ENTREPRENEURSHIP DEVELOPMENT
Project Appraisal
Presented By:
Dr. V. D. Chavan
Ph. D (Management), MBA(Mkt), [Link] (Banking and Cost Accounting)
Associate Professor of MBA
Contents of Business Plan
• General Information
• Promoters
• Location
• Plant and Building
• Production Process
• Utilities
• Transport and
Communication
Contents of Business Plan
• Raw Material
• Manpower
• Products
• Market
• Requirement of Working Capital
• Requirement of Funds
• Cost of Production and
Profitability for first ten years
• Break Even Analysis
• Schedule of Implementation
Project Appraisal
Project appraisal is a structured process that
assesses the feasibility and viability of a
proposed project. It involves analyzing various
aspects of the project, such as its economic,
financial, technical, social, management, and
environmental factors. The primary function of
project appraisal is to determine if a project is
feasible and can achieve its objectives.
Project appraisal often involves comparing
various options using economic appraisal or
other decision analysis techniques. Some
methods of project appraisal include:
Project Appraisal
Economic Analysis: Under economic analysis, the
project highlighted include requirements for raw
material, level of capacity utilization, anticipated sales,
anticipated expenses and probable profits.
Financial Analysis: Assessment of the
financial requirements both- fixed
capital/fixed assets and working capital
need to be properly made. Will vary from
enterprise to enterprise.
WC is circulating money changing from cash
to inventories and from inventories to
receivables and again converted into cash.
Project Appraisal
Market Analysis: Anticipation possible market for the
product. Demand forecasting.
A. Opinion polling method: opinion of the ultimate
customer of the product is estimated.
1. Complete Enumeration Survey: Probable customers
of the product are approached and their probable
demand for the product are estimated and then
summed.
2. Sample survey: Only some number of customers out
of their total population is approached.
3. Sales Experience Method: Under this method, a
sample market is surveyed before the new product
is offered for sale.
Project Appraisal
5. Vicarious Method: Under the vicarious
method, the consumers of the product are not
approached directly but indirectly through some
dealers who have a feel of their customers.
B. Life Cycle Segmentation Analysis:
Introduction, Growth, Maturity, Saturation
and Decline
Technical Analysis: The adequacy of the
proposed plant and equipment to produce the
product within the prescribed norms.
Project Appraisal
Technical Feasibility:
1. Availability of Land and Building
2. Availability of other inputs like water,
power, transport, communication facilities
etc.
3. Availability of servicing facilities like
machine shops, electric repair shop
4. Coping-with anti-pollution law
5. Availability of work force as per required
skill and arrangements
6. Availability of required raw material as per
quantity and quality
Management Competence: Leadership and
Project Appraisal
Project Report:
• Introduction
• Scope of the project
• Product/service and process
• Raw Materials and consumables
• Plant and machinery/ equipment
• Market Potential and strategy
• Marketing strategy
[Link]
e-project-reports
/
https://
Project Appraisal
Comparative rating of product ideas: A common way to
compare product ideas is to use a scoring system that assigns
numerical values to each idea based on criteria like:
customer value, market size, competitive advantage, technical
complexity, cost, and risk
Project Appraisal
• Cash Flow: A cash flow statement
tracks the inflow and outflow of
cash, providing insights into a
company's financial health and
operational efficiency.
• Information about the cash flows to
assess the ability of the
enterprise to generate cash
and cash equivalents and the
needs of the enterprise to
utilize those cash flows..
Project Appraisal
Project Appraisal
Project Appraisal
Project Appraisal
Financial Analysis and Planning:
Financial planning and analysis (FP&A) is a
set of processes that help organizations
plan, forecast, and budget to support their
financial health and business
decisions. FP&A is often part of a broader
financial management system, but it can
also be a standalone analytics solution that
integrates with other business systems.
Funding Sources
Sources of Finance
• sources of finance can be classified into three
• on the basis of period, ownership or sources of
generation.
