Objectives and processes of the feasibility study. We draw up a feasibility study (feasibility study) of the project. Conclusions and offers

A feasibility study is made if you need to prove why it is necessary to purchase any equipment, choose certain technologies, follow a certain path of enterprise development, calculate what benefits it will bring.

Feasibility Study: What It Is

A feasibility study (FS) means a documentary justification of the feasibility of a particular project. This document should contain an analysis of the required investment and the expected result.

The feasibility study shows the profitability of the project and whether it is worth investing in it.

Thanks to him, they solve certain problems:

attraction of additional finance;
selection of the most profitable project;
increasing the efficiency of the enterprise;
improvement financial situation enterprises.

Feasibility study and business plan: what are the differences

Business plan and feasibility study are similar. They differ only in that the feasibility study justifies some project at an existing enterprise, and the business plan shows why this company should exist.

Therefore, such areas as marketing research, market analysis, description of the organization itself and manufactured products are not taken into account when compiling it. Techno- economic justification- this, in contrast to a business plan, is a shorter, but rather informative document.

When compiling a feasibility study, they usually rely on:

on the features of the technological process;
on what requirements are set for production equipment, equipment, communications;
staff and workflow costs;
what is the free price for the product;
on what time frame it is planned to implement the project;
on economic results;
on environmental factors.

When do you need a feasibility study of the project, goals and objectives

Life is full of a wide variety of situations, different tasks arise, the degree of their importance is also different. The essence of the feasibility study is to calculate possible or anticipated changes. The costs required to complete the projects are also taken into account.

A feasibility study is an answer to the question of whether a given project is worth the estimated cost.

Thus, a feasibility study is necessary in order to assess the situation in the organization after making qualitative or quantitative changes in its work. When compiling it, a variety of factors are taken into account that directly or indirectly affect the organization and how much its financial indicators have changed.

If this document is drawn up correctly, one can see the effectiveness of investing in new developments and in the completion of existing types of activity, are there any more changes or subsidies needed, and, perhaps, lending is needed. A feasibility study is necessary if you need to select new equipment, make a choice of technologies for the organization and then implement them in life, decide on the organization of the enterprise.

The preparation of a feasibility study is necessary for both the head of the enterprise and its investor. The first is to understand whether the expectations placed on the project will justify themselves, the second is to understand when the investment will pay off.

Both the businessman himself and a group of specialists can develop a feasibility study if the project is complex.

Learn how to prepare a feasibility study for a business project from the video.

The structure and process of preparing a feasibility study

The concept of a feasibility study in the business world is one of the most commonly used and used. There is a rough structure to deviate from, depending on the specifics of the project.

It can either shrink or expand, depending on the complexity of the planned changes.

Usually, the document describes the direction in which the company operates, and also justifies the choice of the location of the business, the type of products produced, and the justification for their cost. Among the mandatory items is the financial part of the project.

It should indicate the sources of funding, when and how the debt will be repaid.

When compiling a feasibility study, as a rule, the following thematic sections are included:

initial indicators, data on the business sector;
possibilities entrepreneurial activity today;
used raw materials, financial opportunities enterprise development;
estimated costs for the enterprise to achieve its goals;
operational costs required to bring the project to life;
prospective development plan;
financial goals of the enterprise;
general data of the future project, its efficiency and payback, conclusions.

The feasibility study must contain tables with data on the movement of material assets, their balance.

Terms of preparation of the feasibility study

Terms of preparation of a feasibility study are related to:

with detailed description;
with the volume that is planned to be developed;
with the number of processes to be considered;
whether the material has been prepared, how relevant these regulations and other company documentation are;
whether there is the necessary staff;
whether the infrastructure is ready.

On average, it takes from one month to a year to prepare a feasibility study, depending on the complexity of the project.

Example of a feasibility study for a project

If the sequence of work on the business plan and its structure are clearly spelled out, then when drawing up a feasibility study, such requirements are not put forward. Depending on the problems that are being considered and will be solved, the options for the feasibility study may differ.

Example one:

The current state of the company.
Analysis of the business and production capacity of the organization.
Technical documentation.
The state of labor resources.
Consignment and organizational expenses of the company.
Analysis of the duration of the project.
Assessment of the material and economic attractiveness of the project.

Example two:

What is the project: its essence, foundations and principles of implementation.
Short description business, highlighting the results of various studies to better understand the demand for a newly introduced service or product.
Engineering and technological component of the project: work process (description);
justification of the need for the acquisition of new equipment and improvement of the existing one;

how the new product fits into the current standards;

analysis of a new product, its pros and cons.

Economic and financial indicators:

necessary and expected investments;

sources Money both internal and external;

estimated production costs.

Analysis of the effectiveness and profit from the project, guaranteed return of external loans.
Assessment of the susceptibility of a new product to risks known in business, resistance to similar crises in the future.
Analysis of performance from external investment.

