Project Formulation Niyam 2013

Project Formulation
Tutor: Niyam R. Shrestha
Defining Business Plan/Project Proposal
Written document describing all relevant

internal/external elements and strategies for
starting a new venture.
Written document prepared by the
entrepreneur
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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copyright Niyam Raj Shrestha
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 to
achieve 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:
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employees,
investors,
bankers,
venture capitalists,
supplier,
customers,
advisors and
consultants for different purposes
Scope and Value of the Business Plan

1.
2.
3.
4.
5.
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Provide guidelines
Attract Investors
Provide Leverage
Psychological Impact
Re-evaluate the strategy
Scope and Value of the Business Plan

1.Provide guidelines:
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it is a road map
What are the goals and how to be
achieved, how to move to the definite
goal
Evaluation by the entrepreneur the
right direction
Scope and Value of Business Plan (contd.)
2. Attract Investors:
it is a powerful tool for the

entrepreneur to persuade:
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the investors,
lenders,
suppliers and
customers
3. Provide leverage:
To get loan from financial
institutions for working capital
Requirement of capital for the
day to day operation of a
business
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4. Psychological impact:
Partners work together to
formulate, revise and modify
business plan
Commitment to work in reality
Increment of understanding
between the partners
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10
5. Re-evaluate the strategy:
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Re-evaluation of strategy of the

business from time to time
Entrepreneur will have answer to all
the questions raising during the
operation of business
It helps them to take corrective
actions to improve
11
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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13
Introductory Page contd...
Name and Address of the Business

Name(s) and Address of the principal(s)
Nature of Business
Statement of Financing needed
Statement of confidentiality of report
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Sample Introductory Page.docx
14
Executive Summary
Project Formulation
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15
Executive Summary contd
Two to three pages summarizing the

complete business plan
Prepared after the total plan is written
It should stimulate the interest of the
potential 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:
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what the business produce or sells

use of effort to develop the product or service
17
Executive Summary (contd.)

Description of market characteristics:
Description of entrepreneurial team:
inclusion of founder members

introduction of persons
Financial Summary:
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description of potential market

market segment to be reached and way to
be adopted to reach there
Summary of initial estimate of profit or loss

It shows how far the business will be
profitable
Need of capital, investment by the founders
and credit to be taken
it-business-plan-sample.pdf
18
Environmental and
Industry Analysis
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19
Environmental and Industry Analysis

contd
Environmental Analysis
Assessment of external uncontrollable variables that

may impact the business plan
Economy GNP, unemployment by geographic, disposable income

Culture evaluation of culture change
Technology
Legal concerns
Industry Analysis
Reviews industry trends and competitive strategies
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Industry Demand market declining or growing, no of new competitors

Competition
20

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 five
years?
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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21

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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22
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23
contd
Provides complete overview of product(s),

services(s), and operation of a new venture
It will enable the investor to ascertain the
size and scope of the business
Mission statement guide firm through long-term decision
making
Key elements:
The location and size of the business

The personnel and office equipment the will be needed
The background of entrepreneurs
The history of the venture
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24
contd
Important question the entrepreneurs need

to answer:
1.
2.
3.
4.
5.
6.
7.
What is the mission of the new venture?

What are your reasons for going into business?
Why will you be successful in this venture?
What development work has been competed to date?
What is your product(s) and /or service(s)?
Describe the product and/or service, including patent,
copyright, or trademark status.
Where will the business be located?
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25
contd
Important question the entrepreneurs need

to answer:
8.
9.
10.
11.
12.
13.
Is your building new? Old? In need of renovation? (if

renovation needed, state costs)
Is the building leased or owned? (State the terms.)
Why is this building and location right for your business?
What office equipment will be needed?
Will equipment be purchased or leased?
What experience do you have and/or will you need to
successfully implement the business plan?
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26
Production Plan
Project Formulation
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27
Production Plan
Contd
All the manufacturing organization prepare
production plan.
Details HOW the product(s) will be
manufactured
The entrepreneur should describe the
physical plant layout
Required machinery and equipment,
raw materials with their suppliers,
production process of technology
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28
Production Plan
contd..
cost of manufacturing future capital

requirement etc.
if the manufacturing is sub contracted ,
the sub contracted should explain in terms of

names, addresses, reason of selection ,cost etc.
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29
Production Plan
contd..
if the business is non manufacturing its

should mentioned its operational plan
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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30
Production Plan issues /questions

contd..
1.
2.
3.
4.
Will you be responsible for all or part of the

manufacturing operation?
If some manufacturing is subcontracted,
who will be the subcontractors? (give name
and addresses)
Why were these subcontractors selected?
What are the costs of the subcontracted
manufacturing? (include copies of any
written contracts)
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31
Production Plan issues /questions

contd..
5.
6.
7.
8.
9.
10.
What will be the layout of the production process?

