Business Plan and

Project Report
 Introduction
Once a potential entrepreneur has made a tentative decision of exploiting a
specific opportunity, he has to prepare a detailed Project Report.
• Helps in anticipating and solving problems.
• Consider several financial and implementation problems well in advance.
• Gives enough time to solve or prepare for them.
For whom the Project Report is made?
• For the entrepreneur himself.
• Essential document for getting assistance from banks.
• For getting subsidies, seed capital etc.
 Who prepares a Project Report?
• Engaging a consultant.
• A well made PR by the entrepreneur himself is helpful to him while
running the industry.
• The process of preparing the PR enables him to interact with realities and
makes him aware of what to expect in the future when he actually
implements the project.
• It is a “drill”, a good training prior to jumping into a venture.
 What does a Project Report Tell?
• A PR forces you to think and plan for future.
• It helps you to realize what you need for implementing the project.
• It can give you a general idea of your resource requirements and means to
procure them.
• It shows the feasibility and probability of achieving profit.
• It gives you an indication of likely returns and benefits you will derive
from your unit.
 What is the project report composed of ?
• Assumptions/ estimates : for production, sales, raw material consumption, man
power needs, prices etc.
• Projections : Financial Projection, production projection and sales projection.
• Information: on technology, competition, prices etc.
• Calculation: costs, profitability, cash flow etc.
• Documents: quotation for machinery, raw materials etc., partnership deed/articles
and memorandum of association, infrastructural needs like land, building, land title
deeds, lease deed , rent deed etc.
 How to prepare a Project Report?
Introduction of the project:
(a) Entrepreneur’s bio data –
(a) personal information, age, address, family back ground,
(b) educational qualification and other training
(c) work experience, specialized capabilities and any other
relevant data.
(b) The product/service
(c) The usage of product in the area, region or country.
(d) Future demand of the product in the market area you
plan to serve.
• Market analysis: Market survey report prepared preferably by entrepreneur himself.
• covers the competitors, machinery/raw material suppliers, traders, clients and their
future requirements.
• Lay out details:
(a) Proposed constitution of firm (proprietorship,partnership, LLP, limited co. etc.)
(b) Details of factory shed.
(c) Details of total area expansion provision
(d) Details of electrification of the factory (connected load)
(e) Plan lay out
(f) Expected cost of land and building
Project engineering:
(i) Preliminary information: NOC from Municipal/Panchayat office and Pollution
Control Board, registration in sale tax dept, excise duty dept, etc.
(ii) Production programme : according to the market estimate first year’s production
programme should be indicated. Similarly 2nd and 3rd years’ calculation can also be
attached.
(iii) Production procedure: technical aspect of product and process of manufacturing
step-by-step.
Raw materials : availability, calculation of the raw material stock according to
availability.
• Total value of RM needed in one year (including transportation charges/tax) as
shown in the table below:
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Sl.no. Description of item Rate per Unit Total Value
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• Consumables and Utilities: Value of consumables like engine oils, spares etc.
• Power, water, fuel, coal/oil.
Machinery :
• Cost estimate for machinery should be made using the same
format suggested above.
• In computing value of machinery and equipment, sales tax,
transportation and insurance costs should be added.
• Installation expenses of the machinery should be mentioned
separately.
• Importance of each machinery and production capacity per hour
should also be mentioned.
• list machinery, quotation from 3 reputed firms.
Personnel requirements:

