A technical feasibility study assesses the details of how you intend to deliver a product or service to customers. Think materials, labor, transportation, where your business will be located, and the technology that will be necessary to bring all this together. It's 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 both troubleshooting and long-term planning. It can serve as a flowchart of how your products and services evolve and move through your business to physically reach your market.
Begin—or End—With an Executive Summary
The word "summary" is key here. Highlight the key points of each section you'll include in your technical feasibility study. You can do this in advance to provide yourself with a sort of guideline or skeleton to follow as you prepare your study. It is often easier and more concise to write it after you've finished, so you have the information you want to include right in front of you.
In either case, the summary should appear at the beginning of your technical feasibility study.
Prepare an Outline
Even if you decide to write your executive summary last, you can begin with an outline that will serve a similar purpose in guiding you through the remainder of the study.
The order in which you present technical information isn't as important as making sure you have all the components in place to show how you can run your business. You don't have to include specific financial information in the technical portion of your feasibility study. However, all information in this component should support financial data represented elsewhere.
Basic areas you'll want to cover include materials, labor, transportation or shipping, physical location, and technology. Be sure to include a thorough description of the services or products you'll be offering. How will your business benefit consumers? Give investors a reason to choose you over your competitors.
Calculate Material Requirements
List the materials you'll require to produce a product or service. This section is where you'll indicate where you'll get those materials. Include information such as whether volume discounts will be available as your business grows or if you plan to manufacture your parts at some point in time.
Include what parts and supplies you'll need to produce a product, including things like glue and nails. Mention all materials that will be involved in producing or manufacturing what you're selling.
You don't have to include actual financial data in this portion of the study either. However, financial data that supports your narrative assessment should be included as an attachment in a separate spreadsheet.
Calculate Labor Requirements
You can't run a business, offer services, or manufacturer products without the help of others and that help will cost you. Even if you start your business as its only employee, you'll have to add to your labor pool at some point if you plan to grow.
In most cases, labor will be one of your biggest small business expenses, if not the biggest. List the number and types of employees you need to run your business now and that you might have to employ in the future as your business grows.
You can break labor into categories if necessary, such as senior-level management, office, and clerical support, production or distribution staff, professional staff including lawyers, accountants, engineers, and marketing, and fulfillment employees—those in the mailroom or shipping department.
If you plan to outsource order fulfillment, fundraising, or other aspects of your company’s business, be sure to list what functions you're targeting and to whom you'll send these tasks.
Transportation and Shipping Requirements
How will you transport items if you must send them from one place to another? Smaller items can be shipped via local carriers, DHL, or USPS, but heavy or bulk items must be transported via a freight or trucking company.
If you're shipping perishable items, you'll need special overnight handling. You might also need special permits to ship certain items, and nonprofit organizations should consider applying for discounted postal rates. These are all things that affect the “how” of moving your goods from one place to another.
If you offer services, how will trainers, educators, consultants, and sales personnel get to customers and clients? You will need a licensed distributor or pharmacy to ship on your behalf if you offer a product that's governed by state or federal law such as medications or prescription medical supplies,
Calculate Marketing Requirements
How will you reach consumers? It is a crucial consideration because your business will fail without them. It's something investors will be keen to know.
Go beyond simple advertising plans, although this is important, too. Exactly what type of advertising campaign do you plan to launch? Will you lean more heavily on print media or other options and what consumers will you target? Explain why they would want to buy from you rather than any of your competitors.
The Physical Location of Your Business
Where you run your business will have an effect on your success. If you're starting in a home-based office, determine when and if you'll need a “brick and mortar” office at some point in the future—office space outside your home. Will you eventually need warehouse facilities, your factory, or your trucking facility? Will you require a retail storefront or any other purchased or rented facilities to conduct your business?
Discuss the pros and cons of where these facilities will be located in the physical location component of your feasibility study. Should they be in one central location or across state lines? Do you need special parking considerations for customers or trucks? Do you have to be near other facilities such as an airport, a commerce center, or a shopping mall?
Technology Requirements to Run Your Business
Every business needs at least some kind of technology to operate. The technology component of your feasibility study should include discussions about telephone answering systems, computer hardware and software, and inventory management.
Don't overlook items like cash registers and potentially the ability to accept credit cards and process checks. You might need special devices to accommodate the disabled, or teleconferencing equipment and facilities. Cellphones and PDAs are almost a must for most businesses, and you might need alarm or camera systems and manufacturing equipment as well.
Include Target Dates
Tell investors when you plan to do what to bring your concept to fruition. Don't neglect to mention the small steps. Cover it all, from initial organizational meetings to when you'll purchase equipment or facilities and when and how you'll open your doors for business.
Be reasonable. You don't want to promise that you'll perform by a miraculous deadline then fail to do so.
Support Your Financial Information
Don't make the mistake of trying to entice investors with your staggering growth projections and a potential return on their investment. There's always an increase in expenses with an increase in revenue.
Don't rely strictly on feasibility study conclusions to impress an investor. An experienced investor or lending institution will read your entire report and come to their conclusions. It's therefore critical that the technical and financial data in your study reconcile. If other parts of your feasibility study show growth, you'll also have to project labor and other costs and the technical ability to support that growth.
The technical component should serve as the written explanation of your financial data because it offers you a place to include detailed information as to why an expense has been projected high or low. You can explain why it's even necessary. It demonstrates to potential investors and lenders—and in some cases, potential clients—that you've thought about the long-term needs your business will have as it grows.
Summary of the Technical Feasibility Study
Be sure to 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 isn't enough—you have to show how you can make money from it. The technical feasibility study addresses the physical and logistical mechanics of it, and how you'll be able to get something into the product and back out the door to customers.