Orientation plan and feasibility study
Request for preparation of a Orientation plan
Request for preparation of a Orientation plan
During the last decade that we have been working in the field of investment consulting and preparation of feasibility studies and feasibility studies, we often see the applicant (investor) making a strong claim in describing the commercial and financial capabilities of his project. One of the factors that can play a positive role in adjusting and rationalizing the expectations of both groups (applicant and investor) and ultimately making it possible to invest in a project with balanced but positive business characteristics, is to prepare a justification report, feasibility studies and regulation. Business plan.
The business plan section is one of the most important parts of the technology to market services corridor, whose main tasks are to prepare and advise the justification plan, feasibility studies and business plans as a prerequisite for financing investment ideas and plans.
A justification report (FS) is an estimate, an estimate or a forecast, which has a series of quantitative and factual parts such as financial parts (equipment, construction, raw materials, etc.) and a series of parts of which are estimates. Such as market size, price forecast and sales volume and the last part is descriptive studies.
In the facts section, the feasibility must move towards real numbers. In the predictions section, the goal should be to achieve realistic or close predictions, and to avoid magnification and make the necessary adjustments. In the discussion of feasibility reports and feasibility studies (FS plan), there are pessimistic to optimistic scenarios in the project. Based on experience, in most cases, the most optimistic situation scenario is drawn by the applicant, so there is always the question or fact whether the team should The producer of the justification and feasibility plan (FS plan) should be next to and in line with the applicant or next to the source of financing (bank, fund, business partner, etc.).
As a company that provides justification reports and feasibility studies (FS), we try to examine different scenarios in the projects and finally check and calculate the most realistic case. Therefore, in some projects, the results of the studies do not show the possibility of the project, which will inform the applicant and the necessary solutions will be provided to him. Of course, we accept that in some projects, especially high-tech projects due to lack The existence of the necessary documents is a lot of estimation because there is no previous record for that project in Iran, but all we try to do in such cases and in such projects is not just justification.
The evaluation of market, technical, financial and economic feasibility studies begins with the proposal of the plan and continues until the implementation of the plan. First, the goals of the project are reviewed, the products are defined, then the costs and benefits are calculated, and finally it enters the selection stage.
Principled and scientific study of industrial designs includes a series of comprehensive and sequential feasibility studies (including market study, technical, financial and economic studies), which, of course, taking into account the specific characteristics and conditions of each design, the severity and importance of each From the above, it is determined.
Industrial feasibility studies are expert studies that are usually performed before the implementation of industrial investment projects. In these studies, the plan is examined and analyzed from a market, technical, financial and economic point of view and the results are used as a basis for decision making. Investors are used.
In conducting feasibility studies and Orientation plans, there are different models, one of these models is the 1991 methodology of the United Nations Industrial Development Organization (UNIDO). The main parts of this model are as follows:
Background and design and idea
Market analysis and marketing concept
Raw materials and equipment
Location, location and environment
Engineering and Technology
Organization and overhead costs
Execution planning and budgeting
Financial analysis and evaluation of investment and results of Kamfar software
Another example of an acceptable internal model includes the following topics:
Study of design technology
Location of the project
Design engineering and project management
Investment and project financing
Design evaluation criteria
Profitability and financial forecasting of the plan
Technical-economic Orientation plan (feasibility study)
Banks and investors are usually presented with investment plans to finance, to convince the investor or the bank that they are participating in the profitability project based on the schedule and resources required, as well as by reviewing the returns and capital return conditions. The feasibility of each investment plan is examined in three sections: market studies, technical studies and financial studies.
Such studies usually deal with issues such as market situation, product specifications, production capacity, necessary machinery, investment and profitability of the project. The company’s activities in this field are:
Opportunity Studies Opportunity Study
Feasibility Study Feasibility Study
Technical Feasibility Study (Technical Feasibility Study)
Objectives of the justification plan
A Orientation plan can be written and developed to achieve a variety of purposes, including:
1- Justification plan personally and for decision making within the organization.
2- Justification plan to get facilities or attract investors.
3- Explanatory plan for obtaining the project license and permit.
4- Justification plans for obtaining land from the public sector.
5- Rationale for business expansion
Writing a justification plan
Most centers and institutions to accept justification plans, have a predefined format on their websites on which people can write their justification plan, which is generally the same for all justification plans, but in detail and The clauses are somewhat different, depending on what branch the draft justification for and for what score is being developed, it can vary the titles and clauses of the plan. If a plan is written to create a new business plan, more technical explanations and explanations should be given about it and more details related to the work should be explained, but if you intend to write a plan to develop and enlarge an old work and profession ; In addition to briefly describing its past operations and providing existing licenses, it should provide a thorough explanation of how and why the business grew.
