How to Write a Technical Feasibility Study
In this lesson, you will learn how to identify the materials, labor, transportation, shipping, physical location, technology, and other important logistics of how your business will run.
What is a Technical Feasibility Study?
The Technical Feasibility Study assesses the details of how you will deliver a product or service (i.e., materials, labor, transportation, where your business will be located, the technology needed, etc.).
Think of the technical feasibility study as the logistical or tactical plan of how your business will produce, store, deliver, and track its products or services.
A technical feasibility study is an excellent tool for troubleshooting and long-term planning. In some regards, it serves as a flow chart of how your products and services evolve and move through your business to physically reach your market.
The Technical Feasibility Study Must Support Your Financial Information
Do not make the mistake of trying to entice investors with your staggering growth projections and potential returns on their investment that only includes income (revenue) to the business. With any increase in revenue, there is always an increase in expenses. Expenses for technical requirements (i.e., materials and labor) should be noted in the technical feasibility study.
You should also not strictly rely on feasibility study conclusions to impress an investor.
An experienced investor or lending institution will read your entire report and come to their conclusions. Therefore, it is critical that the technical and financial data in your study reconcile. If other parts of your feasibility study show growth, you will also have to project labor and other costs and the technical ability to support that growth.
The technical component serves as the written explanation of financial data because if offers you a place to include detailed information about why an expense has been projected high or low, or why it is even necessary. It demonstrates to potential investors and lenders (and in some cases, potential clients) that you have thought about the long-term needs your business will have as it grows.
Preparing an Outline for Writing Your Technical Feasibility Study
The order that you present technical information is not as important as making sure you have all the components to show how you can run your business.
You do not have to include specific financial information in the technical portion of your feasibility study, but all information in this component must support your financial data represented elsewhere. Basic things that most businesses need to include in their technical feasibility study include:
- Transportation or Shipping
- Physical Location
Calculating Material Requirements
In this section, you list the materials you need to produce a product or service, and where you will get those materials. Include information such as if volume discounts will be available as your business grows, or if you ever plan to manufacture your parts at some point in time.
Things to include in your list of materials:
- Parts needed to produce a product,
- Supplies (glue, nails, etc.), and
- Other materials that are involved in producing or manufacturing your product.
You do not need to include actual financial data in this portion of the study but financial data supporting your narrative assessment should be included in a separate spreadsheet as an attachment.
Calculating Labor Requirements
You cannot run a business, offer services, or manufacturer products for free. Even if you start your business with you as your only employee, at some point, if you plan to grow you will need to add to your labor pool.
In most cases, labor will be one of your biggest small business expenses. In this section, you will list the number and types of employees needed to run your business now, and that may be employed in the future as your business grows.
You can break labor into categories if necessary:
- Senior Level Management
- Office and Clerical Support
- Production or Distribution
- Professional Staff (i.e., lawyers, accountants, engineers, marketing)
- Fulfillment (i.e., mail room, shipping department)
If you plan to outsource (hire another company to do a job for you) order fulfillment, fundraising, or other aspects of your company’s business be sure to list what functions will be outsourced and to where.
Transportation and Shipping Requirements
If you need to ship items from one place to another, how will you transport these items? Small items can be shipped via local carriers, DHL, USPS, but heavy or bulk items may need to be transported via a freight or trucking company.
If you are shipping perishable items, you will need special overnight handling. You may also need special permits to ship certain items, and nonprofits organizations should consider applying for discounted postal rates. These are all things that affect the technical, or “how” of moving your goods from one place to another.
If you offer services, how will trainers, educators, consultants, sales personnel get to customers and clients?
If you offer a product that is governed by state or federal law (such as medications or prescription medical supplies), do you need a licensed distributor or pharmacy to ship on your behalf?
In the Transportation Feasibility component, list things that will affect how you get your goods or services to other businesses or individuals, including:
- The methods of transportation and shipping services that will be needed to get your product or services to a customer;
- Special handling or other unique arrangements required to transport your product;
- Any special permits that will be required, including postal rate discounts; and
- Cars (company- or privately-owned) and other vehicles needed to conduct your business.
Physical Location of Your Business
Where you run your business will have an effect on your success. If you are starting out in a home-based office, project whether or not, and when, you might need any of the following:
- A “Brick and Mortar” Office (office space outside your home)
- Warehouse Facilities
- Your Own Factory
- Your Own Trucking Facility
- Retail Storefront
- Any other purchased or rented facilities needed to conduct your business.
In the Physical Location Feasibility component, you should also discuss the pros and cons of where these facilities will be located. Should they be in one central location, or across state lines? Do you need to have special parking considerations for customers or trucks? Do you need to be near other facilities such as an airport, commerce center, or shopping mall?
Technology Requirements to Run Your Business
Every business needs at least some kind of technology to operate. The Technology component includes discussions about and a list of the following:
- Telephone Answering Systems
- Computer Hardware and Software
- Inventory Management
- Cash Registers, Credit Card Collection, Check Processing
- Special Devices to Accommodate the Disabled
- Teleconferencing Facilities and Equipment
- Cell Phones, PDA’s, or Other Devices Needed to Conduct Business
- Alarm or Camera Systems
- Manufacturing Equipment
Summary of the Technical Feasibility Study
The order in which you present your technical requirements is not as important as making sure that you include all the technical requirements of your business from production to customer receipt.
This information will help investors know more about the operations of your business. Having a great idea for a product or business is not enough; you have to show how you can make money from the idea. The technical feasibility study addresses the physical and logistical mechanics of it, and how, you will be able to get something into the product and back out the door to customers.