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Iowa State University Extension

Feasibility audits help businesses increase profitability

Ray Hansen

When you’re stuck axle-deep in a mud hole, it’s too late to stay off the wet ground. That’s why ISU Extension’s Value Added Agriculture program conducts comprehensive business feasibility audits for new and existing rural businesses, says interim program director Ray Hansen. A feasibility audit lets business owners and their investors know up front whether a potential project has hidden constraints that could impact profitability.

Agricultural producers, rural businesses and entrepreneurs need good information to make decisions about expanding services, adding products or building or remodeling facilities, Hansen said. A feasibility audit by an independent third party can help businesses decide among alternative opportunities.

“We take all the emotion out of it and look at it from strictly a business point of view,” he said.

Extension’s Value Added Agriculture team has developed a comprehensive business feasibility audit that examines economic, market, technical, financial and management factors, Hansen explained. Within each area the team seeks answers to a series of questions; the answers help determine whether a project might work.

As the research accumulates, a project will seem more or less practical, Hansen said. However, changing the parameters can make a potential project more favorable. For example, providing more private capital can reduce the interest costs on borrowed money. To deal with a lack of market access, a business could increase its trade area.

A feasibility audit may seem like just another hoop a business has to jump through for funding, but it often proves beneficial for the long run, Hansen said. “As a result, they’ve put together a better business package.”

In addition, the relationship that is established during the audit often leads to further business development assistance from the ISU Extension Value Added Agriculture team, Hansen said.

Extension’s Value Added Agriculture team conducts 12 to 15 feasibility audits per year, Hansen said, and not only agricultural businesses have been reviewed. USDA Rural Development has asked the team to conduct feasibility audits for such diverse businesses as retirement homes, motels and a fuel/convenience store station. In addition, the team has conducted feasibility audits on renewable energy ethanol and biodiesel facilities, a glycerin refinery, a swine reproduction facility and a pork processing facility.

For more information contact Hansen,

This article appeared in June 2009 -- From Jack Payne Newsletter