• period can be categorized into three parts; long-
term sources (5 years and above-required for the
acquisition of fixed assets), medium term (1-5 years)
sources as well as short-term sources for repayment
within 1 year used to replenish the working capital
Sources of Finance
• On the basis of ownership
• owners’ funds and borrowed funds
• Owners’ funds remain invested in the business
for a longer duration
• the borrowed funds on the other hand refers to
funds raised through loans or borrowings from
commercial banks, loans from financial
institutions
• debt and equity are the two major sources of
financing
Sources of Finance
• Personal Savings:
• Contribution from Friends and Relations:
• Retained Earnings:
• Venture Capital:
• Private Investors/ Angel:
• Bank Overdraft/Bank Credit:
• Vendor Financing/Trade Credit
• Equipment Suppliers
Sources of Finance
• Commercial Finance Companies
• Insurance Companies
• Cooperative Societies / Credit unions:
• Commercial Banks
• Leasing:
• Hire Purchase
• Microfinance Banks:
Incubation Funding
Business Incubator refers to an organization which
helps small businesses, startups and individuals to
develop and grow their business. This is achieved by
offering a number of services like management
training, office space training and capital financing.
An incubated fund is a fund that is first offered
privately in an incubation period. Investors in this
type of fund are usually employees associated with
the fund and their family members.
Venture Capital Funding
• Venture capital funds are pooled investment
funds that manage the money of investors who
seek private equity stakes in startups and small-
to medium-sized enterprises with strong growth
potential.
• VC funding types: The 3 main types are
• early stage financing,
• expansion financing,
• and acquisition/buyout financing.
Various schemes
PMEGP- Prime Minister Employment Generation
Programme (PMEGP)
The scheme is implemented by Khadi and Village Industries
Commission (KVIC) functioning as the nodal agency at the
national level. At the state level, the scheme is implemented
through State KVIC Directorates, State Khadi and Village
Industries Boards (KVIBs), District Industries Centres (DICs)
and banks. In such cases KVIC routes government subsidy
through designated banks for eventual disbursal to the
beneficiaries / entrepreneurs directly into their bank
accounts.
[Link]
programme-pmegp
Various schemes
• CGTMSE-
• Credit Guarantee Fund Trust for Micro
and Small Enterprises (CGTMSE) is jointly
set up by Ministry of Micro, Small &
Medium Enterprises (MSME),
Government of India and Small Industries
Development Bank of India (SIDBI) to
catalyse flow of institutional credit to
Micro & Small Enterprises (MSEs).
Various schemes
CGTMSE-What is the objective of CGTMSE?
Launched on 30 August 2000, the primary objective of the
CGTMSE scheme is to give credit guarantee to financial
institutions that provide loans to SMEs and MSMEs. CGTMSE
aims to encourage entrepreneurs to take collateral-free loans
for starting businesses without the fear of defaulting.
[Link]
Various schemes
MPDA -the Ministry of Micro, Small and
Medium Enterprises have implemented
Marketing Development Assistance Schemes
(MDA). Market Promotion and Development
Assistance Scheme (MPDA) is a modified scheme
of the MDA formulated and implemented by the
Khadi and Village Industries Commission (KVIC).
[Link]
scheme/
Various schemes
SFURTI- Scheme of Fund for Regeneration of Traditional Industries:
SFURTI Scheme (Scheme of Fund for Regeneration of Traditional Industries) was
launched by the Indian Government and Ministry of MSMEs (Micro, Small and
Medium Enterprises) in 2005 to encourage cluster development. Cluster
Development shall enable conventional industries to be more productive &
profitable. SFURTI plans to establish CFCs (Common Facility Centers) for
generating sustained employment opportunities. Various schemes have been
combined into SFURTI Scheme since its inception.
[Link]
Various schemes
The Ministry is responsible for co-ordination of all Skill Development
efforts across the country, removal of disconnect between demand
and supply of skilled manpower, building the vocational and technical
training framework, skill up-gradation, building of new skills and
innovative thinking not only for existing jobs but also jobs that are to
be created.
[Link]
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%20jobs
Various schemes
PMKVY- Pradhan Mantri Kaushal Vikas
Yojana (PMKVY) is the flagship scheme of
the Ministry of Skill Development &
Entrepreneurship (MSDE). The objective of
this Skill Certification Scheme is to enable a
large number of Indian youth to take up
industry-relevant skill training that will help
them in securing a better livelihood.
