Feasibility Study · F/S
Feasibility Study
What is a feasibility study?
- A five-axis review: market, technology, economics, regulation, operations
- Check the deal-breakers first
- State the conclusion as conditions
What a feasibility study really changes is not the conclusion but the form of the argument. In a meeting room without an F/S, “My gut says it will work” collides with “It looks risky to me,” and the more senior person’s opinion becomes the decision. In a room that has been through an F/S, the same issue is discussed as “We drop it if enrollment per cohort falls below 18.” The subject of the judgment shifts from people to numbers and conditions. That is the real value this work gives a company.
In practice, people often mix up the F/S and the business plan. A business plan describes how to run a business that has already been approved, while an F/S asks whether to do it at all. Combine the two in one document and you build a structure that cannot reach a “no.” For large investments, a two-stage setup works well: a two-to-four-week preliminary review screens only for deal-breakers, and only the projects that pass get budget for an eight-to-twelve-week full study. Korea’s public preliminary feasibility studies follow the same logic. They do not rest on economic efficiency (B/C) alone but combine it with policy considerations through AHP (the Analytic Hierarchy Process) for an overall verdict, reflecting the principle that no single metric decides whether a project lives or dies.
An F/S report has a shelf life. Assumptions such as exchange rates, interest rates, licensing standards, and competitor entry can shift within six months, so write the conditions under which the assumptions break next to the conclusion. That keeps the document usable six months later. Who does the study also matters. If the team that proposed the project also runs the study, the report ends up defending its own plan. At a minimum, require a separate section that argues against the project, or add a third-party review.
The most common failure is deciding the conclusion in advance and fitting the numbers to it. Lower the discount rate by 1 percentage point and assume 20% growth in year three, and NPV will turn positive almost every time. But a positive NPV built this way stops being evidence the moment it gets its approval stamp and becomes an alibi. Two years later, with utilization stuck at 40%, all that remains is 'it passed the feasibility study back then.' Another trap: pushing ahead because the study cost too much to waste is worse than never running an F/S at all. An F/S that cannot lead to a decision to stop is a ritual that only burns money.
John KimInstructor John Kim, CEO of Nanum Consulting and author of “B2B Marketing Design”
Kwangdong MinExpert in business models, revenue models, and market researchIt took shape in the investment review processes for large infrastructure and plant projects. In Korea, it became standard in the public sector through the preliminary feasibility study system introduced in 1999.
Consider a hypothetical case: Company A, a corporate training firm with 140 employees and KRW 21 billion (≈ US$15,711,500) in annual revenue. Its classroom-training revenue had been flat for three years, so it looked at becoming a government-funded training provider. The initial investment alone, covering classroom leases and equipment, came to about KRW 900 million (≈ US$673,400). Before approving the launch, management commissioned an eight-week feasibility study.
- The head of strategic planning assigned the first two of the eight weeks entirely to deal-breakers. “If we get stuck here, we won’t run the market research or the P&L,” she said, and began by checking the dedicated classroom area and number of full-time instructors required for training provider accreditation.
- Interviews with training managers at 12 existing client companies showed that 8 said, “We would send people if the price were lower than it is now.” Demand exists, but the price ceiling sits at around KRW 1.8 million (≈ US$1,350) per person per year.
- The HR review found that the venture needed five full-time instructors but the company had only two in-house. Hiring experienced instructors would cost KRW 6.5 million (≈ US$4,860) per month, with a four-month hiring lead time.
- The finance director ran a three-year cash flow model and got a 2.8-year payback period. But sensitivity analysis revealed a range in which if the completion rate falls below 70%, settlement cuts push NPV negative.
- Instead of “feasible,” the final report closed with a conditional conclusion: “Feasible, provided five full-time instructors are secured and enrollment is at least 18 per cohort.” Those two numbers were written directly into the investment review gate as its pass criteria.
- Only four instructors were available at kickoff, so the company delayed the launch by two months. In that time it filled 22 pre-registrations, then opened the first cohort and finished with an 82% completion rate and no settlement deductions. That avoided a first-cohort loss of about KRW 120 (≈ US$1) million, which it would have taken on had it pushed ahead regardless.