Puplished in26 Mar 2020 No Comments. 974 Views
How do you get a feasibility study prepared specifically for your project?

How do you get a feasibility study prepared specifically for your project?

  1. The importance of preparing an economic feasibility study for a project.
  2. 6 points explaining the importance of a feasibility study for your project.
  3. The basic principles for preparing a successful economic feasibility study.
  4. The most important characteristics of economic feasibility study.

The importance of preparing an economic feasibility study for a project:

An economic feasibility study for a project and evaluation of projects is considered one of the modern economic and administrative branches, which is indispensable for any project (public, private, joint).. The feasibility study of the project aims to rationalize the investment decision, that the economic project must be based on the pillars of economic and technical viability. In other sense, these studies are concerned with the feasibility of establishing the proposed project before its implementation in a practical way. A rational investment decision must be preceded by studies that clarify the existence of an adequate market in which the project’s production will be disposal, and the possibility of developing this market, as well as the availability of raw materials, labor and necessary infrastructure, in addition to the availability of Sources of financing are sufficient and timely. Most important of all, this project will ultimately achieve a return commensurate with the nature of the project and the degree of risk involved in this from an individual point of view. As for the national point of view, the matter requires an estimate of the extent of the project’s contribution to achieving all the basic objectives of development (economic and non-economic).

All this requires the preparation of reports and studies, whether for capital owners or public authorities, and these reports may be simplified in the case of small and regular projects, and may be in the form of volumes as in the case of large projects, and these studies are usually carried out by specialists in the various branches covered by the study, which It varies from project to project according to its nature and size. Previous years have demonstrated conclusively that failure to undertake feasibility studies before the establishment of new projects, or to take replacement and renewal decisions or expansions in existing projects, whether they are ignorant or intentional is a fatal mistake that leads to waste and misuse of resources and the loss of times the money that could have been spent on feasibility studies.

6 points explaining  the importance of a feasibility study for your project: –

  1. The relative advantage enjoyed by available investment opportunities is determined from the point of view of economic development and in a way that helps economic policy to determine appropriate policies and incentives, to encourage the private sector to implement those opportunities.
  2. It contributes to achieving the optimal allocation of economic resources at the national level.
  3. A practical way to help venture capitalists make the right decision.
  4. A practical way to persuade financing centers and bodies (local, regional, and international) to provide appropriate means of financing on appropriate terms.
  5. A practical and scientific way to evaluate the proposed projects under study according to objective financial and economic standards as far as possible from personal and random assessments.
  6. A practical way that helps an investment decision-maker to differentiate between available investment opportunities, maximizing the investor’s objective.

The basic principles for preparing a successful economic feasibility study:

When evaluating the investment market in all Arab countries, we devise a set of projects proposed to be established during successive periods of time. Given the presence of capital and that investor who began to feel the importance of the existence of economic feasibility studies, based on realistic scientific foundations, we set the basic principles in a feasibility study for any project Suggested or prepared. We note that when we return to any economic reference that carries with it a title for the study of feasibility, there are basic principles that must be adopted, and for information, these principles are not taken as fixed assumptions or as permanent premises. Rather, each proposed project has its own economic feasibility. We note that it is possible to distinguish between the types of projects. For example, there are industrial, agricultural, or commercial projects. The economic feasibility study differs according to the nature of the project, due to the different technological level, the restrictions and laws that govern it, and the different ratios of revenues and costs in general, the volume of the project, whether large or small, as well as the different economic policy followed in the country concerned .

But in general there are basic principles found in feasibility studies, and they can be classified into:

1.       The basic principles of marketing feasibility studies.

2.         The basic principles of technical feasibility studies.

3.         The basic principles of financial  feasibility studies.

4.        Financial analysis.

5.        the final report.

The most important characteristics of economic feasibility study:

  • Its dependence on predicting the future

The economic feasibility study is concerned with studying the extent to which an investment idea can be implemented and approved at the present time to extend its life span to cover future years, which means that all of its contents and the results of its stages should be possible estimates that correspond to reality or deviation from it, and therefore accuracy must be taken into account in these estimates.

  • The magnitude of cost

The cost to shareholders increases in the event of large investment projects, if the aim of the study is to obtain substantial bank financing.

  • Interest in the time factor

That is, the period of time between the completion of the study preparation and obtaining the approval of the competent authorities and the beginning of the actual implementation. As throughout this period leads to many negative repercussions represented in the widening gap between the contents of the study and what will happen in practice

  • Sequence and interdependence of stages

The study consists of several stages and consecutive steps, each of which depends on the positive results of the previous steps, and those positive results represent direct inputs to the next stage of it, and therefore it is necessary to prepare its various stages in an order that is not subject to differing views.

  • Flexibility of study

It means that it is illogical to give equal and absolute importance to all stages of the study, but be flexible so that any stage can take the largest share of attention in some cases if the need arises, be it the marketing, the financial, or the economic stage.

Whether this project already exists, or just an idea, the importance of this study is that it seeks to establish the scientific evidence in a quantitative manner on the quality or suitability of the proposed project to be established, or the decision required to be made with investment spending to purchase a machine or create a new production line for an existing project. There is no doubt that this requires a team of diverse specialties, and with a high degree of knowledge and scientific experience, and the formation of the team depends on the nature and volume of the project.

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