(illustrate steps if possible.)
What equipment will be needed immediately for
manufacturing?
What raw materials will be needed for
manufacturing?
Who are the suppliers of new materials and what
are the appropriate costs?
What are the costs of manufacturing the product?
What are the future capital equipment needs of the
venture?
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32
Production Plan
contd..
If a retail operation or service:

1.
2.
3.
4.
5.
6.
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From whom will merchandise be purchased?

How will the inventory control system operate?
What are the storage needs of the venture and
how will they be promoted?
How will the goods flow to the customer?
Chronologically, what are the steps involved in a
business transaction?
What are the technology utilization requirements
to service customers effectively?
33
Operation Plan
Project Formulation
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34
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 product
or service (services intangible)
Elements of this plan includes facilities,
inventory management, human resource
requirements, legal and insurance issues
Goes beyond the manufacturing process
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35
Organizational Plan
Project Formulation
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36
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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37
Organizational Plan
contd
It describes
the ventures for line of authority &

responsibility,
subordinate relationship scalar chain, board of
directors
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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38
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 of
directors and
organizational chart indicating the line of authority
& responsibility
The appointment of board of director & their
remuneration should be mentioned.
It should include the job description & job
specification for each individual & activity.
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39
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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40
Financial Plan
Project Formulation
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41
Financial Plan
contd
A comprehensive evaluation of an investor's

current and future financial state by using
currently known variables to predict future
cash flows, asset values and withdrawal plans.
Potential investment commitment
Capital Costs and Sources of Finance
Assessment of Working Capital Requirements
Indicates whether the business plan is
economically feasible or not.
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42
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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43
Marketing Plan
Project Formulation
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44
Marketing Plan
contd..
SWOT Analysis
Market Research
Distribution Channels
Strategic Alliances
E-commerce & Technology
Marketing Budget
Credibility & Risk Reduction
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45
Project Implementation
Project Formulation
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46
Project Implementation
Task \ months
1. Formulation of Project Report

2. Application for Term-Loan
3. Term Loan Sanction
4. Possession of Land
5. 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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Project Formulation Niyam 2013

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Project Formulation

Tutor: Niyam R. Shrestha

Defining Business Plan/Project Proposal

Written document describing all relevant

copyright Niyam Raj Shrestha

Defining Business Plan (contd.)

copyright Niyam Raj Shrestha

Defining Business Plan

An integration of functional plans

copyright Niyam Raj Shrestha

Scope and Value of the

Report may be read by:

Scope and Value of the Business Plan

copyright Niyam Raj Shrestha

Scope and Value of the Business Plan

copyright Niyam Raj Shrestha

Scope and Value of Business Plan (contd.)

it is a powerful tool for the

Scope and Value of Business Plan (contd.)

copyright Niyam Raj Shrestha

Scope and Value of Business Plan (contd.)

copyright Niyam Raj Shrestha

Scope and Value of Business Plan (contd.)

5. Re-evaluate the strategy:

Re-evaluation of strategy of the

Structure and Components of Business Plan

copyright Niyam Raj Shrestha

Structure and Components of Business Plan

copyright Niyam Raj Shrestha

Introductory Page contd...

Name and Address of the Business

Sample Introductory Page.docx

copyright Niyam Raj Shrestha

copyright Niyam Raj Shrestha

Executive Summary contd

Two to three pages summarizing the

What is the business concept or the model?

copyright Niyam Raj Shrestha

Executive Summary (contd.)

Brief introduction of a business

Description of proposed venture:

time of formation of company, owner of company and

uniqueness of the company

what the business produce or sells

copyright Niyam Raj Shrestha

Executive Summary (contd.)

Description of entrepreneurial team:

inclusion of founder members

description of potential market

Summary of initial estimate of profit or loss

copyright Niyam Raj Shrestha

Environmental and Industry Analysis

Assessment of external uncontrollable variables that

Economy GNP, unemployment by geographic, disposable income

Reviews industry trends and competitive strategies

Industry Demand market declining or growing, no of new competitors

Environmental and Industry Analysis

What are the major economic, technological, legal,

copyright Niyam Raj Shrestha

Environmental and Industry Analysis

Critical Issues: contd

Who are the nearest competitors?

copyright Niyam Raj Shrestha