What should take care to choosing profitable project to an entrepreneur

An entrepreneur takes numerous decision to convert his business idea into a running concern. His decision making process starts with project or project selection.The project selection is the first corner stone to be laid down in setting up an enterprise.


The success or failure of an enterprise largely depends upon the project.

Meaning of project

If you know to meaning of project than I say that “Project is a scheme, design a proposal of something intended or devised to be achieved.

According to Encyclopedia of managementA project is an organized unit dedicated to the attainment of goal-the successful completion of a development project on time, within budget, in conformance with predetermined programme specifications.”

And other economist Newman and his associates defined that “A Project has typically has a distinct mission that it is designed to achieve and clear termination point, the achievement of the mission.

Project can differ in their size, nature of objectives, time duration and complexity. However projects partake of the following three basic attributes:

  • A course of action
  • Specific objectives and
  • Definite time perspectives

Every Project has starting point, an end point with specific objectives.

Project classification

Projects classification helps in expressing and highlighting the essential features of project. The following are some of the important classification of projects.

  1. Quantifiable projects
  2. Non-Quantifiable projects
  3. Sectional projects
  4. Techno Economic Projects

Quantifiable projects are those in which possible quantitative assessment of benefits can be made.

Non-Quantifiable projects are those where such assessment is not possible.

Projects concerned with industrial development power generation,mineral development fall in the first category while projects involving :-

  • Health
  • Education
  • Defense

Sectional Projects

Here the classification is based on second category project are :-

  • Agriculture and allied sector
  • Irrigation and power sector
  • Industry and mining sector
  • Transport and communication sector
  • Information technology sector
  • Miscellaneous

This system is useful in resources allocation at macro level.

Techno-Economic Projects

Classification of projects based on techno-economic characteristic fall in this category. This type of classification, causation oriented classification as discussed below.

a). Factor Intensity-Oriented Classification : Based on this projects may be classified as capital intensive as capital intensive or labour intensive if large investment is made in plant and preparation of machinery the project will be termed as capital intensive.

On the other hand project involving large number of human resources will be termed as “labour intensive”.

b). Causation-Oriented Classification : On the basis of causation, Projects can be classified as demand based and raw material based projects. The availability of certain based and the very existence of demand for certain goods or services makes the project demand-based.

c). Magnitude-Oriented Classification : This is bested on the size of investment involved in the projects, accordingly project are classified into large scale, medium scale or small-scale business.

Step of Project Selection

The selection of a project consists of two main steps:

  • Project identification
  • Project selection

Project identification

Often indenting entrepreneurs always are in search of project having a good market but how without knowing the product coat they determine market whose market they find out without knowing the item.

The process of Project Selection starts with idea generation. In order to select most promising and profitable project. The Project ideas can be discovered from various internal and external sources. Those may include:

  • Knowledge of potential customer needs.
  • Personal observation of emerging trends in demand for certain products.
  • Scope for producing substitute product.
  • Trade and professional magazines which provide a very fertile source of project ideas.
  • Departmental publications of various departments of the government.
  • Success stories of known entrepreneurs or friends or relatives.
  • A new product introduced by the competitor
  • Ideas given by knowledgeable persons.

All these sources putting together may give few ideas about the possible projects to be examined among which the project must be selected.


Project Selection

Project selection starts once the the entrepreneur has generated few ideas of project. After having some ideas, these project are analyzed in the light of existing economic conditions, market conditions, and the government policy and so on.

In addition the entrepreneur needs to analyze other related aspects also like raw material, potential market, labour, capital, location and forms of ownership etc.

On the basis of this analysis, the most suitable idea is finally selected to converted it into an enterprise.

Common mistake by entrepreneur in Project Selection and Formulation

Entrepreneurs do make mistakes while selecting and formulating their projects and evolving business plans. Some of the common errors found in project formulation are:

  • Selection of project Area
  • Market study and Analysis
  • Selection of technology
  • Optimistic Estimates
  • Ownership form
  • Selection of location

Selection of project Area :- Entrepreneurs select wrong area of product or service by studying wrong or exaggerated data of particular industries. The selection of a product without detailed study of product market, demand patterns, competition in this industry, change of customer taste and perceptions or mistaken overview of the demand pattern.

Market study and Analysis :- Market Research, study and analysis is a critical aspect for an entrepreneur in selection of a product and market segment. Any wrong data will give a distorted demand picture leading to wrong choices.

An entrepreneur should also choose products based on the objective studies and not go by his previous experience, avoiding likes and dislikes in his personal capacity.

Selection of technology :- An appropriate technology is necessary for any new enterprise for its survival and growth. A wrong selection of technology leads to problems of costs, profit margins and feasibility issues of the entire project.

Optimistic Estimates :  Over optimistic estimates by the entrepreneurs in the area of productivity, capacity utilization, prevailing marketing conditions, under estimation of competitors and pricing give wrong selection of products.

Any business plan made by an entrepreneur based on wrong data, financial jugglery will give problems in selection and implementation of the project.

Ownership form :- A suitable ownership form be evolved for the project to avoid stoppages and disputes.

Selection of Location :- An entrepreneur should not be tempted select locations that are not viable. A location is almost permanent to any project and as such plays an important role in cost competitiveness and viability of the organization throughout its life.

At last words, Entrepreneur should always conduct a project by looking at the facts given above. If he ignores all these things, then he probably increases the chances of heavy losses in the project.

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