Every year, thousands of entrepreneurs pour their savings into business ideas that never had a chance. Not because the founders lacked passion or skill — but because they skipped one critical step: the feasibility study.
A feasibility study is the honest, data-driven answer to the question "Will this business actually work?" It's not a business plan (that comes later). It's not a pitch deck. It's the cold, hard analysis that tells you whether your idea is worth pursuing — or whether you should pivot before investing your time and money.
In this guide, we'll walk through everything you need to know about writing a feasibility study in 2026 — from the seven essential components to the financial metrics that investors and banks actually care about.
What Is a Feasibility Study?
A feasibility study is a structured analysis that evaluates whether a proposed business, project, or investment is viable. It examines the idea from multiple angles — market demand, financial returns, operational requirements, legal considerations, and technical capability — to produce a clear go or no-go recommendation.
Think of it as due diligence on your own idea. Before you sign a lease, hire staff, or take out a loan, a feasibility study gives you evidence-based confidence that the numbers actually work.
Why Feasibility Studies Matter
The statistics make the case better than any argument. According to the Bureau of Labor Statistics, roughly 20% of new businesses fail within the first year, and nearly 50% don't make it past five years. The leading causes? Insufficient market demand, cash flow problems, and poor financial planning — all problems that a thorough feasibility study is specifically designed to catch.
A feasibility study matters because it forces you to confront reality before reality confronts you. It answers questions like: Is there enough demand for this product in this location? Can I achieve the margins I need at a realistic price point? How long before I break even? What happens if costs run 20% over budget?
Feasibility Study vs Business Plan
One of the most common confusions is between a feasibility study and a business plan. They're related but serve fundamentally different purposes.
| Feasibility Study | Business Plan | |
|---|---|---|
| Purpose | Should I do this? | How will I do this? |
| Timing | Before commitment | After validation |
| Focus | Viability analysis | Execution roadmap |
| Outcome | Go / No-Go decision | Operational blueprint |
| Audience | You (and potentially investors) | Investors, banks, team |
| Financial Depth | NPV, IRR, payback period | P&L, cash flow, budgets |
The feasibility study comes first. If it says no, you've saved yourself the time and money of writing a full business plan for an idea that won't work. If it says yes, you proceed with confidence into detailed planning.
For a deeper dive into this distinction, read our article Feasibility Study vs Business Plan: What's the Difference and Which Comes First?.
The 7 Components of a Feasibility Study
A comprehensive feasibility study examines your business idea through seven distinct lenses. Each component addresses a different dimension of viability, and weakness in any single area can be enough to kill an otherwise promising idea.
1. Market Feasibility
Market feasibility is arguably the most important component. It answers the fundamental question: Is there sufficient demand for this product or service in this location?
A thorough market feasibility analysis includes:
Market Sizing (TAM/SAM/SOM): Your Total Addressable Market is the entire revenue opportunity if you captured 100% of your market. Your Serviceable Addressable Market narrows this to the segment you can realistically reach. Your Serviceable Obtainable Market is what you can realistically capture in the near term. These three numbers frame the opportunity and set boundaries on your revenue projections. Demand Analysis: What's driving demand in this market? Is it growing, stable, or declining? What are the demographic, economic, and social trends that affect your customer base? For a restaurant, this might mean analysing population density, income levels, dining-out frequency, and food preferences in your target area. Competitive Landscape: Who are your direct and indirect competitors? What are their strengths and weaknesses? What's their pricing? Is the market saturated or underserved? A hotel feasibility study, for instance, would analyse the competitive set — existing hotels within a defined radius, their occupancy rates, average daily rates, and service levels. Customer Analysis: Who is your ideal customer? What's their willingness to pay? How do they currently solve the problem you're addressing? What would make them switch to you?For more detail on market sizing, see our guide TAM, SAM, SOM Explained: How to Calculate Your Market Size.
2. Financial Feasibility
Financial feasibility is where many business ideas fall apart — and where they should fall apart, if the numbers don't work. This component determines whether the business can generate sufficient returns to justify the investment.
A complete financial feasibility analysis includes:
Capital Expenditure (CAPEX): What's the total upfront investment required? This includes everything from property acquisition or lease deposits to equipment, fit-out, technology, initial inventory, and pre-opening marketing. Be thorough and add contingency — most projects run over budget. Operating Expenses (OPEX): What will it cost to run the business on a monthly and annual basis? Include rent, utilities, salaries and wages, insurance, marketing, supplies, maintenance, technology, and administration. Don't forget less obvious costs like accounting, legal, and licensing fees. Revenue Projections: Based on your market analysis, what revenue can you realistically expect? Build this from the bottom up. For a hotel: projected occupancy × number of rooms × average daily rate = room revenue. Add ancillary revenue streams. Apply seasonal variations. Be conservative — optimistic revenue projections are the single most common flaw in feasibility studies. Key Financial Metrics:- Net Present Value (NPV): The total value of future cash flows discounted back to today's dollars. A positive NPV means the investment creates value; negative means it destroys value. This is the single most important metric in a feasibility study.