[Link]
kaushal-vikas-yojana#tab=tab-1
Various schemes
SANKALP- In order to strengthen institutional mechanisms
for skill development and increase access to quality and
market-relevant training for youth across the country,
Skills Acquisition and Knowledge Awareness for Livelihood
Promotion (SANKALP) was launched on 19th January,
2018 with an implementation period till March, 2023.
[Link]
Various schemes
STAR- The scheme is for encouraging skill
development among the youth by
providing monetary rewards for successful
completion of approved training
programmes. The scheme shall be
implemented through Public- Private and
Public-Public partnerships.
[Link]
schemes/star_scheme.html#:~:text=Ministry%20of%20Skill
%20Development%20and,completion%20of%20approved
%20training%20programmes.&text=The%20scheme%20shall%20be
%20implemented,Private%20and%20Public%2DPublic
%20partnerships
Various schemes
MUDRA LOAN- Mudra Loan is a credit
funding scheme initiated by the
Government of India to offer business
loans and working capital loans of amount
up to Rs. 10 lakh to individuals, MSMEs and
self-employed professionals. No
collateral/security is required by any
financial institution from the borrowers.
[Link]
Crowd funding
Crowdfunding is a way to raise money from a large
number of people. Large groups of people pool
together small individual investments to provide the
capital needed to get a company or project off the
ground. Individuals, charities, or companies can
create a campaign for specific causes and anyone
can contribute.
Milaap. ...Ketto. ...
Wishberry. ...BitGiving. ...
ImpactGuru. ...DreamWallets. ...
Catapooolt.
Venture capital
Venture capital funds are pooled
investment funds that manage the
money of investors who seek private
equity stakes in startups and small- to
medium-sized enterprises with strong
growth potential.
Private Equity
Private equity is an alternative investment class
and consists of capital that is not listed on a
public exchange. Private equity is composed of
funds and investors that directly invest in private
companies, or that engage in buyouts of public
companies, resulting in the delisting of public
equity.
Stages of Project Feasibility
• Feasibility study is a means to investigate the
potential outcome of a project, but most of
entrepreneurs are ignorant of this before setting up a
business. Feasibility Report is a detailed study that
examines the profitability, feasibility, and
effectiveness of a proposed investment opportunity.
The goals of feasibility studies are as follows:
• To understand thoroughly all aspects of a project,
concept, or plan.
• To become aware of any potential problems that
could occur while
implementing the project.
Stages of Project Feasibility
Market Analysis: This is one of the most important sections of the feasibility study
as it examines the marketability of the product or services and convinces investors
that there is a potential market for the product or services. If a significant market
for the product or services cannot be established, then there is no project. Market
Feasibility is all about how will the real-world market be reacting towards a
particular development. It is concerned with gaining the in-depth knowledge and
doing a deep analysis of market and knowing how is the target market going to
respond towards particular project/product.
• Determines if there is a market for your product or service.
• Involves researching your target market, competition, and industry trends.
• Helps you understand the potential demand for your product or service and the
factors that will affect its success
Stages of Project Feasibility
Market feasibility studies should include a description of the industry, current
market analysis, competition, anticipated future market potential, potential
sources of revenue, and sales projections.
Areas in this type of analysis are:
• Investigating full market and potential for product and service
• Analyze whether we can exploit the potential market
• Continuous market analysis to stay in market
Stages of Project Feasibility
We can do
• Collecting data from various sources on
• Customer demand pattern
• Seasonal variation
• Government policies affecting demand
• Range of prices of substitutes
• Prices of competition and complimentary goods
• Customer spending and purchasing power
Stages of Project Feasibility
Steps in market feasibility analysis
• Industry analysis: Market Share, growth rate, innovations, cultural changes
and regulations.
• Demand of the product: Expert opinion, customer’s survey, sales forecast,
trend analysis, various other methods
• Potential Market: potential market is group of customers have some level of
interest in buying the product or service
• Customer Segmentation and Targeting: dividing market according to common
characteristics
• Marketing strategy: planning 4p’s according to need of segment
• Cost, Price and Profitability analysis: this can help in planning pricing
strategies
• Competitor analysis: Can help in differentiating the product and services in
market, developing new products and services to compete with competitors.
