INTRODUCTIONPrefeasibility study is the first and foremost analysis of a potential business

Table of Contents

INTRODUCTIONPre-feasibility study is the first and foremost analysis of a potential business project. They are usually proposed by a small team and are prepared to give company stakeholders the basic information that they need as a blue print for a project or choose between potential investments. These studies typically give an overview of a business project’s logistics, capital requirements, key challenges and other information deemed important to the decision-making process. A feasibility study is simply an analytical tool that is used for project planning which in the later stages, helps to assemble the entire project. The feasibility study uses various scenarios to assess the risk involved in implementation of the project and projects the evaluation of the project.The scenarios which may alter the feasibility study includes volume of product or service; the equity capital invested; the prices of the product or service; labour requirement and cash collection and disbursement schedule.There are various elements considered while conducting a pre-feasibility study. They include technical feasibility, market feasibility, commercial feasibility, overall risk assessment and the feasibility of purchasing an existing business unit. While all these elements are required for the business, some feasibility studies usually focus on certain aspects.Technical feasibility determines the potential of the new product or service. The technical feasibility study proposes the introduction of the product or service; its nature and existence; how the product or service protects itself from the competitors; the strengths and benefits of the product or service; the resources required to produce the product or service; how it proves capable to the organization and its regulatory standards. Market feasibility focuses on testing the product or service in the market. It analyses various situations that the product or service goes through and helps in product or service development and innovation. Market feasibility study provides information on the target market segments; why customers would buy the product or service; the analysis of potential customers; their buying patterns; how will the organization sell the product or service to the customers; the competitors of the product or service in past, present and future; the strength and weakness of the product or service that would help in better planning of precautions; the product or service’s competitive edge. Commercial feasibility study focuses on the probability of the commercial success of the business plan or the product or service. Commercial feasibility study involves studying the strength and weakness of the organisation; the potential sales volume or service; the pricing structure or strategy used on the product or service; the sensitivity points for the business in terms of sale; the Return on Investment (ROI) of the product or service; how long will the product or service take to reach the break-even point; the financial requirements to start the business.Overall risk assessment study focuses on the risk that entails the entire project. This study gives an overall assessment of different ways in which the organization can reduce the risk on taking step into a new action. Overall Risk Assessment analyses the major risks associated with the operation; the survival outlook for the risks; the sensitivity of the profits; the most effective ways to reduce the associated risks. This assessment helps to cover all the possibilities of the risk and create a risk assessment map, which gives information on the possible risks and its impact onto the business. If a new business is to be started, it also provides information on self-sufficiency of financing for the business. It forecasts into the future to plan accordingly for the unfavourable situations that might arise.Feasibility of purchasing an existing business may not be necessarily conducted for every business. The purchase of the business may be considered as a growth strategy for an existing business and if it a sound investment to make. This study includes the information on why the current owner is selling the business; the performance of the business with its valid reasons; ascertainment of value of assets and liabilities of the business; the advantages and disadvantages of purchasing the business.A comprehensive pre-feasibility study should include detailed designs and descriptions for the business operation, as well as cost estimates, project risks, safety issues and other important information. There should also be multiple options included in the study for tackling different issues, as that will provide organizations with more ways to overcome potential challenges.The steps to conduct a pre-feasibility study includes conducting preliminary analysis; outline of project scope and conducting current analysis; comparison of proposal with current product or services or services; examining the market conditions; ascertaining the potential financial costs; and review and analysis of data.Preliminary analysis provides a pre-screening of the proposed project and examines if the study is worth the time and money. If the preliminary analysis clears out without any obstacles and there is potential possibility, it leads to the next step in the process. The project scope must include the objectives of the study thoroughly. The key to outlining the scope of the project is to understand the end users of the study. It is also important to analyse the current situation before the implementation of the study. The next step in the study includes the comparison of proposal with current product or service. This can be better related with Porter’s Five Force Model where the product is compared with five competitive forces of buyers, suppliers, competitors, new entrants and substitute products. The main outcome of this part of the study is to ascertain the revenue projection for implementation of the project. Financial feasibility is the next step in the process where the costs are ascertained for the project plan. Some considerations of the study include the financial resources; the realistic effects of the proposed plan; the break-even schedule of the project; the financial risks associated with the proposed plan; and the financial cost of failure. The final step of the pre-feasibility study includes the review and analysis of data. This involves the review of the previous steps of the study and examining if there is a potential to implement the plan into action.If a pre-feasibility study results in a positive case scenario, the company will likely move on to the next stage of the process. If the study is negative, the company may head back to the starting point or abandon the potential project altogether.LITERATURE REVIEWA literature review is a summary and a critical discussion of the previous works that are of ‘general’ or ‘specific’ reference in some areas. An extensive relevant literature review of research papers and white papers were conducted on the topic “Prefeasibility study in setting up a dialysis unit at HCG hospital” to understand the relevance of the topic and obtain the conceptual knowledge for the same.1. Umesh Khanna (2009) wrote an article on “The Economics of Dialysis in India” which explains the situation of the dialysis patients in India, the statistics of chronic renal disease (CKD) patients and requirements of dialysis unit in India.2. Shilpa Bhattar (2011) wrote an article on “Is Dialysis the next big opportunity in Indian Healthcare?” which states the current supply demand gap in the need for dialysis care in India.3. Ankit Doshi (2018) wrote an article on a panel discussion of “Single Specialty Hospitals – when are they going to break out?” which comprised of Cloudnine Group of Hospitals’ co-founder and managing director Rohit MA; Alvarez & Marsal’s MD Kaustav Ganguli; Peepul Capital investment director Srini Vudayagiri, and Oasis Centre for Reproduct or serviceive Medicine’s co-founder and MD Kiran Gadela. The panel discussed the current state of single specialty hospitals, their business models, the interest of private equity and venture capital investors in this space and exit opportunities and visibility.4. Neeraj Lal (2018) wrote an article on “The Scope of Single Super Speciality Hospitals” in which he explains on the statement “The actual quality of healthcare no longer depends on how well qualified a doctor is but how adequate his team is and how well equipped his hospital is”.5. Michael Cichon, William Newbrander Hiroshi Yamabana, Axel Weber Charles Normand, David Dror, Alexander Preker wrote a book on “Modelling in health care finance – A compendium of quantitative techniques for health care financing” which provides instruction on how to build financial models on hospitals. The book attempts to create synergies and bridge gaps between quantitative health economics, health financing and actuarial science.6. Dilip Khanna, Associate Director, Health sciences Practice, Ernst & Young (2008) wrote an article on “Investment and Financing in Healthcare Sector” which includes the investment considerations and prerequisites for opening a hospital in India.7. ICRA Management Consulting Services Limited, Noida (2012) submitted a study on “Prefeasibility Report of setting up of Dialysis Centres at Taluka Level Hospitals of Bijapur District”. The objective of this study is to establish dialysis centres at taluka level hospitals of Gulbarga, Bijapur and Raichur on Public-Private Partnership (PPP mode).8. Vivekanand Jha (2017) wrote an article on “Uncovering the rising kidney failure deaths in India” which provides a detailed study on the deaths caused in India due to chronic renal diseases and the need for quality dialysis treatment centres. 9. Vivekanand Jha (2018) conducted a study on “Cost of haemodialysis in a public sector tertiary hospital of India” which aims at providing information in the context of planning for dialysis services