• Factory staff, their no. , monthly and yearly emoluments

• Administrative staff, their no., their monthly and yearly emoluments
• Sale staff and their no., and salary.
• If any special technical personnel are required, then need and
availability should be explained
Other Administrative expenses:
(i) Stationery and printing
(ii) Postage
(iii) Telephone / fax
(iv) Traveling
(v) Newspaper/business magazines
(vi) Technical/legal fees
(vii)Advertisement expenses
(viii)Monthly payment to sales men
(ix) After sales services.
(x) Miscellaneous expenses
• Working capital calculation:
a) Raw material stock…… (Days/weeks)
b) Goods under process…… (Days/weeks)
c) Finished goods stock …….( Day/weeks)
d) Stores and spares
e) Monthly expenses
• Total Cost of the Project
a) Fixed Capital…Land & building, Machinery & Equipment
b) Preliminary/preoperative expenses
c) Working capital
d) Provision for contingencies
Financing of the Project
a) Own investment
b) Capital subsidies from State/central govt.if any
c) From friends and relatives
d) Long-term loans from banks/ corporations
e) Short-term credits from banks as Cash
Credits.
 Profitability calculation( for 3 years)
1. Sales Revenue
2. Estimates production expenses
3. Profitability( 1-2)
4. Other income
5. Profit before tax
6. Income tax to be paid
7. Net Profit
8. Net cash return ( 7 plus depreciation)
9. Percentage of net profit
On sales
On investment
Break Even Point Calculation

% of Break-even = Fixed expenses x 100/contribution

Contribution= Income from sales- variable expenses

Eg. Fixed expenses : Rs. 2,00,000
Sales : Rs.12,00,000 and Variable expenses:Rs.8,00,000
Break even : 2,00,000 x100/ 12,00,000- 8,00,000=50%
Financial inflow
• Net profit (after interest and tax)
• Own investment
• Depreciation
• Investment allowances
• Long term loans
• Short term loans
• Other income
Financial outgo
• Preliminary & pre-operative expenses
• Fixed investment
• Increase in current assets
• Reduction in long term loan
• Reduction in short term loan
• Interest
• Income tax
Repayment of Loans
1 st yr 2nd yr 3rd
yr
a. Net profit
b. Drawings
c. Available profit (a-b)
d. Amount to be returned to Financial institutions
e. Interest on funds from banks/FI
Model Scheme -1:Manufacturing chappels
•Assembling unit
•Process : The rubber sheet is purchased, cut using cutting machine and
strap is attached.
•Fixed capital :

Land and building (1000 sq.ft) : Lease deposit

: Rs. 10,000
Cutting press, drilling machine, die,
Tools, furniture etc : Rs.50,000 Total(a) : Rs.60,000
Working Capital:
–Raw material ( Rubber cut sheet, v-strap, printed plastic cover):
Rs. 1,00,000
–Labour(5 no.): Rs. 25,000
–Finished goods (one week): Rs. 40,000
Total (b): Rs. 1, 65,000
Total Capital : (a) + (b): Rs. 2,25,000
One month production cost
–Rent : Rs.5,000
–Raw materials: Rs.1,00,000
–Wages: Rs.25,000
–Administrative exp.: Rs.10,000
–Depreciation: Rs.4,080
–Interest: Rs. 3,200
–Electricity charges: Rs.3,000
–Other expenses: Rs. 1,000
Total: Rs. 1,50,280
•One month revenue
-3000 pairs of chappals@ Rs.65 (avg) : Rs. 1,95,000

Monthly profit : Rs. 44,720

Model Scheme-2DTP Centre
(a)Fixed Capital
•Computers 2no. :Rs.50,000
•Printer:Rs. 7,500
•Scanner:Rs. 6,500
•Photocopier:Rs.50,000
Total(a): Rs. 1,14,000

(b)Working Capital
Rent:Rs.5,000
Stationery, CDs, etc.:Rs.10,000
Wages :Rs.5,000
Total (b): Rs.20,000

Total (a) + (b): Rs.1,34,000

Service charges per day: Rs. 1500
•Monthly income (25 days) : Rs. 37,500
•Monthly cost
–Rent :Rs.5,000
–Wages:Rs.3,000
–interest:Rs.2,000
–Stationery:Rs. 10,000
Total cost :Rs.20,000
Profit:Rs.17,500
Enclosures
•Educational certificates
•Experience certificate
•Testimonials for license and permission letters
•Map of factory building and expected cost of building or rent
receipt
•Quotations of machinery and equipments
•Partnership deed or any other document
•Suppliers list
•Future clients list
Precautions
•Always estimate your costs to be higher and your income less.
•Do not put any cost/price unless you have checked
•Do not take data from some other PR with out updating.
•Consider the implementation time.
•Do not consider full capacity utilization in the 1styear itself.
•Prepare PR yourself
•Counter-check all calculations, like cost project should match means of finance
•Take opinion from experts