Business Feasibility Study

Lecture:
Dr. Sayu Ketut Sutrisna Dewi, S.E., M.M., Ak.

Compiled by:

1.​ I Gede Dipta Mahesa (2307521116)

2.​ Benediktus Brian aditya Nyudak (2307521128)
3.​ Bryan Alphariel Sutanto (2307521175)
4.​ Sang Made Rio Kurnia Indracahya (2307521194)

FACULTY OF ECONOMIC AND BUSINESS

UDAYANA UNIVERSITY
2025
 I.​ Aspects That Must Be Analyzed in Compiling a Business Feasibility Study

A business feasibility study serves as a multidimensional diagnostic tool to assess the

viability, sustainability, and strategic alignment of a proposed business initiative. It integrates
diverse analytical frameworks to provide decision-makers with actionable insights, mitigating
uncertainty and reducing investment risk. The following are the principal aspects that must be
evaluated, each contributing uniquely to the overall feasibility profile:

a. Market and Marketing Feasibility

Market and marketing feasibility is arguably the foundational pillar of any feasibility study. It
seeks to determine whether there is a substantial, growing, and addressable market that aligns
with the proposed value offering. This aspect encompasses comprehensive market
intelligence, including macro- and microeconomic trends, consumer behavior analysis,
market segmentation, positioning strategy, and competitive intelligence.

Key Analytical Dimensions:

●​ Market Demand Sustainability: Is there a demonstrable and enduring demand for

the product or service? This involves assessing market growth trajectories, customer
lifetime value (CLV), and adoption curves.
●​ Competitive Landscape: Who are the incumbent players and what are their relative
strengths, weaknesses, and market shares? Utilize Porter’s Five Forces to analyze
threat levels and potential profitability.
●​ Strategic Marketing Fit: How will the business differentiate itself through branding,
pricing strategy, distribution efficiency, and promotional channels to achieve strategic
market penetration and long-term customer retention?

b. Technical and Operational Feasibility

This aspect evaluates the technological soundness and operational readiness of the business.
It determines whether the venture can deliver its value proposition with available resources,
infrastructure, and technical competencies while maintaining scalability and quality control.
Key Analytical Dimensions:

●​ Technology Readiness Level (TRL): Is the technology mature, scalable, and

protected by intellectual property? Will further R&D be needed?
●​ Operational Efficiency and Logistics: Is the supply chain robust and resilient?
Consider capacity planning, location optimization, and vertical/horizontal integration
strategies.
●​ Resource Availability: Does the business have reliable access to raw materials, labor,
utilities, and infrastructure? Are there bottlenecks or dependencies that increase risk
exposure?

c. Organizational and Management Feasibility

A business concept, regardless of its innovativeness, is only as strong as the leadership team
executing it. This component assesses the organizational structure, governance model, and
managerial competency, all of which are vital for navigating complexity and change.

Key Analytical Dimensions:

●​ Leadership and Execution Capability: Does the core management team possess the
strategic acumen, domain expertise, and leadership experience to implement and scale
the venture?
●​ Human Capital Strategy: Are talent acquisition, retention, and upskilling
frameworks aligned with operational needs and long-term growth?
●​ Corporate Governance and Culture: Are there clearly defined decision-making
hierarchies, performance metrics, communication protocols, and ethical standards that
align with industry best practices?

d. Financial Feasibility

This is the quantitative backbone of the feasibility study and often the most determinative.
Financial feasibility provides a data-driven projection of the business’s capacity to generate
value, manage risk, and deliver a return on capital invested.

Key Analytical Dimensions:

 ●​ Capital Structure and Funding Strategy: What is the optimal mix of debt, equity,
and internal financing? Are financing sources secured and cost-effective?​

●​ Profitability Forecasts: Evaluate financial statements (pro forma income statements,

balance sheets, and cash flow forecasts) using sensitivity analysis and scenario
planning.
●​ Valuation Metrics and Investment Appraisal: Utilize NPV, IRR, Payback Period,
and Profitability Index to determine if the business justifies the investment based on
time value of money and opportunity cost.

e. Legal and Regulatory Feasibility

This component scrutinizes the legal and institutional framework surrounding the business,
ensuring full compliance with jurisdictional mandates. Failure in this area could result in
operational shutdowns, financial penalties, or reputational damage.

Key Analytical Dimensions:

●​ Licensing, Permits, and Zoning Compliance: What legal authorizations are

required, and are they obtainable within a reasonable timeframe?
●​ Intellectual Property and Contract Law: Are patents, trademarks, or copyrights
necessary? Are key supplier and customer contracts legally robust?
●​ Regulatory Risk Mapping: What are the risks associated with changing laws,
international trade regulations, labor laws, and environmental standards?

f. Environmental and Social Feasibility (ESG)

In the era of sustainable capitalism and impact investing, evaluating environmental and social
feasibility is no longer optional—it is essential. This analysis identifies both risks and
opportunities related to environmental impact and societal contribution.

