Dr. Mohamed Riyazh Khan DoMS Project Formulation Dr. Mohamed Riyazh Khan DoMS

Meaning of Project Report: PROJECT FORMULATION Meaning of Project Report: A written statement of what an entrepreneur proposes to take up. Serves like a kind of big road map to reach the destination determined by the entrepreneur. A well evolved course of action devised to achieve the specified objective within a specified period of time. Significance of Project Report: Describes the direction of the enterprise is going in, what its goals are, where it wants to be, and how it is going to get there. To attract lenders and investors,

Contents of Project Report : PROJECT FORMULATION Contents of Project Report : General Information : Product profile and details Promoter : Educational qualification, work experience, project related experience Location : Location of the project and advantages Land and Building : Land area, Construction area, type and cost of construction, detailed plant layout Plant and Machinery : Details of machinery required, capacity, suppliers, costs, alternatives available Production Process : Process chart, technical know how, production programme Utilities : Water, power, steam. Compressed air, sources of utilities Raw Material : Quality and quantity of raw material, sources of procurement, costs

PROJECT FORMULATION 9. Transport and communication : Mode, possibility of getting, costs 10. Manpower : Skilled and semi-skilled, sources, costs, requirement of training and its cost 11. Products : Product mix, estimated sales, distribution channels, product standard, input-output ratio, product substitute 12. Market : Sales promotion devices, proposed market research, distribution of market as local, national, international 13. Requirement of Working Capital : Sources, need for collateral security, nature and extent of credit facilities offered and available 14. Requirements of Funds : Break up of project cost in terms of costs of land, building, machinery, miscellaneous assets, preliminary expenses, contingencies and margin money for working capital

Formulation of a Project Report: The Stages are 1. General Information PROJECT FORMULATION Formulation of a Project Report: The Stages are 1. General Information 2. Project description 3. Market potential 4. Capital costs and sources of Finance 5. Assessment of Working capital requirements 6. Other Financial aspects 7. Economic and social variables 8. Project implementation

PROJECT FORMULATION 1. General Information : Bio-data of promoter, Industry profile, Constitution and organization structure, product details. 2. Project description : Site, Physical infrastructure (raw material, skilled labour), Utilities (Power, fuel, water), Pollution control, communication system, transport facilities, production process, machinery and equipment, capacity of the plant, Technology selected, R&D. 3. Market Potential : Demand and Supply position, expected price, Marketing strategy, After sales- service 4. Capital costs and Sources of Finance : Estimate of capital items like land and buildings, plant and machinery, installation costs, preliminary expenses, Owners fund and fund raised from financial institutions.

PROJECT FORMULATION 5. Assessment of Working capital requirements : Requirement and its sources of supply. 6. Other Financial aspects : A projected Balance sheet and cash flow statement should be prepared. BEP = F S – V F – Fixed cost, S – Sales projected, V- Variable cost 7. Economic and Social variables : Employment generation, Import substitution, Ancillarization, Exports, Local resource utilization.

8. Project Implementation : PROJECT FORMULATION 8. Project Implementation : Tasks Months 1 2 3 4 5 6 7 8 9 10 Formulation of project report Application for term loan Term loan sanction Possession of land Construction of building Getting power and water Placing order for machinery Receipt and installation of machinery Manpower recruitment Trial production Commencement of commercial production

PROJECT FORMULATION Common errors in Project Formulation : Product Selection : Not giving attention to size of the product markets, its future demand, competitive position, lifecycle, availability of labour, raw material and technology Capacity utilization estimates : Present enterprise performance, prevailing market conditions, competitive atmosphere, technical snags. Market Study : Demand and supply of their proposed product. Technology selection : Select technology based upon the nature of the product. Location Selection : Availability of raw material, manpower and infrastructural facilities. Selection of Ownership Form