Feasibility Studies

Why conduct a Feasibility Study?

Provides a thorough examination of all factors of business success

Gives focus to the project and outline alternatives

Provides quality information for decision making

Narrows business alternatives

Detects new opportunities through the investigative process

Identify reasons NOT to proceed

Lists the reasons to undertake the project

Develops marketing strategies to convince banks or investors that the project is worth considering as an investment

Provides documentation that the project was thoroughly investigated, emphasizing potential problems and defining internal and external project constraints

Serves as a solid foundation for developing the business plan

The Feasibility Study is a critical step in the assessment process

Helps to improves the probability of success by addressing as well as mitigating risk elements

Types of Feasibility Assessment

A feasibility study of a project is conducted at several levels

Legal Feasibility

Please check mor einformation in our Internationalization section.

The analysis will indicate the risks and obstacles that need to be addressed within the technical, economic and financial feasibilities.

The main objectives of the legal feasibility analysis are as follows:

• To ensure that the project is legally doable;
• To facilitate risk management, indicating the risks and obstacles that need to be addressed within the technical analyses, the financial model and/or the Value for Money analysis; and
• To avoid, to the extent possible, major problems in the project's development and implementation, specifying the requirements that need to be considered at subsequent stages of the process.

Organisational Feasibility

This is a measure of how well a proposed project could have a success and takes advantage of the opportunities, identified during scope definition. It also measures how the proposed project satisfies the requirements identified in the analysis phase.

• Types of organisation
• Academic qualification, and experience of key persons
• Availability of personnel required for project execution.
• Assessment of other specific skills required for the project
• User's role in case of development projects etc.

Market Feasibility

Market Feasibility provides important information to identify and analyse the market need, market size and competition.

We can set up the goals of the market feasibility study as follows:

• Determine the market structure and shape.
• Determine exact demand for product.
• Identify the factors affecting the market demand and supply.
• Identify market targeted groups, and market segments.
• Select the price policy and the best price mechanism to sell the products.
• Estimate the Market potential

Technical Feasibility

• Inputs: Availability of electricity, water, fuel, cattle, etc.
• Types of field / soil test
• Climate conditions
• Location / Infrastructural facilities / Layout / Logistics
• Environmental impacts
• Investment cost and operational cost of different technology/process
• Size and scale of operations: based on the demand, capital requirement, and technology, inputs available
• List of recommended equipment suppliers
• Reputation of the suppliers and performance guarantees (service and warranties)

Environmental Feasibility

Infrastructure projects will often have significant environmental impacts arising from construction and operation, which can be both positive and negative. The impacts may also include follow-on effects beyond the immediate project area, as well as beyond the people directly associated with the project (secondary impacts).

These impacts (including secondary impacts), and the corresponding formal process of approvals (which varies enormously from country to country), are a common source of delays for projects.

The mitigation strategies for environmental risks imposed by approving agencies are also a significant component of project costs that can reduce the expected return on investment or impact directly on the governmental liabilities, depending on the risk allocation regime.

Thus, an effective evaluation of the environmental issues and a structured recommendation about the project's environmental feasibility is a very important output of the Appraisal Phase.

The main purpose of a comprehensive assessment of environmental issues is to ensure that environmental considerations are explicitly addressed and incorporated into the green light decision, and that there are no unmanageable environmental obstacles ahead of the project. This allows anticipating, avoiding, minimizing, or offsetting the adverse significant bio-physical effects of the infrastructure. It is also very relevant that all the measures required for the environmental approvals be taken to prevent unnecessary delays in the project schedule.

The project will:

• Identify positive impacts
• Identify required mitigation measures
• Design an environmental management plan

For more information visit the Environmental Impact Assessment section.

Economic & Financial Feasibility

Economic analysis is the most frequently used method for evaluating the effectiveness of a project. More commonly known as cost/benefit analysis, the procedure is to determine the benefits and savings that are expected from a candidate project and compare them with the costs. If benefits outweigh costs, then the decision is made to design and implement the system. A company must accurately weigh the costs versus benefits before taking an action.

