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Sunday, June 5, 2011

How to write a Feasibility Study Report

  A feasibility study is a form of proposal prepared in lieu of an intended business.Today,i shall be taking a look at the steps to consider when preparing this study,do not go nowhere.

1.Cover page:This is regarded as the first step because it shows what the report is all about,who prepared it and date.

2.Table of Content:This contains the introduction and other parts that i shall be listing below.
1.Intoduction
1.1.Executive Summary:The nature of the business,name of promoter,profit before tax,total capital investment,initial capital outlay,terms loan(if loan was used),equity contribution,project turnover in the first year,should all be summarized here.
1.2.Consultation:The person/business consulted by the promoters should be named here.
1.3.Terms of Reference:This may include,(a)A market study to determine the demand and supply gap of the product.(b)To determine the technical feasibility,economic viability and commercial desirability of the project etc.
1.4.Objective of the Study:Talk about the reason for carrying out the study.

1.5.Scope of the Study:Talk about the coverage area of the study.
1.6.Methodology:Talk about the type of research method used.
1.7.Period of the Study:State the month and year the study was conducted.
1.8.Outline of the Study:Briefly talk about the different parts of the report.

2.Project Background
2.1.The project:Talk about the project in detail.
2.2.Product:Talk about the various products to be offered.
2.3.Location:Indicate where the project is to be located.
2.4.Legal Consideration:Indicate whether all statutory requirements have been met.
2.5.Economic Viability:Indicate the impact of the project on the economy in terms of GDP,employment etc.
2.6.Challenges:List the various problems that may challenge the survival of the business.
2.7.Prospects:Indicate the  opportunities available to the project.

3    Market Analysis
3.1.Market Review:Make reference to the global opportunities of the product of project,narrowed down to country of location while identifying the target market/potential users
3.2.Demand:Indicate the character of the market demand for the product.
3.3.Projected Demand and Supply:State how the project will be able to sustain demand and supply.
3.4.Other Businesses:This should include opportunities other than the primary product.
3.5.Competition:Talk about other businesses offering the same type of product.

4.  Technical Feasibility
4.1.Equipment:List equipment needed for the project.
4.2.Accommodation:The business should be spacious enough to take all the facilities needed.
4.3.Technical Assistance:Define the technologies to be used in the project.

5. Capital Expenditure
5.1.Equipment:Indicate the types and number to be used.
5.2.Motor Vehicle:Indicate the cost and why you think it is needed or not.
5.3.Capital Utilities:Indicate capital utilities and include price.
5.4.Furniture and Fittings:Give details including cost.
5.5.Pre-Operational Expenses:Indicate the cost.
5.6.Total Capital Expenditure:Indicate this too.
5.7.Cost of Production:Cost of direct labour only
5.8.Efficiency Level:State the level to be attained.

6.  Operating Cost
6.1.Man power:State if its direct/indirect labour or both.
6.2.Organisational Structure:Develop an organogram that will embrace man power resource.
6.3.Depreciation:State basis for depreciation.
6.4.Utilities:Detail utilities here.
6.5.General Expenses:Estimate general administrative expenses.
6.6.Repairs and Maintenance:Estimate the annual cost.
6.7.Promotion:State the value and period of the promotion.
6.8.Bank Charges:Estimate bank charges.
6.9.Accounts and Audit:State if the organization is to engage the services of an external control team or not
6.10.Insurance:State estimate for insurance.
6.11.Total Operating Cost: This could be limited to one year expenses excluding depreciation.
6.12.Working Capital:State the calculation based on period.
6.13.Total Project Cost:Give an estimate or assumption.

7.   Financial Analysis.
7.1.Turnover:Detail the turnover assumed.
7.2.Financial Plan:Detail the financial plan here.
7.3.Financial Assumptions:State all assumptions including company tax,depreciation etc.
7.4.Projected Trading,Profit and Loss Account:Detail this too.
7.5.Projected Balance Sheet for Period Assumed.
7.6.Projected Cash flow.

8.   Payback Analysis
8.1.Payback Period:The average time it would take the project to recover the initial investment.
8.2.Net Present Value(NPV):This is a technique applied to ascertain the viability or otherwise of the project.A project is accepted if the NPV is positive and rejected if negative.
8.3.Cost Benefit Ratio/Profitability Index:The project is accepted if the profitability ratio is greater than one.
8.4.Return on Investment(R.O.I):This measures how effective management has been able to utilize the firm's assets to generate income.

9.  Findings,Views,Conclusion and Recommendation.
9.1.Consultants' Findings:Indicate the total cost and number number of staff required to run the project in the first 12 months.
9.2.Consultants' Views:Consultants view should be stated here.
9.3.Recommendation.Comment on whether the project should be implemented or not.
9.3.Conclusion:State the completion of the work.

10.  Implementation Schedule.

S/N Required Activity      Duration         Date
 1.    Preparation of          3 weeks        Indicate
        feasibility report
2.    Sourcing for
       finance                     3 weeks        Indicate
3.   Installation                2 weeks         Indicate
4.   Test-running
       equipments                 1 week         Indicate
5.   Project commissioning  1 day           Indicate
6.   Development of
      accounting system       1 week          Indicate
7.   First six months
      review                          1 week        Indicate

      Note:Implementation schedule is a guide on how you can write your on schedule.

3. Development of the Table of Content: This is done after the table of content.In this case,you develop the various parts of the table of content already discussed.


   I do hope by now you must have learnt how to prepare a feasibility report,please share this with your friends















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1 comment:

RTjourn said...

Very concise. Thanks for a jumping-off point for writing.

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