Feasibility Analysis: Types, Methods & Real-World Application

What is Feasibility Analysis?

Feasibility analysis is the process of evaluating whether a business idea is viable before investing time and money. It answers:

• Can this idea work?
• Is it worth pursuing?
• What are the risks and rewards?

Why is it important?

• Reduces financial risk by identifying potential problems early.
• Helps secure funding by proving the idea’s potential.
• Guides entrepreneurs in refining or abandoning unfeasible ideas.

Types of Feasibility Analysis

Feasibility analysis is divided into four key areas:

mindmap
  root((Feasibility Analysis))
    Technical Feasibility
      "Can we build it?"
      "Do we have the skills/tech?"
    Financial Feasibility
      "Can we afford it?"
      "Will it be profitable?"
    Operational Feasibility
      "Can we run it smoothly?"
      "Do we have resources?"
    Market Feasibility
      "Will people buy it?"
      "Is there demand?"

1. Technical Feasibility

Definition: Assesses whether the product/service can be developed and delivered using available technology and expertise.

Key Questions:

• Do we have the right technology?
• Can we hire or train the required skills?
• Are there existing solutions that can be adapted?

Example:

• eSewa (Nepal) used technical feasibility to develop its digital payment system by partnering with banks and leveraging existing fintech infrastructure.

Advantages: ✔ Identifies skill gaps early. ✔ Helps in technology selection.

Disadvantages: ✖ High initial costs if new tech is needed. ✖ Risk of delays if expertise is lacking.

In the real world

1. eSewa (Digital Payments in Nepal)

   • Market Feasibility: Conducted surveys to confirm demand for online payments before launching.
   • Technical Feasibility: Partnered with banks (Nabil, Global IME) to ensure secure transactions.

2. Daraz (E-commerce in Nepal)

   • Operational Feasibility: Analyzed warehouse and logistics capacity before expanding to new cities.
   • Financial Feasibility: Calculated profit margins per product to ensure sustainability.

3. Pathao (Ride-Hailing in Nepal)

   • Technical Feasibility: Used GPS and driver apps to ensure real-time tracking.
   • Market Feasibility: Tested demand in Kathmandu before expanding to Pokhara.

Methods of Feasibility Analysis

1. SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)

mindmap
  root((SWOT Analysis))
    Strengths
      "Unique selling proposition"
      "Strong brand"
    Weaknesses
      "Limited funds"
      "Lack of expertise"
    Opportunities
      "Growing market"
      "Government incentives"
    Threats
      "Competitors"
      "Economic downturn"

Example:

• Nabil Bank (Nepal) used SWOT analysis before launching its digital banking app to identify strengths (customer trust) and weaknesses (low tech adoption).

2. Cost-Benefit Analysis

Formula: $$\text{Net Present Value (NPV)}=\sum \frac{\text{Benefits}-\text{Costs}}{(1+r{)}^t}$$ Where:

• $r$ = discount rate (e.g., 10%)
• $t$ = time period

Example:

• A small café in Pokhara calculates:
  • Costs: Rent (₹50,000/month), salaries (₹100,000/month), raw materials (₹30,000/month).
  • Revenue: Expected ₹200,000/month.
  • NPV: If costs exceed revenue in the first year, the café may not be financially feasible.

3. Break-Even Analysis

Formula: $$\text{Break-Even Point (Units)}=\frac{\text{Fixed Costs}}{\text{Selling Price per Unit}-\text{Variable Cost per Unit}}$$

Example:

• A mobile phone repair shop in Kathmandu
  • Fixed costs: ₹20,000/month (rent, utilities).
  • Variable cost per repair: ₹500.
  • Selling price per repair: ₹1,500.
  • Break-even point: $$\frac{20,000}{1,500-500}=20\text{ repairs/month}$$
  • If the shop does less than 20 repairs/month, it loses money.

Case Study: Himalayan Java (Nepal)

Business Idea: Organic coffee export to Europe. Feasibility Analysis:

Outcome:

• Feasible but risky → Partnered with a European distributor to reduce market risk.

Exam Tip

1. Understand the four types (technical, financial, operational, market) and give examples from Nepali businesses.
2. SWOT vs. Cost-Benefit: Know when to use each—SWOT for strategic planning, cost-benefit for financial decisions.
3. Break-even analysis is a favorite question—always show calculations with realistic numbers (e.g., café, shop, or service).
4. Case studies matter! If asked about a business (e.g., Daraz, eSewa), link it to feasibility types (e.g., "Daraz used market feasibility to test demand before expansion").
5. Avoid vague answers—always tie theory to Nepali examples (e.g., NTC’s feasibility before 4G rollout, Nabil Bank’s digital banking).