Entrepreneurial

Project Development
Sources of Idea generation
1. Our own needs: In 1984, Tom Hunter was an unemployed graduate
(in Scotland) and liked to wear training shoes and found that there was
no shop around where he could find a good selection
e.g. fashion and trends

2. Observing markets: Market surveys can reveal the demand and

supply position of various products. It is necessary to estimate the
future demand of customers, competition and price trends
e.g. scarcity of edible oil prompted many firms for the production,
distributers and logistics of virtual organizations

3. Prospective consumers: contacts with prospective customers can

reveal features that should be built into a product or service
e.g. consumer likes, preferences and dislikes
Sources of Idea generation…
4. Development in other nations: People in underdeveloped countries
generally follow the fashion trends of developed countries
e.g. washing machines and microwaves which are common in India
today, were used in the US and Europe before the 80’s

5. Study of Project Profiles: Govt. and private agencies publish

periodic profiles of various projects and industries

6. Govt. organizations: Assistance form govt. orgn.

e.g. Aid by banks in lower rate of interests

7. Trade fairs and Exhibition: At trade fairs producers and dealers in

the concerned industry put up their products for display and/or sale. It
provides information about new products/ machines
Sources of Idea generation…
8. Success stories of friends and relatives
9. Trade and professional journals/magazines
10. Research organizations
11. Study of govt. policy: exports, imports
12. Use of waste materials
13. Brainstorming: problem solving technique
14. Hobbies
15. Social and economic trends: shift towards readymade
garments
16. Distribution channels
Methods of generating Ideas
A business idea is a business seed which expands and grows into
a business tree
1. Focus groups: A group is consumers is interviewed by a
moderator who leads a group. This group consists on 8-14
participants
2. Brainstorming: No criticism is allowed
3. Reverse brainstorming: Criticism allowed
4. Rawlinson brainstorming: Led by a leader who asks random
questions to expect creative answers
5. Brain writing: Created by Bernd Rohrbach, Brain writing is
silent, it consists of 6 members. Each group member
generates and writes down 3 ideas on a piece of paper and
passes it to the adjacent person, who in return adds another
3 ideas to it and so on..
Methods of generating Ideas
6. Problem inventory analysis: It is a method by obtaining new
ideas and solutions by focusing on the problems
7. Gordon Method: begins with a group of members not
knowing the exact problem. The entrepreneur starts by
mentioning a general concept associated with the problem.
Then a concept is developed and followed upon
8. The checklist method: A list of related issues or suggestions
9. Free association: new idea is developed through a chain of
word associations (similar to brain writing)
10. Forced relationships: new idea is developed by looking at
product combinations
e.g. hair care, tooth care
Methods of generating Ideas
11. Collective notebook method: a pocket size notebook
provided wherein an entrepreneur notes down one
ideas/solution in a day, and by the end of the month evaluates
all
12. Attribute listening: Evaluate and rationalize all negatives and
positives of an idea
Ideas/ Project Identification
• Project identification is the process of finding out the most
appropriate project from among the several investment
opportunities

• Project identification cannot be completed without identifying the

characteristics of a project. Every project has 3 basic dimensions-
INPUTS, OUTPPUTS and SOCIAL COSTS AND BENEFITS

The Input characteristics define raw material, energy, manpower,

finance etc.
The Output characteristics defines the final goods and services,
revenue, employment, etc. the quantity and quality of such goods
should be clearly specified
Social costs and benefits: Impact on the society
Ideas/ Project Identification

Internal Constraints External Constraints

1. Wrong cost estimation and delay of 1. Nature, size, location
project schedule due to wrong network 2. Govt. policies- approvals
analysis 3. Financial Institutional support
2. No proper execution of project
3. Non availability of necessary materials
and skills