- Internal Rate of Return (IRR): The annualised return rate the investment generates. Investors typically look for IRR above their cost of capital — often 12-20% depending on risk.
- Payback Period: How many years until you recover your initial investment. Shorter is better, and anything beyond 5-7 years starts to concern most investors.
- Break-Even Point: The revenue level at which total costs equal total revenue. Knowing your break-even gives you a concrete target to work toward.
For a plain-English explanation of these metrics, read What is NPV, IRR, and Payback Period? A Non-Accountant's Guide.
3. Technical Feasibility
Technical feasibility assesses whether you have — or can acquire — the technology, equipment, infrastructure, and expertise needed to deliver your product or service.
For a restaurant, this might mean evaluating kitchen equipment requirements, ventilation systems, and POS technology. For a SaaS business, it means assessing development capabilities, hosting infrastructure, and scalability requirements. For a manufacturing business, it covers production equipment, supply chain logistics, and quality control systems.
Key questions to answer: Can we build or source what we need? Is the technology proven or experimental? What are the technical risks? Do we have the expertise on the team, or do we need to hire?
4. Operational Feasibility
Operational feasibility examines whether the business can function effectively on a day-to-day basis. It covers staffing requirements, management structure, supply chain logistics, processes, and workflows.
This component is particularly critical in labour-intensive industries like hospitality and healthcare. Can you recruit enough qualified staff in your location? What are the prevailing wage rates? What's the turnover rate in your industry, and how will that affect costs?
Operational feasibility also covers physical requirements: Do you need a specific type of premises? Is there suitable real estate available in your target location at a viable rent level? Can the premises be configured to meet your operational needs?
5. Legal and Regulatory Feasibility
Every business operates within a legal framework, and some industries are more heavily regulated than others. Legal feasibility identifies the permits, licences, zoning approvals, health and safety requirements, environmental regulations, and industry-specific compliance obligations that apply to your business.
This component can be a deal-breaker. A restaurant concept that requires a liquor licence in an area where they're difficult to obtain. A manufacturing facility that needs environmental permits with a two-year approval timeline. A healthcare business that requires practitioner accreditation. Identifying these requirements early prevents costly surprises later.
6. Scheduling Feasibility
Scheduling feasibility assesses whether the project can be completed within a reasonable timeframe. It maps out the key milestones from concept to launch — securing premises, obtaining permits, completing fit-out, hiring staff, testing systems, and opening for business.
This is especially important for time-sensitive opportunities. If your business idea depends on being first to market, or if there's a seasonal window you need to hit, scheduling feasibility tells you whether the timeline is realistic.
7. Economic Feasibility
Economic feasibility zooms out from your specific business to consider the broader economic environment. Is the local economy growing or contracting? What are the inflation trends? Are there any upcoming regulatory changes that could affect your industry? How sensitive is your business to economic downturns?
This component also considers the cost-benefit analysis for the wider community. Some feasibility studies — particularly for government-funded projects — need to demonstrate economic impact: jobs created, tax revenue generated, and community benefits delivered.
Step-by-Step Process for Writing a Feasibility Study
Now that you understand the components, here's the practical process for putting it all together.
Step 1: Define the Scope
Start by clearly articulating what you're evaluating. Write a concise description of the business concept: what it is, where it will operate, who it serves, and what makes it different. Set boundaries around the study — are you evaluating the entire business concept, or a specific aspect like a new location or product line?
Step 2: Conduct Market Research
This is the most time-consuming step if done manually. You need to gather data on market size, growth trends, customer demographics, competitor offerings, and pricing benchmarks. Sources include industry reports, government statistics, trade publications, competitor websites, and primary research like surveys or interviews.
This step typically takes 2-4 weeks when done manually — or minutes when using AI tools with search-grounded data.
Step 3: Build the Financial Model
Using your market research as inputs, construct a financial model that projects revenue, costs, and returns over a 3-10 year period. Start with conservative assumptions and document every assumption clearly. Your model should calculate NPV, IRR, payback period, and break-even at minimum.
Step 4: Assess Non-Financial Feasibility
Work through the technical, operational, legal, scheduling, and economic components. Identify any showstoppers — requirements that are difficult or impossible to meet. Flag risks and mitigation strategies for each.
