A feasibility study is an analytical tool used during a business development process to show how a business would operate under a set of assumptions. These assumptions often include such factors as the technology used (the facilities, equipment, production process, etc.), financing, (capital needs, volume, cost of goods, wages, etc.), marketing (prices, competition, etc.), and so on.

The study is usually the first time in a project development process that many key pieces and information about the project are assembled into one overall analysis. The study must show how well all of these pieces fit and perform together. The result will be an overall assessment of whether the proposed business concept is technically and economically feasible. Feasibility studies should also provide sensitivity analyses of the business given changes in key assumptions. One should note that a simulation or projection model, while useful, is not a substitute for a comprehensive feasibility study. This type of model is sometimes used in a "pre-feasibility" study done early in the project timeline to provide a first-cut evaluation of the proposed business idea.

The feasibility study evaluates the project's potential for success. The perceived objectivity of the evaluation is an important factor in the credibility placed on the study by potential members, lenders, and other interested parties. For this reason, it is important to hire a consultant with no formal ties to equipment manufacturers or marketers, for example, so that an unbiased evaluation of operating potential and efficiency can be made. Also, the creation of the study requires a strong background both in the financial and technical aspects of the project. For these reasons, outside consultants conduct most studies, although the project leadership normally has input as well.

Feasibility studies for a cooperative are similar to those for other businesses, with one exception. Potential members use the feasibility study to evaluate how a cooperative business idea would enhance their personal businesses rather than to determine the return on investment they would receive on invested stock. A study conducted for an agricultural marketing cooperative, for example, must address the project's potential impact on members' farming operations in addition to analyzing economic performance at the cooperative level. In other cases, such as food cooperatives, the value to the member is access to consumer goods or services, possibly at lower prices, and is not based on the economic return to the cooperative itself. Cooperative businesses are developed first and foremost to serve members' needs and enhance their economic well-being. However, to do so, they must operate efficiently and compete effectively in the marketplace.