Feasibility Studies and Business Plans- What’s the Difference?
When starting a business or considering a new venture, entrepreneurs are often recommended to undertake a feasibility study and create a business plan in order to mitigate risk and to make more informed decisions. Whilst both studies are typically conducted in the early stages of a potential business venture and have some overlap, it is important to understand the differences between both planning tools:
- The main purpose of a feasibility study is to determine whether a potential business venture is actually worth the client’s time, efforts and resources. As such, feasibility studies serve as an important foundation and initial step to be undertaken prior to drafting the business plan.
- Feasibility studies focus on the viability of a potential project or venture. As such, they tend to be comprised of calculations, analyses and estimated projections. Business plans, on the other hand, tend to focus on marketing strategies designed to help establish and grow the business in accordance with a number of goals.
- Considering the main focus of feasibility studies is to assess the potential profitability of a project, they are often conducted for internal purposes. On the other hand, business plans are often formulated with the key purpose of being presented to external parties, such as investors or banks in order to raise funding. That said, a feasibility study can also be presented for external purposes and a business plan be utilized for internal purposes.
Whilst both feasibility studies and business plans are typically conducted in conjunction with each other, they focus on different points. Simply put, feasibility studies are designed to understand the viability of a given venture whilst business plans are designed to explore how to build a sustainable venture. These planning tools serve a vital role in helping entrepreneurs make informed decisions and ultimately reduce risk.