Example three:

Announcement of all the main provisions of the feasibility study.
On what conditions is it possible to implement these plans in life (the author of all the main ideas, where the source material was taken from, a description of the preparatory stages and research).
Description of prospective sales markets, assessment of enterprise capabilities, calculation of the most strengths companies, a variety of factors.
Provision of production (available resources and planned reserves), assessment of competitors' capabilities, possible suppliers, possible costs.
The geographic location of the company and associated costs.
Calculation of the estimated rental payment.
Documentation (project, design work).
Analysis of the necessary auxiliary facilities, without which it is impossible to carry out all the planned activities.
The human factor: how many employees are needed, and what positions, to implement the project.
The number of employees, engineers and other specialists is calculated. It is also important to indicate how many local or nonresident (foreign) specialists will work at the planned enterprise.
It is necessary to calculate the company's expenses for wages these employees, taxes, pension and other fees.
When is it planned to start the implementation of the planned project.
Material and economic assessment of the benefits from of this project.

Most of these feasibility studies can be compared to a meticulously crafted business plan. The line that exists between the feasibility study and the business plan is thin enough to argue that these are completely different things.

Loan Feasibility Study: An Example

When applying for a loan for the development of an enterprise, you cannot do without this document. A feasibility study is a demonstration of the seriousness of the borrower's intentions.

Here he proves that the enterprise needs credit and what it intends to spend it on, and most importantly, what it can return. This document can be executed in any form, the main thing is to prove to creditors that the money will go to the necessary things and this investment will pay for itself over time, thanks to which the borrower will be able to give the bank funds with interest.

On average, the volume of a feasibility study prepared for a report to the bank is several pages, sometimes more.

Whether the owner of the enterprise will receive credit funds depends on how high-quality and competently the feasibility study of the loan is drawn up. In this document, you need to indicate all the nuances and reasons why a credit institution should issue a loan.

This document must set out the facts confirming the payback of the planned project. This document is of equal importance to both the applicant and the financial structure.

When applying for a loan, a potential borrower prepares a feasibility study, the purpose of which is:

prove to the credit institution that the company needs these funds and that the company will be able to repay this loan;
provide economic and technical evidence of the feasibility of the project.

In order for the bank to agree to the loan agreement, the document must reflect the effectiveness of the economic plan and the ability to recoup the costs for the loan period.

An approximate example of a feasibility study prepared for taking a loan looks like this:

key dates of the contract;
funds that are currently in use by the company;
accounting for currency fluctuations at the time of the conclusion of the contract;
the price of the entire transaction (for contracts with foreign partners, all excise customs duties must be taken into account);
estimated profit from the project;
consideration of possible costs;
movement of funds;
tax on estimated profits.
The real amount of funds that will remain with the client after the payment of the loan and all taxes. Calculation of the rate of return and profit from this transaction.

For example, one company wants to take out a loan in the amount of RUB 50 million. at 15 percent per year for 3 months for the purchase of any product, for example, perfumery. A guarantee agreement has been concluded with an insurance company.

The organization wants to carry out these actions without using its own funds and the money of investors. It is planned to receive a profit on a monthly basis, from which the loan debt will be paid. Some funds will remain for the company as well.

After evaluating this feasibility study by specialists of the banking structure, the low profitability of this project will immediately be determined.

They will conclude that the company will be able to repay the loan on time with a threefold turnover.

Moreover, taking into account all tax payments, the profit will be even less. The turnover in this situation is possible only with the established relations with partners.

It can be concluded that without involvement own funds in the turnover of this project, the future transaction cannot be considered profitable.

Most likely, the bank will not take risks and the company will not receive a loan on such conditions.

Learn how to draw up a business plan and a feasibility study in the video.

A business case is a document that outlines the benefits, analysis, calculation of indicators and effectiveness investment project... The purpose of the project can be the purchase of machinery, equipment, construction or reconstruction of an industrial building, etc.

Instructions

The main goal of the economic feasibility study is to convey to the investor the volume of project costs, the payback period and the results of work. The difference of this document from a business plan consists in the fact that it is drawn up for new products of an existing enterprise, therefore, issues related to market analysis, marketing research are not set forth in it. The business case usually contains a detailed description of technologies and equipment, as well as the reasons for their choice.

There is a sequence to follow when preparing a business case. It starts with initial data, information about the market sector. Then the existing opportunities for the development of activities, sources of raw materials, material resources for expanding the business, the amount of capital costs required to achieve the goal are described, production plan, financial policy, as well as general information about the project.

Thus, the economic rationale contains a description of the industry where the enterprise operates, the type of input products, the price level for it. The financial part of this document includes the conditions for attracting borrowed money, sources of their coverage. Calculations are shown in tables showing cash flows.

