What is a Feasibility Study?

If you require assistance with a feasibility analysis, please contact Iowa State University Extension and Outreach. Their Farm, Food and Enterprise Development Team offers services such as feasibility studies, business planning, and entrepreneurship training. A feasibility study is a critical first step in launching an agribusiness. It evaluates whether a business idea is viable, profitable, and sustainable before significant time and financial resources are invested. The study helps entrepreneurs identify risks, analyze market decisions, and assess resource requirements, ensuring they make informed decisions before committing to a business venture.

A well-structured feasibility study includes market, technical, financial, operational, and legal considerations that can determine whether the proposed agribusiness is realistic and sustainable.

A feasible business venture should:

Generate adequate cash flow and profits
Withstand risks and market fluctuations
Remain sustainable in the long term
Align with the founders' goals and resources

A feasibility study is only one step in the business development process. Reviewing this process and understanding the study's role ensures informed decision-making.

Six Steps Feasibility Study Icons Infographic Stock Vector (Royalty ...

Why Conduct a Feasibility Study?

Prevents Costly Mistakes- Avoids investing in a business model that lacks demand or sustainability.

Improves Decision-Making- Helps in choosing the right location, production methods, and target market.

Attracts Investors & Funding- A feasibility study provides data-backed evidence to secure loans, grants, and investor funding.

Identifies Risks Early- Uncovers potential operational, financial, and regulatory challenges before launch.

Define the Business Concept & Objectives

Before diving into research, clearly outline:

The type of agribusiness (crop farming, livestock, agritech, food processing, etc.).
The target market and customer base (wholesale buyers, retailers, direct consumers).
The business goals (profitability, sustainability, export potential).

Example:

A farmer wants to establish an organic vegetable farm selling directly to consumers through CSA (Community-Supported Agriculture) model. The feasibility study will determine if there is enough market demand, sufficient land, and a viable pricing structure to make the business sustainable.

a. General Feasibility Information

Operational feasibility determines whether the business can run efficiently given its resources and logistical setup.

Key Considerations:

Production Timeline & Efficiency- How long does it take to produce and deliver the product?
Supply Chain & Distribution- Can products be delivered fresh and on time?
Technology Integration- Will automation or precision agricultural tools improve efficiency?
Scalability- Can the business expand without significant operational bottlenecks?

Outcome: If the business can operate efficiently and meet demand, it is considered operationally feasible.

Financial Feasibility PowerPoint and Google Slides Template - PPT Slides

Pre-Feasibility Study

A pre-feasibility study helps filter out non-viable business ideas early. Before committing to a full feasibility study, conducting a preliminary assessment can save time and resources.

Market Assessment

A market assessment helps determine if a market exists for the product. If no market opportunities are found, a feasibility study may not be necessary. If opportunities exist, the market assessment provides focus and direction for business development.

Results and Conclusions

A feasibility study should outline various business scenarios, identifying implications, strengths, and weaknesses. Decision-makers must analyze the study's findings critically, ensuring assumptions are realistic and actionable.

Go/No-Go Decision

The go/no-go decision is one of the most crucial steps in business development. Once a definitive decision is made to proceed with a business venture, turning back becomes costly and complex. The feasibility study serves as a key information source in this decision-making process.

Feasibility Study vs. Business Plan

A feasibility study is not the same as a business plan. The feasibility study determines if the business idea is viable, while the business plan provides a detailed roadmap for execution.

Comparison	Feasible Study	Business Plan
Purpose	Evaluates business viability	Provides a roadmap for implementation
Focus	Identifies risks & success factors	Outlines detailed operational & financial plans
Decision-Making	Determines if the idea should proceed	Guides actual business execution

A business plan is only created if the feasibility study confirms that the business is viable.

Conclusion: Why a Feasibility Study is Essential

A feasibility study is a critical step in business assessment. It provides:

Risk reduction by identifying potential challenges early.
Strategic guidance for making informed investment decisions.
Investor confidence through data-backed projections.
Stronger market positioning by ensuring demand exists for the product/service.

If conducted properly, a feasibility study may be the best investment you make before launching an agribusiness.

b. Steps to Evaluate the Viability of an Agribusiness Idea

i. Market Feasibility- Is There Demand for Your Product?

Understanding market demand, competition, and industry trends is essential to determine whether customers will buy your product or service.

Key factors to Analyze:

Target Market Identifications- Who are your potential customers?
Market Size & Demand Trends- Is demand growing, stable, or declining?
Competitor Analysis- Who are the key players in the market? What pricing strategies do they use?
Sales & Distribution Channels- How will you reach customers (farmers' markets, online platforms, wholesalers)?
Consumer Preferences- Are there preferences for organic, sustainable, or locally grown products?

Tools for Market Feasibility:

Google Trends & Industry Reports- To analyze consumer interest and demand trends.
Surveys & Interviews- Gather insights from potential buyers, retailers, or distributors.
Competitor Benchmarking- Study similar agribusinesses to assess pricing, branding, and supply chain practices.

Outcome: If the study shows strong demand, the business idea moves forward. If demand is weak, consider adjusting the business model (e.g., focusing on a niche product or a different sales strategy).

ii. Technical Feasibility- Do You Have the Right Resources?

Technical feasibility assesses whether you have the land, equipment, labor, and expertise needed to operate the business efficiently.

Key Areas to Evaluate:

Land & Location Suitability- Soil quality, climate conditions, access to water.
Infrastructure & Equipment Needs- Machinery, irrigation systems, storage facilities.
Production Methods- Traditional vs. technology-driven farming techniques.
Labor Requirements- Availability of skilled or seasonal labor.
Supply Chain Logistics- How will raw materials be sources and products distributed?

Outcome: If resources are sufficient, the business idea moves forward. If there are gaps, the study highlights areas that need investment or adjustment.

iii. Financial Feasibility- Can the Business Be Profitable?

Financial feasibility examines startup costs, revenue potential, and profitability projections.

Key Financial Considerations:

Startup Costs- Land acquisition, equipment purchases, infrastructure setup.
Operating Expenses- Labor, seeds, feed, fertilizer, utilities, transportation.
Pricing Strategy & Revenue Forecast- Expected sales, pricing models, profit margins.
Break-even Analysis- How much must be sold to cover costs?
Funding Sources- Loans, government grants, private investors, crowdfunding.

Financial Feasibility Formula:

(Include break-even visual)

Outcome: If financial projections show sustainable profits, the business idea advances. If the numbers indicate high risks, cost-cutting measures or additional funding sources may be needed.

iv. Operation Feasibility- Can the Business Function Smoothly?