Market Feasibility Studies

The role of a feasibility study is often misunderstood. Too often, developers of new projects pick a site, decide on the exact mix for their project, and even work out a preliminary design and cost estimate, and then seek a market feasibility study. In a sense, that's putting the cart before the horse.

A market feasibility study comes at the beginning of the development process once a potential site is selected and becomes the foundation for the mix and design, rather than verification for them.

A market feasibility study accomplishes a number of things:

  1. It evaluates the site to assure it's a good choice. The location and characteristics of a site have a significant impact on the size of the market, market penetration and attendance. Sometimes, the difference in potential project attendance between two sites only a mile apart can be dramatic. Development costs will usually be relatively equivalent between comparable sites. Therefore, it makes sense to select a site that will have the highest attendance to get the highest investment return.
  2. Based upon determination of the market area, analysis of direct and indirect competition and the demographic and socio-economic lifestyle characteristics of residents, and possibly the tourist population, a market feasibility study will determine not only whether a project is feasible, but also what mix and project characteristics would be most profitable.

Many of our clients start off with a site and basic project idea. Then, through the market feasibility study, we not only evaluate the site to assure it is a good choice, but also test the concept and mix, refine it based upon the market and recommend the best mix of components. We had one client who was initially thinking about developing a driving range. Our market study concluded that was not a good option, but that a family entertainment center would work better. Sometimes clients start with the concept of an all outdoor FEC and the market study finds that an FEC with strong indoor components would be more successful. Once, we concluded the originally selected site was not a good choice, but an alternate site not far away was very feasible.

Then, based upon the market study findings, the second phase of feasibility analysis -- that we call economic feasibility -- is completed. This includes preliminary plans, attendance projections, pro forma financial projections and a detailed cost estimate.

You can learn more about market and economic feasibility here.