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Feasibility Study Module 5

This document provides an outline for the chapters of a feasibility study project summary. The summary should include: 1. The proposed business name, industry description, project description, and location. 2. Highlights of major assumptions used in the study, including market projections, costs, financing, and expected returns. 3. A summary of findings and conclusions from the market, technical, management, and financial studies conducted for the project. The project summary is intended to attract investors by presenting the key details of the feasibility study in a clear and concise manner. It should highlight the attractiveness and viability of the proposed project based on the analysis and findings of the full study.

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Carl Buglosa
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46 views

Feasibility Study Module 5

This document provides an outline for the chapters of a feasibility study project summary. The summary should include: 1. The proposed business name, industry description, project description, and location. 2. Highlights of major assumptions used in the study, including market projections, costs, financing, and expected returns. 3. A summary of findings and conclusions from the market, technical, management, and financial studies conducted for the project. The project summary is intended to attract investors by presenting the key details of the feasibility study in a clear and concise manner. It should highlight the attractiveness and viability of the proposed project based on the analysis and findings of the full study.

Uploaded by

Carl Buglosa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Feasibility Study

Project Summary
(CHAPTER 2)

NATURE AND CONCEPT


The project summary presents the highlight of the study, lists its major assumption,
and summarize the major findings and conclusions. The other terms for project summary
are abstract synopsis or overview.

The project summary, though it appears after the title page and the table of contents,
is written only after all the aspects of the study have been completed. It is very important
since not all readers have the luxury of time to read every detail of the study. Oftentimes,
readers check the details only when they find the proposal financially interesting. The
project summary, therefore, should be written in sample language and in an interesting
manner to attract investor or any interested user. It is the façade of the whole study, and if
possible, it should win the hearts of investors.

There are no definite or prescribed sections of a project summary. It is recommended,


though, that the project summary should have the following sections:

1. Proposed name of the business


2. Description of the industry
3. Description of the project
4. Location of the project
5. Highlights of major assumptions
6. Summary of findings and conclusion

With these sections, the total perspective of the whole study is vividly presented to
the reader.

PROPOSED NAME OF THE BUSINESS


In selecting a business name, several important points should be considered.
Remember that selecting a business name is a delicate process in business planning. The
business might be carrying the chosen trade name for the next five decades, or more.
The business name should
1. Be reflective of the business identity;
2. Reflect the philosophical values and culture that the company cherishes;
3. Profess the brand identify of its product; and
4. Be appealing to the customers.

In proposing trade names, these questions need to be answered:


1. How does the trade name look like?
2. Does it reflect the identity of the business?
3. Does it reflect the philosophical values and organizational culture it cherishes?
4. Does it reflect the types of products or services it produces or serves?
5. Will it attract customer’s attention?

Provide one to two brief paragraphs for his section in the project summary.
In suggesting trade names, the proponent should observe some mandatory requirements
set by government agencies like the Department of Trade and Industry (DTI), the Securities
and Exchange Commission (SEC), and the Bangko Sentral ng Pilipinas (BSP). The proponents
should suggest three possible business names to choose from and make brief explanation
about the proposed trade names.
Before proposing the trade names to the investors, the proponent should first check
with DTI whether the three suggested names already exist or not. In case a name is already
used or claimed by others, it should no longer be suggested. If the proposed business
organization is a sole proprietorship or a partnership, the proponent usually ends at this
point. However, when the proposed business firm is a corporate entity, the proponent has
to seek the approval of the SEC for the proposed trade names. In similar manner, if the
proposed business will engage in a banking operation, the requirements of the BSP should
be met.

DESCRIPTION OF THE INDUSTRY


This section of the project summary describes the industry where the business
belongs. A mere description, however, will not suffice. It is very important that the
proponents cite recent trends in the global market that have bearing on the study.
Likewise, the description should indicate vividly current programs and thrust of the national
government from which the proposed project will benefit. In other words, the proponent
gradually conditions the minds of the readers on the attractiveness of the project, both in
the local market and in the global arena.

In describing the industry where the proposed business belongs, the proponent
should answer the following:
1. What is the nature of the industry?
2. What are the trends in the global market?
3. What are the developments in the programs of the national government?
4. Are there barriers in the form of higher tariffs and other customs requirements?
5. What makes the project attractive?
6. What are the bright prospects of the proposed project?

Provide one to two paragraphs for his section in the project summary.

