Just as a parachute ensures a safe landing, a feasibility study ensures your project begins on solid ground. Before investing your company’s hard-earned resources, confirm that your vision is financially sound and strategically positioned for success.
Financial Sense
Assessing feasibility begins with determining if the operational efficiencies and other potential benefits of the project justify the costs. In a feasibility analysis, CVP Development will estimate the all-in total development costs inclusive of land, design, permitting, construction, and financing. The analysis also includes an estimate of operating costs of the new facility, giving a clear picture of future expenses for maintenance, property management, taxes, and insurance.
Multiple metrics, including Return on Investment (ROI), Internal Rate of Return (IRR), Net Present Value (NPV), and Break-Even Analysis (BEA) all play into determining the potential benefits of expanding or relocating your business.
Deal structure and funding options can make a significant impact on a project’s financials. The decision to own or lease will fundamentally change how a project is financed. Components of the capital stack, such as loans, equity investment, grants, incentives, or other financial products, could affect the affordability of the project, and the most prudent mix of capital is highly dependent on the goals of the client and current market conditions.
Market Analysis
The practicality of the project also relies on the potential success of your company within the respective market. Is there adequate labor in the market to support your operations? Do facility values in the area justify the investment that’s being made? Even if labor demographics appear favorable, how many competing businesses already operate in the area? Are the types of employees available likely to meet your employment needs? Do they possess the needed skills to join your workforce? Is there population growth in the market to support the growth of your business and future hiring needs?
Understanding market rents and building valuations is important, even for a business that plans to own their facility long-term.
Site Assessment
Every site offers unique opportunities. Some offer greater accessibility to major roads, public transportation, and airports, while others provide better visibility to potential customers and convenient parking.
Confirm alignment with zoning and usage requirements early to ensure your vision is achievable. Proactively evaluate environmental factors, such as soil quality, site conditions, and resilience against natural risks like floods or storms — steps that protect long-term durability and manage insurance costs effectively.
The location and availability of utilities, such as water, electricity, gas, and internet connectivity, could increase costs if they need to be relocated or introduced to an undeveloped area.
Weigh the pros and cons of competing sites in the area by comparing occupancy rates, rental prices, and available amenities.
Related Post: Where to Grow Your Business: Selecting a Site
Legal & Regulatory Practicality
Easements, land use restrictions, and historic preservation requirements can determine what is and isn’t possible on a site.
Compliance with local, state, and federal regulations, such as building codes, ADA requirements, environmental laws, fire codes, and labor laws, can make the difference in keeping your project on track.
Risk Potential
Plan for the unforeseen by identifying risks early and evaluating their potential challenges. Consider factors, such as economic shifts, interest rate changes, construction delays, cost fluctuation, and litigation. With an experienced partner onboard, assess the possible impact for each on a scale of minor to significant and use this insight to turn uncertainty into opportunity.
Look Before You Leap
Before taking a leap of faith into a new commercial facility, practice your due diligence by commissioning a feasibility study through CVP. You’ll be glad you began your project with a clear vision of the costs, risks, and potential rewards.
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