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What Is a Viability Study?

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  • Written By: Osmand Vitez
  • Edited By: PJP Schroeder
  • Last Modified Date: 15 November 2016
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A business often conducts a viability study to determine the potential profit that may exist in a new business idea. The study may come from several different angles, so all aspects of a new idea or business are under review prior to implementation. Common areas under a viability study include studies on the market, technical aspects, business model, and management. Other aspects may also have inclusion in the analysis depending on the idea and potential for unsuccessful implementation. The length of time a company spends on the study also varies based on the aspects of the new operations.

Market studies tend to review all the external factors a company often cannot control. Consumer demand, regulatory environment, competition, and resource availability are typically parts of this portion of the viability study. Each individual factor or a number of them can all signal problems for the new idea or operation. In some cases, a company may need to conduct a market study for several regions or international markets as well. Essentially, any area that the company will enter falls under the study.

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Technology typically plays a large role in the current business environment. Technical aspects in a viability study may be technology, value, supply chain, integration with current operations, or others. This portion of the study often requires the aid of operational managers who can explain the most technical aspects of changing current operations. Companies may also hire outside agencies to review and cover technical aspects to ensure all issues have answers prior to spending capital on these changes.

A business model describes how a company completes current operations. It often details the process and activities necessary to operate a specific section of the business. A viability study looks at how a current business model may integrate with new operations or if a new model is necessary. Creating new models takes time and capital. The model is often a process that must be started prior to actually implementing new operations.

Management analyses or models are also important parts of viability studies. Companies must determine who is going to guide the new operation during its infancy. While a company may be able to reallocate management resources, hiring new managers may be necessary. A lack of qualified individuals, however, can reduce an opportunity’s chance of success. A thorough review on available manpower is necessary to determine how a company will staff new operations.

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KoiwiGal
Post 3

I was allowed to attend a gifted students business seminar when I was in high school, and one of the things they had us practicing was a basic viability study.

It was a little bit cheesy, since we had to survey the students and teachers of our schools in order to come up with a business model. But I think it was a really valuable lesson, and one that they should probably get all students to do.

We all started out with pie in the sky dreams about what kind of business would be best, and almost everyone had to change it by the end of the day.

croydon
Post 2

@indigomoth - There is another good reason to run one of these feasibility studies. Not only will you see what the public wants, you will also be able to see which part of the public wants what. So, in your example, I'm sure not every type of person agreed on what kind of cookie was best.

When the guys decided on the type of cookie they wanted to make, they probably also figured out who was most likely to want that cookie. Say, university students.

So, then they can direct their publicity and so on towards students.

This is pretty important, actually, and you'd be surprised how much companies can get it wrong!

indigomoth
Post 1

I know that you are supposed to run a viability study before starting a small business or a similar enterprise. Even when opening an online store.

There are companies which will run surveys and things like that to help you figure out what customers want.

One of my favorite examples was these guys who decided they wanted to make cookies and ran a study to see what people wanted from a cookie. They ended up with a large, cheap cookie with big chunks of high quality chocolate in it, and made a lot of money.

Even if you think you know exactly what you want to sell, it doesn't hurt to see what the people want to buy with a feasibility study.

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