Preparing a plan for the establishment of a new enterprise or business is an important function of the entrepreneur. He makes imagination for building a new project, based on his various abilities, imaginative capacity, creativity, farsightedness, observation, self-confidence, Optimist, and adventure capacity.
Also, he prepares a specific plan for it, by considering various aspects, in which several stages or steps are included.
In brief, the following may be the important stages and steps in the preparation of a new project in business:
- Origin of the project idea.
- Formulation of the whole project.
- Appraisal of the project.
- Selection of best project.
- Implementation of the project.
- Commencement of project.
These stages are explained below:
1. Origin of Project Idea
In the first stage of preparation of the project, it is determined, why the project is being prepared?
Thereafter, the whole business environment is studied to originate from the project idea.
For it, the following two functions are required:
(A). Identification of Investment Opportunities
The entrepreneur identifies the new concepts, new ideas new opportunities.
Hence, he searches the new opportunities for investment by collecting and analyzing economic information.
But, for that, the entrepreneur should essentially know various environmental elements, like – political, social, economic, the sensitivity of investment possibilities, material and immaterial elements, etc.
The entrepreneur should consider the following points for determining investment opportunities:
1. Structure of Government Regulations
For identification of investment opportunities. The entrepreneur should know various government rules, acts and policies and also the facilities, concessions, incentives, etc. Provided by the government.
Hence, he should study the Legal structure, including industrial policy, industrial development, and Regulation Act, control of foreign collaboration and investment, foreign exchange management act, MRTP act, incentives for small industrial units, etc.
2. The search for Project Ideas
After gaining knowledge about the structure of government regulations, an entrepreneur should search for project ideas.
For it, the following points are worth consideration:
- Study of profitability and capacity utilization of the existing Industries.
- Local raw material and resources for industries.
- Possibilities of various types of imports and export of products.
- Suggestions for Financial Institutions and Development Agencies.
- New technological development and Research activities.
- Analysis of causes of the sickness of sick units and their revitalization.
- To take information from trade fairs to determine project ideas regarding new product and development.
- To develop ideas for new products through various techniques and methods of creativity.
3. Preliminary Examination
The unprofitable ideas may be removed by preliminary examination based on aforesaid points.
For that, various criteria may be used, like – relevance of the enterprise, availability of resources, adequacy of markets, justification of costs, ability to take risks and determination of project for an existing company.
(B). Preliminary Project Analysis
Preliminary project analysis means a General analysis of various aspects in various which marketing, technical, financial and economic aspects, etc. are considered.
Such analysis is in the form of the role of feasibility studies:
The objective of the preliminary project analysis is to see that:
- Whether the project is preliminarily acceptable?
- Will it be justified to have a comprehensive feasibility study for it?
- Which aspects are important from the viewpoint of its economic viability, for which detailed investigation is required?
Thus, by a preliminary selection of any project, the entrepreneur may selection matrix to compare it with other projects.
For that, the entrepreneur should have the adequate imaginative capacity, experience, foresightedness, and analytical capacity.
The entrepreneur requires information regarding the production method of the commodity, raw material, market, demand, Technology, labor, and the surrounding environment, etc. for preliminary project analysis.
Hence, he should pay attention to the following points for preliminary analysis:
- Knowing various market-related issues.
- Proper assessment of future demand of the commodity.
- Proper analysis of the future competition and its nature.
- Knowledge about the number of various firms in the market and their mutual relations.
- To collect knowledge about the popularity of existing commodities and also about similar commodities.
Preliminary project analysis is useful for various purposes, like – the entrepreneur may forecast the difficulties to arise in the starting years, appropriate arrangements may be made based on forecasts, various aspects of product strategy maybe comprehensively studied in and justification of close feasibility may be known.
2. Formulation of the Outline of the Whole Project
In the second stage of project formulation or preparation, the outline of the whole project is prepared, for achieving the objectives of the project, with minimum expenditure and sufficient resources.
In this stage, The Invisible ideas about the project are given definite shape and permission may be given for further analysis to bring it to the ground reality.