When preparing a business case, it is necessary to study current position enterprises, their place in the market, technologies and equipment used. In addition, it is necessary to determine ways to increase the company's profitability and business development, predict the level of profitability that can be achieved during the implementation of the project, study the necessary technical data, and analyze the level of training of personnel. You will also need to draw up a project implementation plan, cost estimate and cash flow plan, as well as give an overall economic assessment of the investment.

Justification stage the project very important. During it, you can identify and, if possible, correct those moments that in the future may lead to failure. Take away special attention starting early and you will achieve better results.

Instructions

Define the goals and objectives of the rationale the project... You need to answer the main question: do you need a project. Based on how well you work out the idea and convey the benefits that a new business can bring, a decision will be made whether to accept or not. the project.

Describe the essence the project... Tell us what exactly is planned to be done and what goals are being pursued. Explain how the need for a new business arose and why this path was chosen.

Communicate to the reader or listener the main ideas and the ways in which the result will be achieved. Reassure him that the chosen methods are the most effective in this case.

Tell us how many employees will be required to implement your the project and what qualifications they should be. Give reasons that the workforce should be just like that. Describe in detail the functions of each member of the team. If you have any candidates, announce their names and surnames. In addition, the panelists or your management should know how participation in the project will affect the main work of these employees.

Establish a sequence of actions and announce a deadline the project... List clearly the main stages of its implementation. Then go into detail at each stage. There should be a logical relationship between the actions so that it is clear why one item follows another. Speak out the real terms, if it is problematic, do not mention only the minimum possible due date the project, it is better to indicate the maximum period. Explain what factors can affect the time it takes to complete the assignment.

Give the calculation of the material resources that will be involved in the project. Show what each cost item consists of. Re-count everything before presenting. Remember that if you make an inaccurate calculation or miss an important article, it can blur the whole impression of the rest of your rationale and lead to abandonment. the project.

How to write a business case

A business case is also called a financial and economic assessment, which is a form of impact assessment. It is used to be able to assess the changes in all net cash flows that arise as a result of the implementation of methods state regulation, establishing regulatory legal documentation, corporate programs, which are aimed at changes in the economic and social structure.

Instructions

Introduce changes to technical regulation standards, and also change industry norms, introduce various technical regulations. It will help you change and redistribute the benefits, costs, risks of the enterprise.

Conduct a forecast of changes in all existing factors (benefits, costs) at the design stage of a change in technical regulation standards. Evaluate the financial and economic result of the implementation of these norms, ensure the optimization of costs for the implementation of the norms.

Adjust the direction for the standards development process and provide simulations of the impact of all standards that are being developed on the position of the enterprise and its industries. Create a plan for more effective interaction of requirements at different levels of the technical regulation structure.

There is a common misconception that a feasibility study is nothing more than a condensed version of a business plan with a significantly stripped down or missing section on marketing. In fact, this is not true. What, then, is the feasibility study of the project? See example in this article.

The essence of the term

A feasibility study, or feasibility study, is a printed confirmation of the technical viability of a project and its feasibility from an economic point of view. This formulation seems to be logically complete and understandable. A feasibility study is an idea reflected on paper.

For clarity, the designation of the term "business plan" can also be cited. A business plan is a detailed document containing the following information: who will implement the project and with what tools, in what period of time and in which markets the goods or services will then be presented. At the same time, a feasibility study is a component of a business plan, since the implementation of any project is preceded by its technical and economic assessment. In other words, if a feasibility study is a document that contains a business plan, it is step by step plan for its implementation.

When creating a feasibility study for the construction of an enterprise, it is necessary to take care of its maintenance. This will be the foundation of the project. The content of the feasibility study, as a rule, includes the following items: name, project objectives, basic information about the project, economic justification, additional data and applications. In this case, the economic justification is supported by subparagraphs, namely: the cost of the project, the calculation of the expected profit, as well as economic efficiency indices.

The given content of the production feasibility study is indicative and includes only the main sections. If they are not enough, then you can use other additional ones that will help in the implementation of the project.

Name and purpose

The title should be short but informative. In addition, the attractively formulated name of the feasibility study of the project will help to hook the investor. An example is the Center for Precision Instrumentation. You should also concisely state the purpose of the project. The main objective of these two parts of the sample feasibility study is to produce good impression and interest the investor. Too much text can discourage reading a project.

Basic information. Project cost

The feasibility study of the project is considered successful, an example of which includes the types of activities of the company, as well as a list of products. In addition, a description of production capabilities and planned production volumes must be entered in the basic information. In the section on the cost of implementation, there should be a list of works that will be required to complete the project, as well as their cost.

Next, you should indicate the expected amount of income and expenses, provided that the project company will operate at the planned load. Based on this data, profit is calculated. It should be noted here that depreciation deductions should go as a separate item. Investors often regard this indicator as one of the sources of profit.