Stages of Project Feasibility
Technical Analysis
The technical feasibility refers to the ability of the process to take advantage of the
current state of art technology in pursuing further improvement. The technical
capability of the personnel as well as the capability of the available technology in
relation to the requirements of the proposed project idea should be considered
and the extent of compatibility should be studied.
• Assesses the feasibility of your product or service from a technical standpoint.
• Involves evaluating the technology, resources, and expertise needed to develop
and produce your product or service.
• Helps you identify any technical risks or challenges that need to be addressed
Stages of Project Feasibility
• Technical feasibility also involves the evaluation of the hardware, software, and
other technical requirements of the proposed system. For projects concerning
manufacturing activities, technical analysis is must. It lays out details on how
will a good or service be delivered, which includes transportation, business
location, technology needed, materials and labour.
Stages of Project Feasibility
Technical analysis can be done by answering to the following
questions:
• Is the technology proposed to be used the latest technology?
• What is the likelihood of the proposed technology becoming obsolete in the
near future?
• Is the technology proposed to be used a process technology?
• Is the technology proposed to be used available indigenously?
• In case of imported technology, is the technology freely available?
• Is the technology proposed to be used cost effective in the long run?
• Is the technology proposed to be used capable of producing goods and
services according to the requirements and satisfaction of the customers?
• Is there any ongoing or additional research and development needs?
Stages of Project Feasibility
Financial Analysis
Financial analysis is the process of evaluating businesses, projects, budgets, and
other finance-related transactions to determine their performance and suitability.
Typically, financial analysis is used to analyse whether an entity is stable, solvent,
liquid, or profitable enough to warrant a monetary investment. The primary
purpose of doing a financial analysis of a project is to evaluate the project's
profitability or cost-effectiveness relative to some alternative project or
investment. Frequently, the results of the financial analysis are used to compare
alternative projects to select which ones should be implemented.
• Determines the financial viability of your project.
• Involves forecasting your revenue, expenses, and profits.
• Helps you understand the potential return on investment (ROI) for your project
and the financial risks involved.
Stages of Project Feasibility
Financial analysis will include analysis of data with regard to:
1. Capital requirements: It refers to the fixed capital requirement of the project
and its time frame during which the capital will be required. Various components
of capital cost of a project/business are:
• Land and building
• Plant and machinery
• Electricals
• Transportation
• Knowledge and Consultancy fees
• Miscellaneous assets
• Preliminary expenses
• Margin money for working capital
Stages of Project Feasibility
Social Analysis (Social Impact)
The external environment consists of a general environment and an operating
environment. The general environment consists of the economic, political, cultural,
technological, natural, demographic and international environments in which a
company operates. The operating environment consists of a company's suppliers,
customers, market intermediaries who link the company to its customers,
competitors and the public. Both the general and operating environments provide
business opportunities, harbor uncertainties and generate risks to which a
business must adapt.
• Assesses the social impact of your product or service.
• Involves evaluating the potential benefits and risks of your project for society.
• Helps you identify any ethical or sustainability concerns that need to be
addressed.
Stages of Project Feasibility
• The environmental analysis refers to conditions and factors external to the
company which are outside of the company’s control, that might affect its sales,
market, costs, and so forth. These are often grouped into kinds of factors, such
as the common PESTLE, which stands for political, economic, social,
technological and legal factors that might affect the company. It can be analysed
by SWOT analysis. It aims at highlighting non-economic factors that may affect
the performance of the firm.
Stages of Project Feasibility
It includes factors such as:
• Government policies with regard to particular industry.
• Government incentives for special zones for location of the plant.
• Waste disposable plans, if required.
• Political Stability.
• Environment Regulations.
• Regulations related to operations of the business.
Stages of Project Feasibility
Various Techniques of Environmental Analysis
• SWOT
• PESTEL
• QUEST (QUICK ENVIRONMENT SCANNING TEST)
• CPM (COMPETITIVE PROFILE MATRIX)
• ETOP (ENTVIRONMENT THREAT OPPORTUNITY PROFILE)
Project Implementation Stages
• Planning: This stage involves
developing a detailed plan for
implementing your project, including
timelines, budgets, and resource
allocation.
• Execution: This stage involves carrying
out the plan and completing the project
tasks.
• Monitoring and controlling: This stage
involves tracking the progress of your
project and making adjustments as
needed.
•