What is the function of a feasibility study?

A feasibility study is a vital tool in the initial stages of developing a business idea or project. Its primary function is to assess the viability of that idea or project by examining various aspects such as market demand, technical requirements, cost implications, and legal considerations. This assessment helps entrepreneurs and business leaders determine whether the idea is worth pursuing, ensuring that resources are allocated effectively and potential risks are identified before significant investments are made.

By conducting a feasibility study, one can gather critical insights that inform decision-making processes and strategic planning. This analysis provides a well-rounded view of the business environment related to the proposed project, including strengths, weaknesses, opportunities, and threats, thereby enabling entrepreneurs to make informed choices.

The other choices represent activities that, while they may be relevant in the broader entrepreneurial context, do not capture the primary purpose of a feasibility study. Creating an advertising budget focuses on marketing strategy instead of the viability of the project itself. Identifying potential investors is more about funding strategies and capital acquisition than evaluating the feasibility of a business idea. Analyzing past performance of existing products pertains to market research rather than assessing the potential success of a new idea or project.