project formulation niyam 2013
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Project Formulation
Tutor: Niyam R. Shrestha
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Defining Business Plan/Project Proposal
Written document describing all relevant
internal/external elements and strategiesfor
starting a new venture.
Written documentprepared by theentrepreneur
It is also referred to road map
It is also known as project proposal A written statement regarding what the
entrepreneur is going to do
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Defining Business Plan (contd.)
Definitions:David H. Holt
A business plan as a comprehensive set of
guidelines for a new venture
S S Khanka
A project proposal can best be defined as a
well evolved course of action devised toachieve the specified objective within a
specified period of time
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Defining Business Plan
An integration of functional plans
such as
marketing, finance,
human resources
Manufacturing and production Raw materials
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Scope and Value of the
Project Report/Business Plan Report may be read by:
employees,
investors,
bankers, venture capitalists,
supplier,
customers, advisors and
consultants for different purposes
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Scope and Value of the Business Plan
1. Provide guidelines2. Attract Investors
3. Provide Leverage
4. Psychological Impact
5. Re-evaluate the strategy
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Scope and Value of Business Plan(contd.)
2. Attract Investors:
it is a powerful tool for the
entrepreneur to persuade: the investors,
lenders,
suppliers and
customers
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Scope and Value of Business Plan(contd.)
3. Provide leverage:
To get loan from financial
institutions for working capital Requirement of capitalfor the
day to day operation of a
business
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Scope and Value of Business Plan (contd.)
4. Psychological impact:
Partners work together to
formulate, revise and modifybusiness plan
Commitmentto work in reality
Increment of understandingbetween the partners
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Scope and Value of Business Plan (contd.)
5. Re-evaluate the strategy: Re-evaluationof strategy of the
business from time to time
Entrepreneur will have answerto allthe questions raising during theoperation of business
It helps them to take correctiveactions to improve
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Structure and Components of Business Plan
contd...
Introduction Page
Executive Summary
Industry Analysis
Description of Venture
Production Plan
Operation Plan
Organizational Plan
Marketing Plan
Financial Plan Assessment of Risk
Appendix (contains backup material)
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Introductory Page
Structure and Components of Business Plan
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Introductory Page contd...
Name and Address of the Business
Name(s) and Address of the principal(s)
Natureof Business
Statement of Financing needed
Statement of confidentialityof report
Sample Introductory Page.docx
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Executive Summary
Project Formulation
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Executive Summary contd
Two to three pages summarizing the
complete business plan
Prepared afterthe total plan is written
It should stimulatethe interest of thepotential investor
It should address no. of questions or issues: What is the business concept or the model?
How is this business concept or model unique?
Who are the individuals starting this business?
How will they make money and how much?
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Executive Summary (contd.)
Executive Summary:
Brief introduction of a business
It creates the interest of the investor or kills the zeal to
read other sections
It concentrates on following subjects:
Description of proposed venture:
time of formation of company, owner of company and
the purpose of company
uniqueness of the company
Description of product or service:
what the business produce or sells
use of effort to develop the product or service
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Executive Summary (contd.)
Description of market characteristics:
description of potential market
market segment to be reached and way tobe adopted to reach there
Description of entrepreneurial team:
inclusion of founder members introduction of persons
Financial Summary:
Summary of initial estimate of profit or loss
It shows how far the business will beprofitable
Need of capital, investment by the foundersand credit to be taken
it-business-plan-sample.pdf
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http://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdf -
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Environmental and
Industry Analysis
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Environmental and Industry Analysis
contd
Environmental Analysis
Assessment of external uncontrollable variables that
may impact the business plan
EconomyGNP, unemployment by geographic, disposable income
Cultureevaluation of culture change
Technology
Legal concerns
Industry Analysis
Reviews industry trends and competitive strategies
Industry Demandmarket declining or growing, no of new competitors
Competition
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it-business-plan-sample.pdf
http://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdf -
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Environmental and Industry Analysis
contd
Critical Issues: What are the major economic, technological, legal,
and political trends on a national and an international
level?
What are the total industry sales over the past fiveyears?
What is the anticipated growth in this industry?
How many new firms have entered this industry in the
past three years? What new products have been recently introduced in
this industry?
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it-business-plan-sample.pdf
http://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdf -
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Environmental and Industry Analysis
contd
Critical Issues: contd Who are the nearest competitors?
How will your business operation be better that this?
Are the sales of each of your major competitors
growing, declining, or steady? What are the strengths and weaknesses of each of
your competitors?
What trends are occurring in your specific market
area? What is the profile of your customers?
How does your customer profile differ from that of your
competition?
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it-business-plan-sample.pdf
http://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdfhttp://localhost/var/www/apps/conversion/tmp/scratch_5/it-business-plan-sample.pdf -
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Description of Venture
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Description of Venture
contd
Provides complete overview of product(s),
services(s), and operationof a new venture
It will enable the investor to ascertain the
size and scope of the business Mission statementguide firm through long-term decision
making
Key elements: The locationand sizeof the business
The personneland officeequipmentthe will be needed
The backgroundof entrepreneurs
The historyof the venture
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Description of Venture
contd
Important question the entrepreneurs need
to answer:1. What is the mission of the new venture?