The feasibility study of the project is literate, an example of which includes the main indicators of investment efficiency. These include the amount of investment, the net profit for the year, the internal rate of return (IRR), (NPV), the payback period of the project, and the BEP for the year - the break-even point.

Additional information and applications

The additional information section should include any material that will help enhance the impression of the project and highlight its positive and beneficial aspects. In addition, such information should be aimed at disclosing the main tasks of the project, as well as emphasizing it. economic efficiency and benefits for the investor. Additional Information, moreover, appropriately designed, will add weight and solidity to the project. In addition, these materials will not overload the main points of the feasibility study, as they are displayed in a separate section. But at the same time, it should be emphasized that there is no place for little useful information. Any information and data must be of value to the investor.

In conclusion, I would like to remind you that a good and competent example of a feasibility study can be called a document, which is notable for its brevity and specificity. The main idea should be clearly understood from it. The feasibility study does not need a detailed description of the project implementation process itself, but is intended only to attract the investor's attention. But after achieving this goal, you will need a business plan.

The feasibility study carried out by our specialists will allow you to look at your project from the point of view of its real effectiveness and prospects. It often happens that a promising project that can bring investors a good profit is simply not noticed and is not implemented. What comes up between an entrepreneur and an investor? Daydreaming, outdated views on the market and facts that are not supported by arguments, or something else?

The answer is very close, ineffective business planning is to blame for everything. To do everything correctly, you need to develop a feasibility study.

What is a project feasibility study

A feasibility study, abbreviated as a feasibility study, is an analysis, assessment and calculation of the economic feasibility of implementing a project to create an enterprise, reconstruction and modernization of existing facilities, construction or construction of a new technical facility. It is based on comparing the assessment of results and costs, determining the effectiveness of the application and the period for which the investment is recouped. This can be a third-party investment.

It is also needed to confirm the advisability of choosing a new production technology, processes, equipment. Most often this is suitable for already operating enterprises.

Feasibility study required for every investor. In the course of its development, a sequence of works is carried out to analyze and study all the components of the investment project and calculate the return on investment.

The difference between a feasibility study and a business plan

Business plan and feasibility study are often not distinguished. The main difference between their structures is that in the second there is almost no description of the company and product, market analysis, risk analysis and marketing strategy- the most important aspect in a business plan. You can read more about the marketing strategy in the articles “ Marketing plan". Such an abbreviated structure is due to the fact that it is written for projects of introducing new processes, technologies and equipment to existing enterprises. The feasibility study provides information on the reasons for choosing certain solutions, processes and technologies, economic calculations of the effectiveness of their implementation.

So, we can say that the feasibility study is specific in comparison with the business plan, and is more narrow.

Why do you need a feasibility study

Correctly drafted feasibility study will allow you to see the effectiveness of investments in the development of new or revision of previous types of company activities, the company needs a merger or acquisition, is there a need for lending. The feasibility study also helps to choose necessary equipment, to select and implement suitable production technologies, to correctly organize the activities of the company.

The package of documents that must be submitted to the bank for approval of lending necessarily includes a feasibility study. In this case, the feasibility study shows the profitability of providing a loan, an increase in the level of activity due to lending, and, of course, a guarantee of the return of the loan to the bank. Before taking a loan from a bank, we advise you to read the article Sources of business financing, which describes the advantages of two main types of business financing - lending and finding an investor.

Feasibility study development

The development of a feasibility study is needed in the following cases:

when, the company's management needs a justification for the choice of new equipment;
when the company's management needs an explanation of the decision to modify the production technology.

To develop a feasibility study, you will need the integral work of a group of specialists - lawyers, financiers, economists, etc.

When developing a feasibility study, consider the following points:

General information about future work... Brief description of the area of the project, its participants and location, analysis of supply and demand, main buyers of products, main competitors. Important parameters are prescribed: the range and type of products, the volume of the company.
Capital expenditures. An estimate of the one-time costs required for implementation is shown decisions taken.
Annual costs. Shows the estimated operating costs by item.
Manufacturing program. It consists of a description of all types of products that are supposed to be provided within the scope of these works, the volume of production and sales prices are indicated. Price indicators are also justified here.
Financing. This item is very similar to financial plan business plan, but it also has its own differences. Financing scheme, indicating the sources of obtaining credit funds, conditions for their use and maturity dates.
Evaluation of the rationality of the implementation of the proposed option. Based on input data suitable for economic assessment, the main economic indicators are calculated, which will make it possible to calculate the rationality of the project.
Calculated part. Prescribes important calculation materials - balance forecast and schemes for the movement of financial flows.

Feasibility study structure

Again, compared to the structure of a business plan, which has clearly defined sections and points, the structure of a feasibility study can fluctuate between several variations. The options may differ in that each one deals with different problems.

