The most common reason would be to limit one’s losses. For example, suppose a company is considering developing and launching an expensive new product. The research and development expenditures could easily cost millions of dollars, and the launch would cost even more. Two or three years of R&D costs would be sunk into the project before there was any possibility of recouping any expenses through sales. Worse, a business owner or entrepreneur could burn through a sizable amount of funds/ life savings in this new venture. In this case, a feasibility study would be a high priority before substantial resources become invested in R&D. If the feasibility study indicates a very low probability of success, it would be far less expensive to invest in the feasibility study and kill the project, than it would be to go forward without the study and see the project fail.

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Whether a study’s findings are positive or negative, the feasibility study can help entrepreneurs and managers better understand what aspects of the project are of greatest strategic importance to the success of the venture. If the feasibility study is negative, the findings still may uncover previously unknown market opportunities and can thus help set the stage for some other successful product or service commercialization. If the feasibility study is positive, the findings should provide useful insights and benchmarks for the project as it moves forward in the commercialization process.