Project formulation for Entrepreneurs

1. Revathy Rajasekaran
Co-ordinator, EDC
V.V.VanniaperumalCollege forWomen
Virudhunagar

2.  Project formulation is the systematic
developments of project ideas for eventual
objective of arriving at an investment
decision.
 Project formulation involves step by step
investigation and development of project
idea.
 It helps in taking decisions of accepting or
rejecting an idea.

3.  Project formulation process involves involves
experts from various fields
 Industrial economist
 Market analyst
 Technologist/Engineer
 Mechanical & Industrial Engineer
 Civil Engineer
 Management accounting expert

4.  Well formulated project is passport for
obtaining required assistance from financial
institution.
 A well formulated project is the best way of
selling a project idea.
 It is also a great assistance for obtaining
necessary government clearance and
sanctions without difficulties

5.  Selection of appropriate technology –
Modern technology in developed country
may not be suitable for adopting in
developing country. Due to limited market for
the products and limited availability of capital
and skilled labour.
 Hence the entrepreneur has to examine the
project idea thoroughly in regard design,
production & marketing

6.  Influence of external Economics- No project
can function independently in economy.
 It depend on other industries for raw
material, power tools, spare parts, technical,
financial and managerial service,
communication &Transport facility.
 Dearth of technical qualified personnel-
lack of skilled personnel for coping with
modern technology.

7.  Resource mobilization-The capital required
is difficult to generate.
 Knowledge about government regulations-
an entrepreneur has to undergo numerous
government regulations.
 The ‘Guidelines for Industries’ published by
ministry of industrial development provides
information about industrial policy, licencing
procedure, import –export control orders.
 Gives information about the future prospects
of industry

8. 1. Feasibility Analysis
2. Techno-economic Analysis
3. Project design and network analysis
4. Input Analysis
5. Financial Analysis
6. Social Cost-Benefit Analysis
7. Project Appraisal

9.  It is the process of evaluating the future of a
project idea within the limitations.
 It determines the desirability of investing in
future development of project idea.
 3 possibility are:
 Feasible(Positive)- proceed to invest resource
 Not feasible- no investment is made
 Data not adequate for arriving decision then
additional information must be collected to
take decision

10.  Project are analysed from angles of technical,
marketing, financial etc.
 There are 3 stages in feasibility study namely
 Prefeasibility study
 Feasibility study
 Project report

11.  The objective of prefeasibility study are
 The investment decision can be taken on
information on prefeasibility study.
 Futher detailed analysis can be done or not.
 Need for in-depth study on critical aspects of
projects.
 The information collected at this stage
include market & plant capacity, material
input, location, technology, manpower,
financial analysis

12.  It is the detailed analysis on different aspects
relating project like economic, technical,
managerial, organizational, commercial and
financial.
 The feasibility study is an iterative process
covering alternative solution for production,
location, technology etc.
 If there is any non-viable project the
parameters should be adjusted to make it
viable.

13.  It is concerned with identification of project
demand potential and selection of
technology for the project.
 There are 2 parts namely
 Determination of project demand potential
 Selection of optimal project strategy.

14.  Estimation of the demand potential of the
project is done by demand forecasting.
 This is done in 3 stages viz. 1.Situation
analysis 2.Data collection & compilation,3.
interpretation & presentation.
 Situation analysis involves identifying the
dimension of demand forecasting.
 Future trend is projected by collecting &
compiling past, present & future market data.
 The data collected is compiled and presented
in a table and interpretation is done to
estimate the future demand.

15.  There are infinite series of strategy to achieve
the project objectives.
 One single optimal strategy which attains the
objective with minimum cost & time is
selected from the list of strategy.
 The techno economic report contains the
details of the selected strategy with which
the further project development is done

16.  It is the heart of the project. It defines the
individual activity comprising a project and
interrelationship between these activities.
 The activity & its relationship is shown in
network diagram.
 It shows the detailed work plan & time profile
 The network analysis is done to identify the
optimal course of action to execute it within
the minimum time within the resources.

17.  Input Analysis is mainly concerned with
identification, quantification and evaluation
of project inputs.
 This include identify the nature of resource,
estimate the magnitude of the required
resource, evaluate the possibility of
uninterrupted supply.
 Resource are needed in 3 stages
 Preinvestment stage, Construction stage &
normalisation stage

18.  Pre investment stage- resource for
investigation of various aspects of project
idea. Less resource is needed.
 Construction stage- non-recurring resource
to develop the project structure. Maximum
resources is needed
 Normalization stage- raw material & other
consumables on recurring basis
 Input requirements includes the cost
estimate of the resource

19.  Financial analysis is done to know the
financial feasibility of the project.
 It involves estimation of the project cost &
revenue and funds required for project.
 It analyse if the project generates the
revenue.
 The information obtained is to do
commercial profitability analysis, break even
analysis & ratio analysis.

20.  Cost benefit analysis estimates the social cost
and social benefits . It analyze the social
profitability of the project.
 It evaluates the impact of the project of the
society.

21.  The details gathered from feasibility studies
are presented in tables reports and
statements are consolidated into one master
report called project report or feasibility
report.
 It contains background information of
industry to which project belong and the
company.
 It provides information for project evaluation
appraisal before the funding agencies finance

22.  Project formulation is investigation process
before investment decision.
 It helps to accept or reject project.
 Detailed project report is a post investment
decision.
 It is the detailed specifications of design,
engineering drawings, site, process design
and time schedule for implementation. It is
the work plan for project

23.  The project profile consist of
 Economic size
 Status of industry or scope
 Raw material availability
 Cost of production
 Capital cost
 Utility requirements
 Infrastructure facility
 Profitability
 Government policy

24.  The criteria of project selection includes
 Investment size
 Location
 Technology
 Equipment
 Marketing

25.  Power &Water
 Others Performance
 Working capital requirements
 Labour component
 Economic viability