If you focus on UNIDO method, then the structure of the feasibility study will look something like this:

Summary. A brief description of the main issues in the content of all chapters.
History and position of the project.
Market analysis and marketing concept.
Material resources. Raw materials and resources needed for production, approximate requirements for the same resources and raw materials, the situation with their supply. If there is no money for the implementation of the business, start looking for them. Read about where to get funds to open and expand a business in another article.
Location, site and environment... Pre-selection of the location, including the calculation of the cost of renting premises or land.
Design and engineering work. Early determination of the scale of work, as well as civil engineering objects, production technology and equipment that are needed for the normal robots of the company.
Organization and overhead costs. Approximate organizational structure, estimated overhead costs. This is something like an organizational plan.
Human resources. Estimated resource requirements by category of worker.
Calendar implementation of the adopted decisions. Approximate timetable for the implementation of the project.
Investment and financial analysis

The feasibility study in the future can serve as the basis for the development of a business plan.

Feasibility study method.

When compiling a feasibility study, the following sequence of thematic parts is allowed:

raw data, information about the market sector,
existing opportunities operating business enterprises,
sources of raw materials, material factors for business development,
capital costs expected to achieve the goal,
operating costs during project implementation,
production plan,
financial policy and financial component of the project,
general information about the future project.

In general, the feasibility study provides a description of the industry in which the enterprise operates, and provides a rationale for the choice of the territorial and geographical location of the current and proposed business, as well as describes the type of products manufactured. Here it is necessary to describe and justify prices for manufactured products. At the same time, the financial part of the feasibility study contains information about the sources of financing and the terms of debt repayment, the conditions for the use of borrowed funds.

Calculations in the feasibility study consist of tables that show the cash flow and balance sheet.

Such a structure of the feasibility study may not be the only correct one and may vary depending on the specific project. Also, it can be expanded for large and complex business projects.

V modern business and office work, the terms business plan and feasibility study have become firmly established in the lexicon of terms of entrepreneurs and economists, but there is still no clear separation of such concepts. The article attempts to highlight the issues of similarities and differences between the business plan and the feasibility study of the business.

Theorists offer the notion that a feasibility study is the result of a variety of studies, both economic and marketing research... But at the same time, a conclusion is made about the feasibility of the project, and a range of economic, organizational and other proposed solutions for optimization is determined. production process... However, a feasibility study is often an integral part of a business plan.

At the same time, there is an opinion that the feasibility study, to some extent, is either an abbreviated version of the business plan, or, on the contrary, it is an ordinary business plan, which was called a feasibility study.

It should be noted that if the procedure for drawing up and the structure of a business plan is clearly spelled out, then when drawing up a feasibility study, you can find several different writing options that differ depending on the problems under consideration.

There are the following options for a feasibility study in practice:

Example # 1

1. The real state of the enterprise;
2. Market analysis and assessment of the production capacity of the enterprise;
3. Technical documentation;
4. State of affairs with human resources;
5. Organizational and overhead costs of the enterprise;
6. Estimation of the duration of the project;
7. Analysis of the financial attractiveness and economic feasibility of the project.

Example No. 2

1. The essence of the proposed project, presentation of the foundations of the project and the principles of its implementation;
2. A short overview of the market, presentation of the results of various studies in order to study the demand for new service or product;
3. Technological and engineering aspects of the project:

a) a description of the production process;
b) evidence of the need to purchase new equipment or upgrade old ones;
c) comparison of the new product with the current quality standards;
d) an overview of the strengths and weaknesses a new product or service;

4. Financial and economic indicators, including:

a) the expected and necessary investments in the project;
b) prospective internal and external financial sources;
c) production costs;

5. Evaluation of the efficiency and payback of the promoted project, guarantee of the return of external borrowings;
6. The susceptibility of the proposed new product, service to existing market risks, as well as resistance to possible risks in future;
7. General assessment of the effectiveness of possible external borrowing.

Example No. 3

1. A summary of all the main provisions of the feasibility study;
2. Conditions for the implementation of the new project (who owns the authorship of the project, the source material for the project, what preparatory measures and research have already been carried out, etc.);
3. Analysis of the prospective sales markets, an overview of the production capabilities of the enterprise, as well as the calculation of the peak capabilities of the enterprise and a number of other factors;
4. This section reflects everything related to production support (necessary stocks and production resources), analysis of existing contractors and potential suppliers, analysis of possible costs for various production factors;
5. The section is devoted to the territorial location of the enterprise and the costs associated with this provision (a rough estimate of where the enterprise will be located, preliminary calculations related to the payment of a lease for a site for production or for an office space);
6. Design and project documentation (assessment necessary technologies for a new project, the assessment of additional auxiliary facilities, without which it will be impossible to carry out production;
7. Organizational and other additional costs associated with the new project (calculation of additional costs, as well as a sketch of the proposed structure of future production);
8. Analysis of labor resources for a future project (assessment human resources which will be needed to start a new project). The estimated number of workers and maintenance personnel is indicated, required amount engineering and technical workers. In addition, it is indicated whether only local workers or nonresident (foreign) specialists will be involved. In the same section, the calculated labor costs, taxes associated with wages and a number of other points;
9. Schedule of the implementation of the submitted project;
10. General assessment of the economic and financial solvency the planned project.