Key Analytical Dimensions:

●​ Environmental Footprint Analysis: What are the carbon emissions, waste

generation, water usage, and pollution risks of the business? How will these be
mitigated?
 ●​ Social Impact Assessment: Does the business model contribute positively to local
communities, employee welfare, and inclusivity? Are there programs in place for
CSR (Corporate Social Responsibility)?​

●​ ESG Compliance and Ratings: How will the business be evaluated by investors,
rating agencies, and regulators in terms of ESG standards?​

II. The Most Decisive Aspect in Determining Business Feasibility: Financial Feasibility

Although each component of a business feasibility study plays an indispensable role in

constructing a holistic evaluation framework, financial feasibility emerges as the most
conclusive determinant of a project's viability. This supremacy is not merely rooted in its
numerical precision, but in its integrative nature—it is the ultimate synthesis of all prior
dimensions and the final arbitrator of commercial potential. Here’s a detailed rationale:

a. Financial Metrics as the Convergence Point of Multidimensional Feasibility

Financial feasibility serves as the terminal point of synthesis where insights from market
research, technical assessments, legal compliance, and operational plans are quantified and
stress-tested under various financial models. Revenue forecasts depend on accurate demand
estimation; cost structures reflect operational and technical strategies; compliance expenses
arise from legal requirements. Thus, financial projections—such as cash flow statements,
income forecasts, and balance sheet estimates—become the cumulative reflection of the
entire feasibility spectrum. If the financials falter, it signals a systemic weakness that may lie
hidden in one of the preceding components.

b. Capital as the Operational Currency of Strategic Execution

No matter how visionary or socially impactful a business idea may be, it remains theoretical
without financial viability. Capital functions not just as a startup catalyst, but as a
continuous enabler of strategic execution. A business that cannot demonstrate its ability to
generate sustainable margins, maintain liquidity, or meet debt obligations is essentially
non-bankable and non-investable. In practical terms, even short-term liquidity
issues—such as a mismatch between receivables and payables—can trigger insolvency,
regardless of strong market demand or innovative capabilities.

Moreover, the cost of capital itself—whether equity or debt—feeds back into feasibility. If
the project’s internal rate of return (IRR) fails to exceed its weighted average cost of capital
(WACC), then it actively destroys shareholder value, rendering it economically irrational to
pursue.

c. Objective Financial Indicators for Cross-Project and Risk Benchmarking

Financial feasibility offers quantitative objectivity, enabling decision-makers to reduce

subjective biases. Strategic tools such as Net Present Value (NPV), Internal Rate of
Return (IRR), Payback Period, Break-even Analysis, and Scenario Stress Testing
provide robust frameworks for benchmarking risk-adjusted performance. These metrics
facilitate comparative analysis not only between alternative project proposals within the same
firm but also across industry best practices and macroeconomic risk environments. In
contrast, qualitative aspects like market trends or organizational culture—while
valuable—are more prone to interpretation bias.

d. Stakeholder and Capital Market Imperatives

The financial component aligns most directly with the interests of key
stakeholders—investors, creditors, regulatory bodies, and shareholders—whose primary
focus is on returns, risk exposure, and capital preservation. A project with compelling
financial projections can offset moderate strategic or operational deficiencies, provided
those weaknesses are manageable or improvable. However, no level of marketing creativity
or technical sophistication can justify proceeding with a business venture that projects
sustained negative cash flows or fails to reach financial breakeven within a reasonable time
frame.

Furthermore, investors today rely on financial due diligence reports as a gating mechanism.
In venture capital, for example, while product-market fit is vital, the exit strategy, projected
ROI, and time to profitability are ultimately decisive.

e. Financial Fragility as a Root Cause of Business Failure

Empirical studies conducted by institutions such as the Harvard Business Review, U.S.
Small Business Administration, and McKinsey & Company consistently show that the
most common root causes of business failure are fundamentally financial in nature. These
include:

●​ Chronic undercapitalization, leading to liquidity crises.

●​ Poor cash flow management, resulting in delayed payments, supply disruptions, or
insolvency.
●​ Unrealistic financial forecasting, where cost underestimation or revenue
overestimation skews strategic planning.
●​ Low margins, which render businesses vulnerable to even minor economic shocks or
cost fluctuations.

Unlike market or technical challenges, financial breakdowns tend to be terminal because they
leave little room for adaptive correction once capital resources are exhausted.