A project feasibility study is a structured analysis that answers one question before any capital is spent: is this project worth carrying out, and on what terms? A good study covers several connected areas: the market and customers, the technical and operational side, the regulatory requirements and licenses, organization and staffing, and finally the financial side, which brings all of this together in numbers. In Saudi Arabia in particular, a study is not complete until it accounts for the licensing, Saudization, zakat and tax requirements that apply to the activity. This guide explains how to prepare a feasibility study for your project step by step, and what a good template contains.
What is a feasibility study and who needs one?
Put simply, a feasibility study tests the idea on paper before testing it in the market. It estimates expected demand, setup and operating costs, potential revenue and risks, and then reaches a clear recommendation: go ahead with the project, change it, or drop it.
It is usually needed by:
- An entrepreneur starting a small project, such as a flower shop, a car wash or a café, who wants to know how much capital is needed and when the project might cover its costs.
- An existing business considering a new branch, product line or additional activity.
- Anyone applying for financing from a bank or a financing body, or presenting the project to a partner or investor, since they will often be asked to show that their numbers have been worked through.
- A foreign investor considering entry into the Saudi market who needs to understand demand, competition and regulatory requirements before setting up.
Types of feasibility study
- Market study: identifies target customers, the size of demand, competitors, prevailing prices and sales channels.
- Technical study: answers the question of execution: location and space, equipment, suppliers, operating capacity, and the staff needed and their skills.
- Economic and financial study: turns all of the above into costs, revenue, cash flows and profitability indicators, and measures whether the project can keep going.
- Regulatory study: lists the licenses and requirements the activity needs and their effect on cost and time.
- Management and organizational study: sets out the management structure, roles and authorities.
How to prepare a project feasibility study step by step
- Define the idea precisely: what is the product or service? Who is it for? In which city or district? What sets you apart from competitors? A vague idea produces vague numbers.
- Study the market: gather primary data from visits to competitors, interviews with potential customers and surveys, and secondary data from reports and statistics published by official bodies, then estimate your expected share realistically.
- Carry out the technical study: choose the location and define its requirements, get actual quotations for equipment and fit-out, and map out the daily workflow and operating capacity.
- List the regulatory requirements: check the right activity for the commercial register with the Ministry of Commerce, the location requirements on the Balady platform, safety requirements with the General Directorate of Civil Defense, Saudi Food and Drug Authority (SFDA) requirements if the activity involves food or pharmaceuticals, Saudization requirements with the Ministry of Human Resources and Social Development (HRSD), and registration with the Zakat, Tax and Customs Authority (ZATCA).
- Carry out the financial study: estimate setup costs, monthly operating costs, working capital and expected revenue, then prepare the projected income statement and cash flows, and calculate the break-even point and payback period, as well as net present value and internal rate of return for larger projects.
- Analyze risk and sensitivity: test the results if sales fall, costs rise or the opening is delayed, and prepare a conservative scenario, an expected one and an optimistic one.
- Conclude and recommend: write a clear decision based on the numbers, together with the conditions that must be met for the project to succeed.
What does a good feasibility study template contain?
Whether you prepare the study yourself or commission it from a specialist firm, the usual structure of a feasibility study template includes:
- Executive summary: the idea, the cost and the recommendation on one short page.
- Project description, objectives and business model.
- Analysis of the market, competitors and target customers.
- Marketing plan, pricing and sales channels.
- Technical and operational study.
- Organizational structure, staffing plan and Saudization.
- Regulatory requirements and licenses.
- Financial study with detailed tables.
- Risk analysis and plans for dealing with each risk.
- Final recommendation and the assumptions it rests on.
The financial tables are best built in a spreadsheet such as Excel, with the assumptions linked to the results, so that everything updates automatically when you change a price or a cost.
Ready-made and free templates: when they help and when they hurt
Many people search for a free ready-made feasibility study template, or a ready-made study in PDF for projects such as a laundry, a coffee shop or a pharmacy. These templates are useful for understanding the structure and headings, but they are risky if you take their numbers as they are. Prices, rents, wages and demand differ from one city to another and from one district to the next, and they change over time. Use a template as a structure only, then build the numbers from actual quotations and field visits in your own market.
A feasibility study for a small project
A small project, such as a home-based productive family business or a mobile phone shop, does not need a lengthy study, but it does need the basics: who will buy, at what price, how much you will spend before revenue starts, how much you need each month to cover costs, and what you will do if sales come in below expectations. Honest answers to these questions alone prevent many losses.
When do you need a feasibility study in English?
If any of your partners, lenders or suppliers do not read Arabic, you may need an English version. In that case, make sure the two versions match in figures and terminology, and state which version prevails if they differ.
Common mistakes in feasibility studies
- Overestimating sales: assuming full capacity from opening day is one of the most common mistakes.
- Ignoring working capital: many projects that are profitable on paper run into trouble because they did not account for the cash needed in the first months.
- Copying a ready-made study: figures from a project in another city or from an earlier year do not fit your project.
- Ignoring regulatory costs: such as government fees, safety requirements, Saudization and social insurance, all of which vary by activity and are set by the relevant authorities.
- Leaving out zakat and tax: the study must account for obligations to ZATCA according to the business’s status.
- Overlooking the end-of-service award: this is a liability that builds up on the business. Under the Labor Law, a worker is entitled to half a month’s wage for each of the first five years and one month’s wage for each year after that, based on the last wage, with parts of a year counted proportionally.
- A study prepared once and then forgotten: a study is a management tool, not a file handed to a lender and then filed away.
How to keep the study useful after launch
The best use of a feasibility study comes after opening: compare actual figures with the forecast regularly, update the assumptions when the market changes, and go back to the study before any expansion or new financing decision. Keep the source of every assumption, whether a quotation, a lease or a customer interview, so you can defend your numbers to a partner or lender. You can also look at the guides and tools that Monsha’at, the Small and Medium Enterprises General Authority, offers entrepreneurs.
The Innovant team can help prepare the financial study, review the assumptions and list the regulatory requirements for the activity.