Note that many of the examples of feasibility studies provided, especially the last example, resemble a detailed business plan. There is a fine line between a feasibility study and a business plan, and this leads to the fact that with a high degree of certainty we can say that if you are required to provide a feasibility study for a project, you can safely draw up a detailed business plan, while leaving unnecessary disputes - to the theorists of economic science, and it is better to get down to business.

The approximate composition of the feasibility study (FS)

1. Table of contents or structure. A brief description of the chapters of the document.
2. General description of the project, input data about the project. Information about the research that was carried out in advance, the assessment of the required investments.
3. Description of the market and production. Demand assessment and forecast of future sales, description of the enterprise's capacities.
4. Raw materials and resources. Calculation of the required volumes of material resources, forecast and description of the supply of resources to the enterprise, analysis of their prices.
5. Choosing the location of the enterprise (objects of the enterprise). Justification of the choice of location and assessment of the cost of renting premises or land.
6. Project documentation... Description of the technology for the production of future products, characteristics necessary equipment, additional buildings.
7. Organizational structure enterprises. Description of the organization of the enterprise and overhead costs.
8. Labor resources. Assessment of the need for labor resources with division into categories (workers, employees, top managers, managers, etc.). Estimation of salary costs.
9. Terms of the project. Project schedule, cost estimate, tranche sizes, etc.
10. Economic calculations. Assessment of investment costs, production costs, financial assessment of the project.

The difference between the feasibility study and the Investment memorandum.

During the research in the field of marketing, the task of which was to identify the preferences of consumers in the market of consulting services, it was identified, among other things, the need to write investment memoranda and business plans. In the course of the analysis of surveys, questionnaires, written appeals, we can conclude that on the modern Russian market business services, there was some uncertainty in the definition and interpretation of a number of related concepts, such as: investment memorandum, feasibility study and business plan. Let us give an explanation of the frequency of the appearance of these economic documents.

Before the appearance of an investment memorandum, a feasibility study or feasibility study is created - this is the basis for determining the need for financial investments. A feasibility study is a document, as a rule, which is created by the forces of leading financial managers of companies. The purpose of the feasibility study is to determine how promising this financial investment will be and is able to bring financial benefits. Creating an investment memorandum is essentially pursuing the same thing, but an investment memorandum is being created for investors.

Having created a feasibility study, they move on to drawing up a more thorough document, which defines how a newly created product or project will behave in the conditions of the existing market. And also what impact the existing ones will have on the planned project. competitive factors in the market, as well as present and future risks. This kind of document is called a business plan.
In the course of working with a business plan, as a rule, an increase in the costs of a commercial structure begins, associated with the need for work in the field of research in the field of marketing. Such studies aim to determine to what extent the assumptions set out in the feasibility study will correspond to the data that will be obtained in the course of these studies. If these studies lead to the fact that if the data, assumptions and proposals of the feasibility study are confirmed in the course of marketing research, then the project is eligible to apply for funding. Financial calculations later form the basis of the investment memorandum.

The birth phase of a new venture is extremely challenging for financial managers. At this stage, the definition and formation of the company's policy begins, information begins to flow, which gives real information about the possible sides and rates of development.

What is the difference between an investment memorandum and a feasibility study.

In the course of assessing the present position of the enterprise, as well as possible future risks, a document is being developed, called the “Investment Memorandum”. The main purpose of the investment memorandum is to attract external financing to the existing project, if necessary.

Most often, an investment memorandum is formed consulting company based on a business plan and differs from it in that it includes information of an investment nature.

At this stage, the financiers of the enterprise must constantly monitor the state of the market. The purpose of this work is to monitor competing structures, identify new opportunities in existing markets and find possible new niches for development.

At the same time, the main task comes down to calculating and identifying the stage of development when the enterprise will need financial investments, writing an investment memorandum and attracting strategic investments in its project. And in addition, financial managers must determine and calculate the amount of necessary financial injections into the project. The period when financial managers enterprises are starting to work out various development scenarios, it is the initial one when drawing up an investment memorandum. Various scenarios for the development of events are determined. Pessimistic scenario (all possible consequences of insufficient funding and related profitability indicators and risks for the business are calculated). An optimistic scenario for the development of events, where it is necessary to reflect the economic indicators with sufficient funding.

What is a Feasibility Study - Feasibility Study

Feasibility study or Feasibility study of the project is, perhaps, one of the most important documents in the creation and development of any modern company. Most often, a project feasibility study (or feasibility study of the project) is necessary if a company or enterprise is going to introduce some new technology, receive any funds for the implementation of production goals.