Techniques for Project Identification

1. Desk research: Secondary data
2. Techno-Economic survey: Research conducted by team of
experts for identifying industrial development by SIDO
(State Industrial Development Corporation)
Classification of Projects/Ideas
1. Quantifiable and Non-quantifiable: Quantifiable-power
generation, mineral development; Non-quantifiable- health,
education
2. Sectorial projects: Agriculture, mining, transport, banking,
social service etc.
3. Financial Intuitions: Profit oriented OR service oriented
4. According to urgency of execution:
Normal projects- completed in normal time
Crash projects- extra cost incurred to save time
Disaster projects: Anything need to save time i.e. incur cost,
change of vendor etc.
Environmental Scanning
ES is a process of monitoring and evaluation the changes in the
environment of a venture. Its is carried out to analyze the
prospective SWOT of the business enterprise
Environmental Scanning- Need
and Importance
• Early warning system
• Identifying changes and threats
• Formation of strategies
• Changes and adjustments
• Coping with demands
• Success of the venture
• Knowledge focus
• Accurate forecasts
• Planning the production
SWOT analysis
Business Plan
A business plan is a blue print for building or expanding a
business. It is a written document articulating what business
opportunity is, why the opportunity exists, what strategy,
actions and resources are necessary to seize it, and why the new
venture team has what it takes to execute the plan
-Pearce and Robinson
Components of a Business Plan
1. Introductory page: Name, address, details of the company,
nature of business, amount of finance needed, etc.
2. Executive summary: What is the biz model? How is it
unique? Who are the owners? How will they make money
and how much?
3. Industry analysis: Future outlook, trends, market
segmentation
4. Description of venture: service, product, office equipment
and personnel, size of business
5. Production plan: manufacturing process, physical plant,
suppliers and raw material
6. Operations plan: flow of goods/ services, orders; technology
utilization
7. Marketing plan: pricing, promotion, product forecasts
Components of a Business Plan
8. Organizational plan: form of ownership, management/team,
roles and responsibilities

9. Assessment of risk: evaluate weakness of business, new

technologies, contingency plans

10. Financial plan: proforma of income statement, cash flow

projections, break-even analysis, sources and application of
funds

11. Appendix:
Letters of approvals, clearness, market research reports,
contracts, price lists from suppliers
Project and Project formulation
Project: A project is an idea or plan that is intended to be
carried out. It has a specific starting point and specific ending
point and is intended to achieve a specific objective. A project
has a proposal involving capital investment for the purpose of
developing facilities to provide goods and services.

Project Formulation: It is a step by step investigation of

resources and development of the project idea. It is the process
of examining technical, economic, financial and commercial
aspects of a project. Thus project formulation means feasibility
study.
Elements of project formulation
1. Feasibility analysis: The project can be feasible/not feasible/
unable to conclude due to less data
2. Techno-economic analysis
3. Project design and network analysis
4. Input analysis
5. Financial analysis
6. Cost-benefit analysis
7. Pre-investment appraisal: the results of all the above is
consolidated to give a final and formal shape to the project.
The decision can be taken now whether to accept or reject
the project/proposal
Project Report
• The details gathered from feasibility studies and presented in
various table reports and statements are consolidated into one
master report called project report or feasibility report
• A project report is a document wherein all the details obtained from
technical analysis, financial analysis, profitability analysis, economic
analysis etc. ate put together
• It states as to what business is intended to be undertaken by the
entrepreneur and whether it could be physically possible, financially
viable, commercially profitable and socially desirable to undertake
such a business
• It serves as a kind of big road map to reach the destination
determined by the entrepreneur
• Prepared by CA, technical consultants, Mgmt consultants, etc.

Significance of a PR:
Proforma of a project report
Project appraisal
• Assessing the viability or feasibility of a proposed project by
the lending institution is called as project appraisal
• According to Vasant Desai, Project appraisal is an exercise
whereby a lending financial institution makes an independent
and objective assessment of various aspects of an investment
proposition to arrive at the financing decision
• While appraising a project, technical, managerial, financial,
commercial economic, ecological and social aspects are taken
into consideration
Project appraisal- Aspects
• Economic oriented appraisal
• Financial oriented appraisal
• Market oriented appraisal
• Technological feasibility
• Managerial competency
Project appraisal methods
• Pay back method
• Average rate of return (ARR)
• Net present value (NPV)
• Profitability index
• Internal rate of return (IRR)