The Economic & Financial Feasibility will be prepare under various production, price and sales levels. This may involve identifying "best case", "typical", and "worst case" scenarios. As well as different global economic scenarios.

Estimate Expected Costs, Revenues, Profit Margin, Net Profit to generate Financial statements (Balance Sheet, Income Statement, Cash Flow Statement & Operating Budget)

Perform Break-Even Analysis

Estimate rate of returns under various production, price and sales levels to create a "sensitivity analysis"

Identify limitations or constraints of the economic analysis

Project expected Financial statements during the start-up period and when reaching full operation

Cost Benefits Analysis such as Net Present Value (NPV), Internal Rate of Return (IRR) and Benefit Cost Ratio (B/C Ratio)

Estimating Total Capital Requirements

• Assess the "seed capital" needs of the business project and how these needs will be met
• Estimate capital requirements for facilities, equipment and inventories
• Replacement capital requirements and timing for facilities and equipment
• Estimate working capital needs
• Estimate start-up capital needs until revenues are realized at full capacity
• Estimate contingency capital needs (constructions delays, technology malfunction, market access delays, etc.)
• Estimate other capital needs

Equity and Credit Needs

• Identify alternative equity sources and capital availability
• Producers, Local Investors, Angel Investors, Venture Capitalists
• Identify and assess alternative credit sources
• Banks, Government (direct loans or loan guarantees), Grants, Local and State Economic Development Incentives
• Assess expected financing needs and alternative sources
• Interest Rates, Terms, Conditions, Covenants, Liens, Etc.
• Debt to Equity Levels

Social Feasibility

Projects can bring various societal benefits when planned responsibly. To ensure this is the case, Espiga Exports will ask the following questions:

• Will the project have positive effects on the society?
• What are positive and negative impacts?
• Will the project produce any population or demographic movement, such as the change in size of the communities affected by the project?
• Will the project significantly alter the economic structure of the local economy or generate any significant change in relative prices, such as land value? What kind of social impacts can these economic changes produce?
• Will there be a significant change in the general access that the communities have to natural resources, such as drinking water and energy?
• Does the local community have effective governance mechanisms to deal with the long-term effects of the project in areas such as land use regulation, negotiations over business transactions, and other such issues?
• Will the project increase or decrease the demand for public goods or services, such as education or health?
• Are there groups (indigenous groups, women, ethnic minorities, and so on) who will be differentially impacted by the project?
• Will the project interfere with the local labour market during or after construction?
• Does the background of project staff (for example, urban, educated, skilled, foreign language-speaking, expatriates, different customs, and so on) differ significantly from local communities and provide potential for misunderstanding and conflict? and
• Will an influx of newcomers seeking opportunities associated with the project disrupt traditional social structures and create undesirable effects, such as crime, violence, disease, or conflict due to religious and ethnic rivalries?

Espiga Exports will :

• Find viable measures to address negative impacts
• Estimates cost for addressing possible negative social impacts

Schedule Feasibility

Considering the current global demand and the benefits that brings Mexico's network of Free Trade Agreements is recommended that the project will be develop in a short time period considering that a project takes some time to be completed before it is completely operating. Typically we must estimate how long the project will take to develop, and if it can be completed in a given time period using some methods like payback period. Schedule feasibility is a measure of how reasonable the project timetable is. Given our technical expertise will be analyse if the project deadlines are reasonable.

Schedule feasibility is a measure of how reasonable the project timetable is. Typically we must estimate how long the project will take to develop, and whether it can be completed in a given time period using methods like payback periods.

Completing a project on time is very important from an investors perspective. Scheduling feasibility is a measure of how reasonable the project duration is. If the project takes longer than estimated, investors will have to bear extra costs and will affect the rentability of the project.

Roadmap