Many entrepreneurs confuse the concepts of "Business plan" and "Feasibility study", believing that the development of a feasibility study is no different from writing a regular business plan. Actually, draw up a feasibility study and writing a business plan are somewhat different things, the main difference is that drawing up a feasibility study is not as complex and detailed work as a business plan.

Feasibility study of the project(Project feasibility study), as a rule, is devoted only to a part common business companies and, as a result, should not contain sections describing the entire business as a whole. That is, the feasibility study of the project includes only those data and calculations that will describe the upcoming changes in the company's activities directly related to this project.

Feasibility study, unlike a business plan, it does not contain details in the form of a marketing promotion strategy, a description of goods or services, or a risk analysis. The feasibility study is drawn up precisely in order to be able to calculate the results of innovations, to see everything possible problems this process.

Why do you need a feasibility study

In order to visually see the situation developing at the enterprise after any changes in its work (it does not matter whether it is quantitative or qualitative), as a rule, a Feasibility Study (Feasibility Study) of the project is developed. At feasibility study the project carefully takes into account a variety of factors that have a direct or indirect impact on the enterprise, as well as all changes in financial indicators.

A well-drafted feasibility study allows you to see how effective investments are in the development of new or revision of old types of enterprise activities, whether the enterprise needs mergers or acquisitions, whether there is a need for lending. Also, the feasibility study of the project will help to select the necessary equipment, select and implement appropriate production technologies, and properly organize the activities of the enterprise.

Feasibility study ( Feasibility study) is mandatory included in the package of documents that are submitted to the bank to obtain a loan. In this case, the feasibility study makes it possible to show the profitability of lending, an increase in the level of activity as a result of lending, as well as a guarantee of the return of the loan to the bank.

How to draw up a feasibility study

When developing competent feasibility study the following provisions should be included in the feasibility study:

Project summary
The idea of the project. What is the idea of a feasibility study of the project, what is it for. Feasibility study plan of the project with a step-by-step explanation.
Justification. Why such solutions are offered, the reason for choosing this particular material, type of activity or equipment. The feasibility study should also include all possible design risks.
Calculations of needs for production (financial, raw materials, labor, energy). It is necessary to calculate how much money will be required to launch this project. If you are preparing a feasibility study for a loan, you should indicate all possible sources of income.
Economic justification (calculations that show the result of the enterprise after the changes)
Conclusions and suggestions (summing up, conclusion, assessment)

At the same time, the feasibility study (feasibility study of the project) can further serve as the basis for drawing up a business plan, the main document that serves to make decisions about the introduction of new technologies or equipment into the production of an enterprise.

Sergey Pankratov
10/2011

An important stage in the implementation of a business project is the calculation of the ratio of risks and planned profitability. V economics there are methods for such a calculation that allow you to determine the feasibility of investing in a project of money.

For a new business project is being developed, it is necessary both for the owners themselves and for attracting funds from (banks, investment companies, private investors). The business plan includes a feasibility study (hereinafter feasibility study). In the current business, the feasibility study is also used for the modernization of production or the introduction of its new direction.

A feasibility study is an official document that contains feasibility studies to determine the degree of feasibility of implementing the planned business project.

It provides the calculation and analysis economic indicators, options are selected for the most effective economic and technical solutions, offers organizational methods for their implementation in the enterprise.

Purpose and main tasks of the document. Rules for its use

The main purpose of a feasibility study is to visualize the return on investment in a new project or modernization of an existing business.

Drawing up a feasibility study allows you to analyze external and internal factors that will affect the project during its existence. In practice, a feasibility study is drawn up in the form of a document when applying for bank loans.

The feasibility study can contain several options for the development of events during the implementation of the project, and, therefore, managers can clearly see the effect of the investment of funds.

Feasibility study allows enterprise managers to decide the following tasks:

Choosing a more efficient project;
Attraction of additional sources of financing for the investment project;
Increased productivity (if a feasibility study is drawn up for an existing business), and as a result, an increase in profitability.

Structure and content

The structure of a feasibility study for an investment project does not imply a strictly established content. The sections that will be included in the feasibility study will depend on the scale of the intended project, the specific goals of the project, on the wishes of managers, or on the requirements of creditors or investors. Thus, the structure and content of the technical and economic content are of a recommendatory nature, let us single out those sections that can be included in the feasibility study.

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Summary

It indicates the name, participants, goals, total cost, sources of raising funds, the main indicators of the financial feasibility of the implementation of the investment project. This part is key, as it sets out the main essence of the project. The information presented in the summary should be presented briefly and succinctly.

A detailed explanation of the items presented is given in the following sections of the feasibility study.

