A project report serves like a kind of big road map to reach the destination determined by entrepreneur. The preparation of project report is of great significance for an entrepreneur.
After project selection Every entrepreneur should have to prepare a project reports before established business.
Dan steinhoff and john F. Burgers hold the view that “without well spelled out goals and operational methods, most businesses flounder on the rocks of hard times.”
Purpose of Project Report
The project report serves two essential purposes :
The first is the project report is like a road map it describes the direction the enterprise is going in, what its goals are, where it wants to be, and how it is going to get there. In simple words it enables that this is proceeding in the right direction about project.
The second purpose of the project report is to attract lenders and investors. The preparations of project report is beneficial from the financial institutions and commercial banks.
Contents of a Project Report
When we sit down to prepare a project report, the biggest challenge we face is what things we need to keep in mind to prepare an ideal project report because business plan or project report is not prepare to shortcuts.
Hence project report should be prepared with great care and consideration. A good project report should contain the following.
- General Information: Information on product profile and product details.
- Promoter : His educational qualification, work experience, project related experience.
- Location : Exact location of the project, lease or freehold, location advantages.
- Land and Building : Land area, construction area, type of construction, cost of construction, detailed plan and estimate along with plant layout.
- Plant and Machinery : Details of machinery required, capacity, suppliers, cost, various alternatives available, cost if miscellaneous assets.
- Production process : Description of production process, process chart, technical know how, technology alternatives available, production programme.
- Utilities : Water, Power, steam, compressed air requirements, cost estimates sources of utilities.
- Transport and communication : Mode, possibility of getting costs.
- Raw material : List of raw materials required by quality and quantity, sources of procurement, cost of raw material, tie-up arrangements, if any for procurement of raw material, alternative raw material, if any.
- Man Power : Man Power requirement by skilled and semi-skilled, sources of manpower supply, cost of procurement, requirement of training and its cost.
- Products : product mix, estimated sales distribution channels, competitions and their capacities , product standard, input-output ration, product substitute.
- Market : End-users of product, distribution of market as local, national, international, trade practices, sales promotion devices, proposed market research.
- Requirement of working capital : Working capital requirement, sources of working capital, need for collateral security, nature and extent of credit facilities offered and available.
- Requirement of funds : Break-up project cost in terms of costs of land, building machinery, miscellaneous assets, preliminary expenses, contingencies and margin money for working capital, arrangements for meeting the costs of setting up of the project.
- Cost of production and profitability of first ten years
- Break-even analysis
- Schedule of implementation.
Formulation of project Report
A project report is an operating document. So that what information and how much information it contains depends upon the size of the enterprise, as well as nature of production.
Project formulation divides the process of project development into eight distinct and sequential stages as below:
- General information
- Project description
- Market potential
- Capital costs and sources of finance
- Assessment of working capital requirements
- Other financial aspects
- Economical and social variables
- Project implementation
The nature of information to be collected and furnished under each of these stages has been given below.
1. General Information
The information of general nature given in the project report includes the following :
Bio-data of promoter : Name and address, qualifications, experience and other capabilities of the entrepreneur. Similar information of each partner if any.
Industry profile : A reference analysis of industry to which the project belongs, e.g., past experience; present status, its organization, its problem etc.
Constitution and organization : The constitution and organization structure of the enterprises; in case of partnership form its registration with registration of firms, certificate from the directorate of industries.
Product Details : Product utility, product range, product design, advantage to be offered by the product over its substitutes if any.
2. Project description
A brief description of the project covering the following aspects should be made in the project report.
Site : Location of the unit; owned,rented or leasehold land; industrial area; no objection certificate from municipal authorities if the enterprise location falls in the residential area.
Raw Material : Requirement of raw material, whether inland or imported, sources of raw material supply.
Skilled Labour : Availability of skilled labour in the area i.e., arrangements for training laborers in various skills.
Utilities : These include –
- Pollution Control
- Communication and transportation facility
- Production Process
- Machinery and Equipment
- Capacity of the Plant
- Technology Selected
- Other Common Facilities
- Research and Development
3. Market Potential
While preparing a project report, the following aspects relating to market potential of the product of the product should be stated in the report.
- Demand and Supply position
- Expected Price
- Marketing Strategy
- After Sales Service
Depending upon the nature of the product, provisions made for after-sales should normally in the project report.
4. Capital costs and sources of finance
An estimate of the various components of capital items like land and buildings, plant and machinery, installation costs, preliminary expenses, margin of working capital should be given in the project report.
5. Assessment of working capital requirements
The requirement for working capital and its sources of supply should clearly be mentioned. It is preferred to prepare working capital requirements in the prescribed formats designed by limits of requirements.
It will reduce the objections from Banker’s side.
6. Other financial aspects
To adjudge the profitability of the project to be set up, a projected profit and loss amount indicating likely sales revenue, cost of production, allied cost and profit should be prepared.
A projected balance sheet and cash flow statement should also be prepared to indicate the financial position and requirements at various stages of the project.
Breakdown level indicates the gestation period and the likely moratorium required for repayment of the loans. Break-Even point is calculated as
Break-Even point (BEP) = F/S – V
F = Fixed Cost
S = Selling Price/Unit
V = Variable Cost/Unit
The break-even point indicates at what even of output the enterprise will break even.
7. Economical and social variables
Every enterprise has social responsibility. In view of the social responsibility of business, the abatement costs, i.e., the costs for controlling the environmental damage should be stated in the project.
In addition the following socio-economic benefits should also be stated in the report.
- Employment Generation
- Import Substitution
- Local Resource Utilization
- Development of the Area
8. Project implementation
Every entrepreneur should draw an implementation scheme or a time-table for his project to the timely completion of all activities involved in setting up an enterprise. If there is delay in implementation project cost overrun.
On the other words, delay in project implementation jeopardizes the financial viability of the project.
In last words, An entrepreneur should have always prepare ideal project report to avoid loss and always the above facts should be kept in mind while making the project report. Otherwise There is a lot of chance that the project will failure.
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Thanks for share this knowledge. This is amazing