reduce the unemployment rate.
You can dig deeper now and see how to prepare a feasibility study for a project in detail: a detailed feasibility study
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