Why are business feasibility studies important?

why are business feasibilty study important

Business feasibility studies become important since a company has a basic goal of seeking profit. This means, all activities or activities of the company are only aimed at profit-seeking. However, the company has another purpose – that is social goals. This type of company was deliberately established to help the interests of the community, especially in providing the facilities and infrastructure needed by the lower community. The company is usually engaged in Education, Hospitals, Orphan Homes and other social enterprises.

In this regard, many companies are engaged to carry out both goals both profit and non-profit. This is based on the statement that many companies move based on profit and non-profit (social). Therefore, the interests of the establishment of the company have a purpose that leads to social enterprises leading to commercial such as companies engaged in education, hospitals and other social services.

Companies established for profit purposes usually think about how to return capital or funds invested in a relatively short period of time. This means, a business must pay attention to the rate of return on investment within a certain period of time can provide financial benefits. If the rate of return cannot be estimated, then the company cannot be run by businesspeople.

Thus, a business, especially a new business needs to be researched first.  This  concerns whether the business to be pioneered is profitable or not. That why a business analysis is needed. Some analyses that can be used are: 1) making a feasibility study of businesses and 2) analyzing with SWOT methods (Strength, Weakness, Opportunity, Threat)

Both of the above analysis, businesspeople use to start new businesses; Developing an existing business; and choose the most profitable type of business or investment/ project. In reality, businesspeople prefer to use a Business Feasibility Study. One reason is that outcomes are closer to truth and flexible.  While SWOT Analysis is more oriented in developing a business.

Businesspeople must realize that conditions in a business cannot be predicted with certainty and even filled with uncertainty. Uncertainty can occur in various areas of life both in the fields of ideology, politics, economy, culture, defense and security, consumer behavior and changes in the environment of society. These factors can cause a plan to be unattainable so that it can pose a risk of loss. Suppose; The economic influence of a region or country can result in unstable prices and even tend to increase production costs. This can result in the selling price of products becomes more expensive, making it difficult for businesspeople to sell products to the market as a result of people’s purchasing power is low or decreased. The economic situation can also have an impact on the unstable level of banking interest rates to the real sector, especially the availability of funds in a bank. While the bank does not want to distribute funds so that there is no financing in the ril sector. This situation leads to a reduction in the provision of goods and services so that there is a scarcity of goods and services. This situation can also indirectly reduce people’s income which has a direct impact on the decline in people’s purchasing power in general. This happens due to a decrease in profits and even the company will experience losses.

Factors changing consumer behavior and the environment in society will also affect the results achieved by the company. Consumer behavior will change the order of life both tastes and lifestyles. One of them is the behavior of the community, especially consumers who always idolize foreign products is a threat to domestic production.

Legal and political factors can also affect the company’s business activities. For example, Legal incompatibility will have a big effect on investors and creditors both domestically and abroad to invest. While political instability can affect foreign parties’ confidence in domestic business. This will indirectly certainly have an impact on the company’s activities, especially in investing.

Based on the above study, the component that must receive great attention in operating a business is investment. In general, it can be concluded that there are several factors that must be considered by businesspeople, including: a) The size of investment funds; b) Business uncertainty; and c) Complexity of influential variables

One of the efforts to reduce the impact of these factors, companies must make a Business Feasibility Study. Business feasibility studies are conducted to identify problems in the future so as to minimize the possibility of the company experiencing losses and not in accordance with the target in corporate planning. This means, business feasibility studies take into account things that will hinder and opportunities from investment.

Business Feasibility Study certainly has the advantage of providing considerations regarding various aspects that must be studied and researched the feasibility of a business.  This makes the results of feasibility studies can be used to decide whether a project or business is worth working on or delayed or even canceled by businesspeople.  Conducting a feasibility study involves many teams of various experts according to fields or aspects such as economics, law, psychologists, accountants, technological engineers and so on.

Business ideas in uncertainty do not always succeed when it will be implemented by new businesspeople/ entrepreneurs. Some of the factors that cause failure are as follows:

First, do not have a comprehensive knowledge of the market. An entrepreneur must have knowledge of the market according to the field of business.  Market knowledge must be thorough and integrated. This is intended so that businesspeople can make decisions   appropriately and quickly according to the situation and conditions.  

Second, do not have comprehensive knowledge of the technical requirements of the business.  An entrepreneur must have technical requirements on how to manage the business well.  This means, businesspeople must have sufficient knowledge about the business.  Knowledge can be obtained through the learning process through both formal and informal education.

Third, do not have comprehensive knowledge about financial aspects.  An entrepreneur must have knowledge of financial management.  Financial management is not just about sufficient sources of funds but  business people can look for other  sources of  funds that are profitable both from investors, creditors and other parties.

Fourth, the produk offered does not have a uniqueness.  An entrepreneur must offer a product that has advantages and specificities over other products that are already circulating in the market. This is intended so that the product can be accepted by consumers even though the product is already on the market.

Fifth, less understanding about legal aspects related to business.  An entrepreneur must have sufficient knowledge about the legality aspects of a business institution. This is related to the existence of businesspeople in a company.

Eduprenerer is a blog platform for sharing information on entrepreneurship, digital business, and start-up in universities or colleges environment.

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