DESCRIPTION OF THE PROJECT


This section describes the nature of the project, and the product or service it will
produce or serve. The proponent should include in the description the particular stage the
project is presently in, and whether the project arises based on regional studies or is related
to some programs of the national government. In case there is available information, the
proponent may include incentives provided by the government for such projects.
This section of summary actually supports the statements in the immediate preceding
section by providing specific details applicable to the business in particular. The promoter
of the study should have specific answers to the following questions:

1. What product or service will the business provide?


2. Is the study a result of regional studies or consultations?
3. What is the major consumer of the product or service?
4. Who is the major consumer of the product in the market?
5. What is the primary raw material required to produce the product?

LOCATION OF THE PROJECT


Oftentimes, we hear the provocative statements that the project should be located
in a strategic location. But, what does strategic location mean?

The term strategic in this context means that the location of the business, its head
office, plan site and outlets, should provide a competitive and ensure the attainment of
maximum efficiency. Competitive advantage means that the business has gained an edge
over its competitors that can hardly be copied and which provides higher profitability level.
The location could provide maximum efficiency of the business would be able to produce
the same amount of products at a lower cost.

A straightforward reason for the selection of the location should be indicated in this
section. It is highly emphasized that all underlying reasons for the project are viewed
valuable from the point of view or prospective investors, and not from the side of the
proponent.

The following questions should be answered in this section:


1. What is the prevailing peace and order conditions in the proposed location?
2. Are there primary competitors within the vicinity of the project?
3. Where are the sources of raw material, labor, and utilities?
4. What is the proximity of the location to the market?
5. Is there available transportation
6. How far is the plant from the households?
7. What is the prevailing climate, temperature or weather conditions in the area?

In providing information about the location, one or two paragraphs may be utilized.

HIGHLIGHT OF MAJOR ASSUMPTIONS


A feasibility study, in its simplest term, is a business forecast based on a mixture of
absolute data and professional opinion of experts in the field. The setting of assumptions
has already been accepted as a normal procedure in conducting a study. There are widely
accepted assumptions the field of economics, operation research or quantitative analysis,
accounting and other specialized fields. Assumptions facilitate the conduct of the study,
and are required in some mathematical and quantitative analysis.
However, assumptions, particularly in a feasibility study, do not simply arise
without any bases. They are based on either of the following:
1. Past experiences of other similar business
2. Trend in the local and global markets
3. Programs of the regional and national governments
4. Regulations and issuances of monitoring agencies
5. Economic, financial, and monetary indicators

The setting assumptions is sometimes the bottleneck of the study, and may
become a constraint of these are not reliable. Assumptions should be realistic and
measurable. This is the basic guiding principle. Remember that investors are updated on
the current or recent financial data from stock exchanges, financial organizations, the
Bangko Sentral ng Pilipinas, the Securities and Exchange Commission and other government
agencies. Using unrealistic assumptions spawns an element of doubt as to the reliability of
the study among investors. They may lose interest in the proposed project.

Assumptions are needed to answer the following questions:


1. What is the market projection in terms of demand and supply?
2. What is the expected market share of the project?
3. How much is the expected cost of the product or services?
4. What is the expected initial selling price of the product?
5. How many units will be produced every year?
6. What is expected cost of the project?
7. How will the project be financed?
8. What is the expected rate of return on investment?
In the project summary, major assumptions are usually provided with shorty
descriptions, including their quantitative bases.
Summary of findings and conclusion
This is usually the last section of the project summary. It presents the findings on
every aspects of the study, and the concluding remarks and findings of the proponent
based on facts.

Usually, a conclusion is reached on the following areas:


1. Market study
2. Technical study
3. Management study
4. Financial study

The proponents should give a specific conclusion and recommendation on each of


these aspects and should provide a general conclusion on the whole study which he deems
appropriate based on the facts and data.

It is a must for the proponent to provide answers to the following questions:


1. Is the project feasible in terms of the market?
2. Is the project feasible in terms of the technical aspects?
3. Is the project feasible in terms of the organization setup?
4. Is the project feasible in terms of its financial operation?

In case the answer to these four major questions are all positive, then the general
conclusion of the proponent would indicate a high probability of the feasibility of the
proposed project. The promoter, however, should never vouch for the attainment of the
findings and conclusion.

However, if one of the answer turns negative, then a general conclusion on the
feasibility of the project cannot be reached. The proponent should clearly indicate this
situation in his concluding remarks. Based on all of these analyses, recommendations, and
conclusions clearly indicated in the study, the user or prospective investor makes his/her
own final decision. His/her decision may sometimes be entirely different from the
recommendations.
The decision of the investors can only be to either implement the project or no.
implementation means that the project is discarded or aborted.

Once the investor commits funds for the implementation of the project, the
proponent next prepares a business plan. The business plan is a thorough and detailed
evaluation and scrutiny of the different factors and forces of the business environment. It
presents the step-by-step procedures on how to implement the proposed business.

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