Captive Feasibility Studies: Common Mistakes (2024)

FAQs

What are the most common mistakes made during a feasibility analysis? ›

Another common mistake to avoid when conducting a feasibility study is insufficient research on the market, the site, the regulations, the costs, and the risks of the project. Without adequate and reliable data, you will not be able to assess the feasibility of your project objectively and accurately.

Brady Young of Strategic Risk Solutions outlines some of the most common mistakes made during feasibility studies, including underestimation of future losses, overestimation of investment income, unrealistic operating expense expectations, and incomplete analysis of tax issues at state, federal, and local levels.

A feasibility study should be considered a failure if: The capital cost is higher than expected. The operating cost is higher than expected. The recovered grade is lower than expected.

4 elements of a feasibility analysis

There are four main elements that go into a feasibility study: technical feasibility, financial feasibility, market feasibility (or market fit), and operational feasibility.

The answer is B) total startup cash needed, the financial performance of similar businesses, and the overall financial attractiveness of the proposed venture. Having the startup cash needed will determine if the venture is fiscally possible.

A financial feasibility analysis examines the expenses of starting, operating, and maintaining the business; market and economic feasibility; expected return on investment (ROI); and expected liabilities.

Detailed feasibility studies require a significant amount of formal engineering work, are accurate to within 10-15% and can cost between ½-1½% of the total estimated project cost.

Expect a feasibility study to take about 60 to 90 days. Unless the market is very hot, don't tie up much money, if any, in sales agreements for the land during this time period. Be sure any agreements you sign include a reimbursem*nt of your deposit should you elect not to pursue the project.

How much should a feasibility study cost? ›

In our experience, the cost of a feasibility study may range between 20,000 USD and 500,000 USD. All the factors explained above may determine the final price which must be subject of analysis by experts in the topic. Make sure you hire the right consultants to deliver you feasibility study or business plan.

A feasibility study aims to provide an independent assessment that examines all aspects of a proposed project, including technical, economic, financial, legal, and environmental considerations. This information then helps decision-makers determine whether or not to proceed with the project.

Conducting a feasibility study need not be difficult or expensive, but the most important aspects should all be taken into account to ensure that potential problems are addressed. These are summarised in the Feasibility Study Checklist in Appendix III and are described in more detail in other Sections of this book.

It involves a thorough analysis of various factors, such as market demand, competition, financial resources, and technical feasibility, to determine whether the idea is worth pursuing. If the owner/manager is already certain that the idea is feasible, there may not be a need to conduct a formal feasibility study.

There are four general elements of a meaningful feasibility study checklist: technical, financial, market, and operational feasibility elements. You need to assess each of the four categories in order to gain a full picture of the project plan and its viability.

The most important issues to consider in financial feasibility analysis are: capital requirements, financial rate of return, and overall attractiveness of the investment. Feasibility analysis is the process of determining if a business idea is viable.