Preparation of a justification plan
In general, each justification plan consultation has four main sections that must be completed by the applicant or the approved consultant:
1. Applicant history section
In this section, the introduction of the applicant and his registration and management records will be mentioned. The financial records and capabilities of the company and the members of the board of directors and shareholders of the company are also presented in this section. In fact, the purpose of this section is to introduce the company in order to check the competence and evaluate its capabilities to the operating bank or other institutions and organizations accepting the plan in order to decide on the plan and the amount of facilities commensurate with the applicant’s financial records and capabilities.
2. sections of market study equivalent to the English word Market Study
In design consulting, the purpose of this section is to provide an overview of the design products and then estimate the market size. The market study section can be divided into two general sections:
– Description section: In this section, the subject of the design and the product should be introduced in general, and in order to enter the discussion of supply and demand, a general view of the product and its applications should be given to the design reader. Presenting general product standards, introducing product ISIC codes, customs tariffs, reviewing and analyzing the location of the project from various aspects of location, including access to materials, consumer market, access to manpower and other items will be done in this section.
– Supply and demand analysis section: In this section, the exact definition of the product or service must be done first. For example, in industrial designs, the ISIC codes of the design products are precisely determined and using the existing statistical systems to estimate the current supply and predict the supply of the design products in the future. Then, using different methods such as per capita consumption, the current demand is estimated and the demand for the products of the project in the future is predicted, and by performing the above steps, the difference between supply and demand for the product for the next short period (about 5 years) It is ready to be exploited, it is estimated. The noteworthy point in this part is that the plan has a suitable market justification if the supply and demand gap for the coming years is more than the production forecast made in the technical sector for the coming years. Otherwise, the technical expert should be warned that the capacity and consequently the production plan of the project should be adjusted
3. Technical justification equivalent to the English word Technical Feasibility
In consulting the justification plan and the technical part, in fact, the most sensitive part of the plan in terms of numbers is that there must be evidence for all the numbers and figures presented in the plan, usually part of these documents are completed by the applicant and part by the consultant. The main purpose of the technical part is to estimate the following 4 parameters, which are the main inputs in the discussion of project profitability decision making.
– Capacity measurement: In this section, according to the type of plan and existing documents and documents, the production capacity of the product or service is calculated. In industrial projects, production lines produce products continuously and discontinuously. In continuous production lines, the output capacity of the line is considered as the basis of capacity measurement calculations based on the production unit per hour, and by considering the assumptions of duration, number of shifts and working days, the annual capacity of the project is calculated. In the case of discontinuous production lines, the capacity of each machine is presented based on the production unit per hour and the production capacity of the factory should be estimated based on the capacity of that machine by determining the line bottleneck and considering the assumptions of duration and number of shifts and working days, The annual plan is calculated.
Production and sales plan: Considering the schedule of the construction phase of the project, the operation time of the project will be determined. In this section, according to the estimation of the practical capacity of product production or service delivery per year, it is assumed that due to marketing and other factors, the plan after operation within 4 years and with a slope of 70% for the first year, 80% for the second year, 90 % For the third year and 100% for the fourth year (basis) to reach the practical capacity of the project. Therefore, considering the above and the selling price of the product, the sales forecast of the product or service for the first 4 years of operation of the project will be done.
– Investment estimation: In this section, the fixed and current investment of the project will be estimated.
Fixed investment of the project includes items that will be spent from the beginning of the construction phase to the beginning of the operation phase of the project. These items include land, premises, buildings, machinery, installations, laboratory equipment, office furniture, vehicles, unforeseen and pre-operation costs (including company registration costs, consulting, bank expertise costs, and capital and salary increases). Before operation).
Working capital of the project includes items that are spent after the completion of the construction phase and in order to start production. These items include the purchase of raw materials, accounts receivable (non-cash sales of products) and salaries, the relevant numbers are calculated based on the turnover period of each item and the annual costs of the project.
Estimation of annual costs: These costs actually include items that are spent during the operation period of the project and are estimated annually and are the criterion for determining the profit and loss of the project. The costs of this section include the annual cost of purchasing raw materials, energy costs, the annual cost of salaries and wages of administrative and production personnel, maintenance and depreciation costs, marketing and sales costs, financial costs and others.
4. sections of financial evaluation equivalent to the English word Financial Analysis
Consultation of the justification plan and based on the results obtained in the technical section and using Kamfar software, the financial analysis of the project is performed. In this section, some important indicators such as internal rate of return, return on investment, sensitivity analysis of rate of return to changes in the three