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Project Formulation: What Is Project Formulation? Stages of Project Formulation Project Report

Project formulation involves carefully analyzing a project idea through various stages including feasibility analysis, techno-economic analysis, project design, input analysis, financial analysis, and cost-benefit analysis. The results are documented in a project report that details the economic, technical, financial, production, and management aspects of the proposed project to obtain investor funding. The report must convince investors that the project will be profitable and generate sufficient returns to repay borrowings.

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42K views

Project Formulation: What Is Project Formulation? Stages of Project Formulation Project Report

Project formulation involves carefully analyzing a project idea through various stages including feasibility analysis, techno-economic analysis, project design, input analysis, financial analysis, and cost-benefit analysis. The results are documented in a project report that details the economic, technical, financial, production, and management aspects of the proposed project to obtain investor funding. The report must convince investors that the project will be profitable and generate sufficient returns to repay borrowings.

Uploaded by

ynkamat
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Entrepreneurship Management

Project Formulation

What is Project Formulation?

Stages of Project Formulation

Project Report
Entrepreneurship Management

What is Project Formulation?

• Taking a first look carefully and critically at the project idea

• Carefully weighing its various components

• Analysing with the assistance of specialists or consultants

• Assessment of the various aspects of an investment


proposition

• It is an important stage in the pre-investment phase


Entrepreneurship Management

Stages of Project Formulation

1. Feasibility Analysis

2. Techno-Economic Analysis

3. Project Design and Network Analysis

4. Input Analysis

5. Financial Analysis

6. Cost-Benefit Analysis

7. Pre-Investment Analysis
Entrepreneurship Management

1. Feasibility Analysis:

• First stage in project formulation


• Examination to see whether to go in for a detailed
investment proposal or not
• Screening for internal and external constraints

Conclusion could be:

• The project idea seems to be feasible


• The project idea is not a feasible one
• Unable to arrive at a conclusion for want of adequate data
Entrepreneurship Management

2. Techno-Economic Analysis:

Screens the idea to-

Estimate of potential of the demand for goods/services


Choice of optimal technology

This analysis gives the project a platform for preparation of


detailed project design
Entrepreneurship Management

3. Project Design and Network


Analysis:
• It is the heart of the project entity

• It defines the sequence of events of the project

• Time is allocated for each activity

• It is presented in a form of a network drawing

• It helps to identify project inputs, finance needed and cost-


benefit profile of the project
Entrepreneurship Management

4. Input Analysis:

• Its assesses the input requirements during the construction


and operation of the project

• It defines the inputs required for each activity

• Inputs include materials, human resources

• It evaluates the feasibility of the project from the point of


view of the availability of necessary resources

• This aids in assessing the project cost


Entrepreneurship Management

5. Financial Analysis:
• It involves estimating the project costs, operating cost and
fund requirements

• It helps in comparing various project proposals on a common


scale

• Analytical tools used are discounted cash flow, cost-volume-


profit relationship and ratio analysis

• Investment decisions involve commitment of resources in


future, with a long time horizon

• It needs caution and foresight in developing financial


forecasts
Entrepreneurship Management

6. Cost- Benefit Analysis:

• The overall worth of a project is considered

• The project design forms the basis of evaluation

• It considers costs that all entities have to bear and the


benefit connected to it
Entrepreneurship Management

7. Pre-investment Analysis:

• The results obtained in previous stages are consolidated to


arrive at clear conclusions

• Helps the project-sponsoring body, the project-


implementing body and the external consulting agencies to
accept/reject the proposal
Entrepreneurship Management

Project Report

• It is a concise copy of detailed analysis done for the project

• An entrepreneur/expert prepares the report before the


investment in project is done

• The report assesses the demand for proposed


product/service, works out cost of investment and
profitability on this investment

• It acts as an instrument to convince investors to invest in


the project
Entrepreneurship Management

A project report gives information on the following:

• Economic aspects – present market, scope for growth,


justification for investment

• Technical aspects – technology, machinery, equipment


needed

• Financial aspects – Total investment needed, entrepreneur’s


contribution, cost of capital and return on capital

• Production aspects – Product details, justification for the


choice of product, export worthiness

• Managerial aspects – Qualifications, experience of people


needed for managerial posts
Entrepreneurship Management

Contents of a project report

• Objectives and scope of the report

• Product characteristics (product design, specifications,


quality standards, uses and applications)

• Market position and trends (current capacity for production,


potential demand, export prospects, trends in import-
export, price structure etc)

• Raw materials (types, quality, sources, price)

• Manufacturing (process, production schedule, technique


used)
Entrepreneurship Management

• Plant and machinery (types, infrastructure support, cost)

• Land and building (Requirement, building construction


schedule, choice of location, cost)

• Financial implications (Capital structure, fixed and working


capital investment, project cost, profitability)

• Marketing channels (Trade practices, marketing and


advertising strategy)

• Personnel (Requirement of staff, skilled-unskilled labour,


salary and wage payment, qualifications, experience)
Entrepreneurship Management

• The project report is submitted to financial institutions for


grant of land and other financial concessions

• Organisations like Small Industries Service Institute (SISI)


and Small Industries Development Organisation (SIDO) help
entrepreneurs to prepare project report

• The financial institutions ascertain from the report,


whether the project can generate enough funds to repay the
borrowings in stipulated time frame

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