Feasibility study: get to know the 4 pillars of the tool and learn how to do yours

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Are you thinking about opening a company or expanding your business? Before even starting the project, it is ideal to carry out a feasibility study of your venture.

This tool defines the chances of success and failure of a business, analyzing financial and market conditions.

Continue reading and check out the importance of creating a feasibility study and the 4 main pillars to do yours.

Why it is important for your business
To help you better understand the importance of a feasibility study, let's use an analogy with a trip. Suppose you want to visit a new place, what's the first thing you do? Research!

That's right. Finding out how much a ticket to the Vietnam Phone Number Lead location costs, what accommodation options there are, the best time to visit and the possible tours are essential to avoid any surprises during your trip.

The same thing happens when you open a business. You need to understand how the market is doing, how much money you need to invest, and what logistics are needed to open the company with as few unforeseen events as possible.

4 pillars of the feasibility study
In the feasibility study, analyses are carried out on the market , company products and services, revenue, cost and investment projections, profitability, competition, cash flow, working capital, revenue, among many other issues.

Phew! That's a lot, right? To make things easier, we're going to divide these questions into 4 essential pillars. Check it out!

Revenue projection
Revenue projection is the identification of the possibility of the project generating revenue and income for the person investing in it (you and potential partners and investors). To make this projection with real and achievable numbers, market knowledge is necessary.

In other words, you need to know how much and when the salesperson will receive for their sales and their development over time. It is recommended to make projections for different types of scenarios, such as negative, realistic and optimistic.

Projection of costs, expenses and investments
Production revenues and costs are related, so they must be designed with the same quality standard. Therefore, all production costs must be designed to reduce this value from revenues and thus project the expected profit.

The main function of cost, expense and investment projection is to become aware of the necessary investments and initial expenses, such as purchasing machinery, paying employees and acquiring raw materials.

Planning allows you to create adaptable plans for changes that may occur.

Cash flow projection
Cash flow is the money that comes in and out of the company every day. The cash flow projection is an estimate of future profits and expenses. To do this, it is necessary to make the relationship between three different values:

How much money will come in from sales;
Time to receive payments;
Amounts spent to maintain the business.
To generate a cash flow projection, subtract all expenses from revenue. These numbers help you make more assertive decisions about your business.

Indicator Analysis
There are some indicators that should be analyzed within the feasibility study of your business. The main ones are:

Opportunity cost: is the cost of investing in something instead of other possible investments. In other words, this index shows the advantage, or disadvantage, of investing in a business;
Business risk: is the set of favorable risks, such as expansion opportunities, and unfavorable risks, such as the chances of large companies dominating their market;
Liquidity premium: this is the ease of redeeming invested capital, for example, whether it is easier to redeem money invested in government bonds or by investing in the company.