Description of the enterprise

This paragraph indicates: industry, principles of management structure, prospects this direction on the market. Possible or existing partnerships are given.

Description of the project idea

This section highlights the relevance and innovativeness of the implementation of this project, and the problems that will be solved by its implementation.

If within the framework of the project the production of a specific product is proposed, then its characteristics are highlighted: name, field of application, competitiveness in the market. Information on environmental friendliness and the possibility of its disposal after the end of operation may also be indicated.

Is given manufacturing program, which indicates:

volume of goods release;
cost with justification;
sales market for the goods produced.

Financial component of the project

This part of the feasibility study provides a description of the sources of the funds raised, specifies the creditors or investors (if any), the stages of use and repayment of the money received.

This information is presented in the form of calculations of economic coefficients.

Economic effect from implementation

The final section provides information about the project, about, the number of jobs created and other data.

Rules and step-by-step instructions for registration

Despite the fact that the feasibility study is compiled for each project individually and there are no uniform rules for its execution, experts still recommend adhering to certain recommendations. This will facilitate the work for beginners in this area and will not allow you to deviate from the main task - to fully reflect the feasibility of implementing the project.

We present a number of recommended step-by-step actions during registration Feasibility study:

disclose the main characteristics and achievements of the enterprise (if there is an existing one), information about the leaders, present the idea of the project;
give a description of the industry, its current state, development prospects in the country as a whole, and in a particular region. This may be the demand for the product that will be introduced to the market within the framework of the project, the analysis of competitors' activities and the characteristics of their products;
highlight the data on costs and incomes in the implementation of the feasibility study. It is important to divide costs into temporary and permanent ones, to calculate incomes at different levels of demand;
give an overall assessment of the project implementation. For this, a cash flow plan and a forecast balance are drawn up, which also contains form No. 1.

Mandatory data that must be indicated in the feasibility study

The feasibility study is drawn up for various industry-specific areas of business, in connection with which its sections can be replaced or added.

But unchanged items in the feasibility study are:

Description of the project, its role in the development of the enterprise, the impact on the economy of the whole country or a separate region may also be indicated;
Analysis of market conditions;
Labor cost analysis;
Financial analysis of a new project;
Payback period planning;
Conducting an economic assessment of an investment project.

Distinctive features of the document

In order to understand the distinctive features of a feasibility study from a business plan, it is necessary to give their concept.

A business plan is a document characterizing the implementation of a business project from all sides of a business.

The feasibility study is description of the project implementation from the standpoint of economic indicators and the characteristics of the equipment required to launch the project.

The business plan is a more voluminous presentation of the material about the project, contains a lot of theoretical information. The feasibility study more clearly shows the effectiveness of the investment. Thus, a feasibility study is included in the business plan.

Let us more clearly present the main parameters that distinguish the feasibility study from the business plan in the table.

Comparison parameter	Feasibility study	Business plan
Compilation objectives	Justification of the profitability and efficiency of the project only from the economic and technical side	Assessment of all factors influencing the project
Consumers	- management personnel; - shareholders; - partners; - less often banks and investors.	- investment companies; - venture funds; - large banks.
Document structure	- general parameters of the project; - items of expenses and income, analysis of coefficients; - justification of the need for monetary resources.	- project parameters, as well as information about the company, founders; - market analysis, including marketing research; - organizational plan; - the impact of the regulatory framework on project implementation; - risks, including economic; - the financial analysis; - payment economic effect from the implementation of the project.
Cases in which the document is drawn up	- search for funds for the introduction of new equipment; - launch of a new production line; - other projects related to modernization.	- launch innovative project; - launching a startup; - attraction of the full amount necessary for the implementation of the project.

Features of feasibility studies for various types of projects

The feasibility study is being developed, as noted above, for various purposes of the enterprise. In this connection, the theory distinguishes several types of feasibility studies for the implementation of projects.

Let's present them in more detail.

Feasibility study for an investment project compiled a visual display of the profitability of the project. Within its framework, products are often already tested and familiar to the market. Investors are the customers of this type.

For an innovative project a more detailed calculation of efficiency is required, since it is assumed that the product is new. The risks in such a project are much greater. The main consumers of this type of feasibility study are managers.

Feasibility study for a construction project has a more complex structure. It reflects the production capacity and capacity of the capital structure. The research of the real estate market of a particular region is given, information about the land plot is indicated.

Feasibility study for reconstruction aimed at disclosing information about the need to update the production complex. The emphasis in the structure of this type of document is on Finishing work, if necessary, the purchase of new equipment is indicated.

Preparation of a feasibility study when upgrading carries the same meaning as during the reconstruction, only in this case a justification is given for the replacement or revision of fixed assets: equipment, machinery and others.

Feasibility study for an agricultural project contains in its structure options for using available land plots, farming methods, models for using the resulting products (further processing, sale).

For a feasibility study for geological projects, see the following video:

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