Thereafter, the outline of the most appropriate and profitable project is prepared.
An entrepreneur should pay attention to the following aspects for preparing the outline of the whole project:
- To define the general and specific targets of the project.
- To analyze the project from the view of inputs and outputs.
- To mention the factors of the success of the projects.
- Determination and analysis of possible obstacles.
Preparing an outline of the whole project is a process and important stage because the entrepreneur makes an objective and independent analysis of the conditions of the project idea in totality.
Besides, various aspects in the context of light from an origin of the idea to future possibilities of the project are analyzed by giving intense thought to various aspects.
3. Appraisal of Project
After preparing an outline of the whole project its appraisal is necessary, which includes economic, technical and financial scrutiny of the projects, but the appraisal of its feasibility is done based on various factors.
The objective of the feasibility study is to present the project, on a sound basis and to make available the necessary facts for its appraisal and scrutiny.
Following aspects are analyzed in the feasibility study for evaluating the project:
- Collection and analysis of information related to the market and demand.
- Technical analysis.
- Plant site and situation.
- Emergency requirements.
- Marketing arrangements, marketing costs, and marketing programs.
- Investment details of the project and its costs.
- Project product description and profits.
- Tax burden assessment.
- Finance and financial analysis.
4. Selection of a Project
This stage or step of the project preparation is called ‘Investment Decision‘ also, because of this stage, the decision is taken regarding making decisions or not, based on feasibilities.
In this stage, the objectives and limits of available resources are kept in view.
Thereafter, a detailed project report is prepared, along with the selection of the project and investment decisions.
In this report, various information and analysis are incorporated in the report form, indicating a summary of various decisions.
While selecting a project, the entrepreneur should determine the following things.
5. Implementations of Project
In the fifth stage of the new project, the execution of the project is undertaken. For it, a detailed action plan is prepared.
For completing it, the supply of equipment and material are arranged.
Following activities are undertaken for the implementation of the project:
1. Project and Engineering Design
Proper site selection for the installation of plant, preparation of maps and outlines for plant layout, selection of specific machinery, implements and equipment are undertaken, as part of this activity.
2. Negotiations and Contracting
In this activity, agreements and contracts are made in respect of obtaining Technology, the establishment of various facilities, marketing arrangements, construction of the building, etc.
For the implementation of the project, several construction activities are carried out.
For example, construction of plant and buildings, office buildings, installation of plants and machinery, constructions of manufacturing facilities and creation of infrastructure facilities.
Training is arranged for the workers, technicians, and engineers, so that they may gain desired knowledge about production methods, manufacturing processes, production system, etc.
The training may either be provided in the Institutions are at various technical institutions.
6. Commencement of Project
In the last stage of project preparation or formulation, the project is commenced. It is known as the operational phase also.
Commencement of the project is such a stage, in which production of particular service or product is started, for which the project was formulated.
In this stage, it is seen that the production activities are being carried out, by the determined targets and decided program.
Following activities are carried out, in this stage of the project:
1. Uninterrupted Operation
For it, the machinery, tools, etc. are well maintained, repairs and service thereof is undertaken, the physical environment is made efficient and operational supervision is established to ensure that no interruption is caused in the production activities.
2. Productivity Norms
In it, various aspects related to production are determined, like – standards, forms, and criteria for production, so that efficient operation may go.
As a result, the standard production becomes possible and control may also be exercised on costs of production.
3. Quality Standards
Quality standards are determined for the production of high-quality commodities.
Efforts are made to maintain the quality of the product at certain standards.
4. Market Acceptance of the Product
The maximum possible acceptance of the manufactured products by customer decides the success of the project.
For it, the entrepreneur carries out various product tests, during project operation and makes efforts to visualize competitive situations.
If required, he also carries out improvements in the quality of the products.
5. Goal Realisation
The entrepreneur assesses the extent to which the goals incorporated in the feasibility report regarding estimates of production, sales, costs, and profits have been achieved.
If the achievements are not by the goals, causes of the shortfall are assessed and remedial steps are taken.
Thus, now you all know the different stages or phases for the preparation of new projects.