2. What are your reasons for going into business?
3. Why will you be successful in this venture?
4. What development work has been competed to date?
5. What is your product(s) and /or service(s)?
6. Describe the product and/or service, including patent,
copyright, or trademark status.7. Where will the business be located?
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Description of Venture
contd
Important question the entrepreneurs need
to answer:8. Is your building new? Old? In need of renovation? (if
renovation needed, state costs)
9. Is the building leased or owned? (State the terms.)
10. Why is this building and location right for your business?
11. What office equipment will be needed?
12. Will equipment be purchased or leased?
13. What experience do you have and/or will you need tosuccessfully implement the business plan?
it-business-plan-sample.pdf
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Production Plan
Project Formulation
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Production Plan
Contd
All the manufacturing organization prepare
production plan.
Details HOWthe product(s) will be
manufactured The entrepreneur should describe the
physicalplantlayout
Required machineryand equipment, raw materials with their suppliers,
production process of technology
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Production Plan
contd..
costof manufacturing future capital
requirement etc.
if the manufacturing is subcontracted, the subcontracted should explain in terms of
names, addresses, reason of selection ,cost etc.
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Production Plan
contd..
if the business is nonmanufacturingits
should mentioned its operationalplan such as supplier of goods or services,
inventory control system,
type of storage required also should be mentioned in
the business plan
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Production Plan issues /questions
contd..
1. Will you be responsible for all or part of the
manufacturing operation?
2. If some manufacturing is subcontracted,
who will be the subcontractors? (give nameand addresses)
3. Why were these subcontractors selected?
4.
What are the costs of the subcontractedmanufacturing? (include copies of any
written contracts)
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Production Plan issues /questions
contd..
5. What will be the layout of the production process?
(illustrate steps if possible.)
6. What equipment will be needed immediately for
manufacturing?
7. What raw materials will be needed for
manufacturing?
8. Who are the suppliers of new materials and what
are the appropriate costs?
9. What are the costs of manufacturing the product?
10. What are the future capital equipment needs of the
venture?
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Production Plan
contd..
If a retail operation or service:
1. From whom will merchandise be purchased?
2. How will the inventory control system operate?
3. What are the storage needs of the venture andhow will they be promoted?
4. How will the goods flow to the customer?
5. Chronologically, what are the steps involved in a
business transaction?6. What are the technology utilization requirements
to service customers effectively?
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Operation Plan
Project Formulation
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Operation Plan
contd
Manufacturing and non-manufacturing Description of companys operations
Flow of orders for goods and/or services
Technology utilization
This section that produce and sell productor service(servicesintangible)
Elements of this plan includes facilities,inventory management, human resourcerequirements, legal and insurance issues
Goes beyond the manufacturing process
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Organizational Plan
Project Formulation
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Organizational Plan
contd
Form of ownership
Identification of partners or principle
shareholders
Authority of principals
Management-team background
Roles and responsibility of members of
organization
Background of board of directors
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Organizational Plan
contd
It describes
the ventures for line of authority &
responsibility,
subordinate relationship scalar chain, board ofdirectors
the form of ownership
sole proprietorship, partnership or corporation
If it is a partnership form
the term & condition of partners should be
mentioned in the partnership deed.
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Organizational Plan
contd
It describes If it is a joint stock company
the details of shares with majors shareholders
should be mentioned.
The names, addresses and experience of board ofdirectors and
organizational chart indicating the line of authority
& responsibility
The appointment of board of director & theirremuneration should be mentioned.
It should include the job description & job
specification for each individual & activity.
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Organizational Plan
contd
Developing the management team Ownership
Liability of owner
Management control Organizational structure
Planning, measure and evaluation schemes
Reward
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Financial Plan
Project Formulation
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Financial Plan
contd
A comprehensive evaluation of an investor'scurrentand futurefinancial state by using
currently known variablesto predict future
cash flows, asset values and withdrawal plans.
Potential investment commitment Capital Costs andSources of Finance
Assessment of Working Capital Requirements
Indicates whether the business plan iseconomically feasible or not.
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Financial Plan
contd
Pro-forma income statement
Cash flow projections
Break even analysis
Pro-forma balance sheet
Capital Requirement
Fixed and working capital
Source and application of funds
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Marketing Plan
Project Formulation
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Marketing Plan
contd..
SWOT Analysis
Market Research
Distribution Channels
Strategic Alliances
E-commerce & Technology
Marketing Budget Credibility & Risk Reduction
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Project Implementation
Project Formulation
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Project Implementation
Task \ months 1 2 3 4 5 6
1. Formulation of Project Report
2. Application for Term-Loan
3. Term Loan Sanction
4. Possession of Land5. Construction of Building
6. Getting Power and Water
7. Placing Order for Machinery
8. Receipt and Installation of Machinery
9. Manpower Recruitment
10. Trial Production
11. Commencement of Commercial Production
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