Step 5: Conduct Sensitivity Analysis
Your base-case financial projections are only as good as your assumptions. Sensitivity analysis tests what happens when those assumptions change. What if revenue is 20% lower than projected? What if construction costs overrun by 30%? What if your key assumption about occupancy rates is wrong?
This is where interactive What-If analysis becomes invaluable — testing hundreds of scenarios to understand which variables your business is most sensitive to.
Step 6: Write the Report
Compile your findings into a structured report with an executive summary, methodology, detailed analysis for each component, and a clear recommendation. The executive summary is the most-read section — it should communicate the key findings, critical metrics (NPV, IRR, payback), and your go/no-go recommendation in one page.
Step 7: Make the Decision
A feasibility study ends with a decision: proceed, modify, or abandon. If the analysis shows a positive NPV, acceptable IRR, and reasonable payback period with manageable risks, you have a green light. If the numbers are marginal, consider what changes could improve the outlook. If the fundamentals don't work, it's time to pivot — and that's valuable information, not failure.
Common Mistakes That Kill Feasibility Studies
Over years of reviewing feasibility studies, certain mistakes appear again and again:
Optimistic Revenue Projections: This is the number one killer. Entrepreneurs consistently overestimate how quickly customers will come, how much they'll spend, and how fast revenue will grow. Always use conservative estimates and validate them against industry benchmarks. Ignoring Competition: Assuming you'll capture market share without accounting for what competitors will do in response. If you're entering a market with established players, your feasibility study needs to explain specifically why customers will choose you. Underestimating Costs: Particularly common with construction and fit-out costs, staffing costs in tight labour markets, and marketing costs needed to build awareness. Always include contingency (typically 10-20% of total costs). Using Outdated Data: Market conditions change. A feasibility study based on pre-pandemic data, or on industry reports from three years ago, may not reflect current reality. Use the most current data available. Skipping Sensitivity Analysis: A feasibility study with a single set of assumptions is incomplete. You need to know how sensitive your results are to changes in key variables. If a 10% drop in revenue turns your positive NPV negative, that's a critical risk to understand. Not Accounting for Time Value of Money: Simple cash flow projections that don't discount future cash flows to present value overstate the attractiveness of investments. NPV and IRR exist specifically to address this — use them.How Long Does a Feasibility Study Take?
The traditional approach — hiring a consultant or doing it yourself — typically takes 2-6 weeks for a thorough study. This includes 1-2 weeks of market research, a week of financial modelling, and a week of analysis and report writing. Professional feasibility studies from consulting firms can cost anywhere from $5,000 to $50,000 depending on complexity.
AI-powered tools have dramatically compressed this timeline. Modern AI feasibility study generators can produce a comprehensive analysis — with real market data, financial modelling including NPV/IRR/payback calculations, and professional report output — in 2-8 minutes.
The key advantage of AI isn't just speed; it's the ability to iterate. When you can generate a feasibility study in minutes, you can test multiple variations of your concept: different locations, different price points, different scales. That rapid iteration is impossible with the traditional approach.
Feasibility Study Checklist
Use this checklist to ensure your feasibility study covers all the essentials:
Market Analysis- Total Addressable Market (TAM) sized and sourced
- Serviceable Addressable Market (SAM) defined
- Serviceable Obtainable Market (SOM) estimated
- Competitor analysis completed (direct and indirect)
- Customer demographics and demand drivers identified
- Market trends and growth projections documented
- Total CAPEX estimated with contingency
- Operating expense budget built (monthly and annual)
- Revenue model constructed with documented assumptions
- Multi-year projections completed (3-10 years)
- NPV calculated
- IRR calculated
- Payback period determined
- Break-even analysis completed
- Sensitivity analysis conducted on key variables
- Technical requirements assessed
- Operational staffing and process plan outlined
- Legal and regulatory requirements identified
- Project timeline / schedule mapped
- Economic environment reviewed
- Executive summary with key metrics and recommendation
- Methodology and data sources documented
- Assumptions clearly stated
- Risks identified with mitigation strategies
- Go / No-Go recommendation provided
The Bottom Line
A feasibility study is the single most important step between having a business idea and investing money in it. It's the difference between informed confidence and expensive hope.
Whether you write one manually, hire a consultant, or use an AI-powered tool, the critical thing is that you do it. The businesses that succeed are the ones that validate before they build.
Want to skip the manual work? SimpleFeasibility generates a complete feasibility study with real market data, NPV/IRR analysis, interactive What-If scenarios, and professional PDF and Excel exports — in under 8 minutes. No sign-up required to start. Generate Your Feasibility Study Now →Related Articles: