Technical economic justification(feasibility study)

A feasibility study (feasibility study) is a study of economic profitability, analysis and calculation economic indicators created investment project. The purpose of the project may be the creation of a technical facility or the construction or renovation of an existing building.

The main task in the preparation of a feasibility study is to evaluate the costs of an investment project and its results, and analyze the payback period of the project.

A feasibility study is necessary for the entrepreneur himself to understand what to expect from the project, and for an investor, a feasibility study of an entrepreneur requesting investments is necessary to understand the payback period for the invested money. The development of a feasibility study can be entrusted to a group of specialists (in complex projects), and can be compiled independently by the entrepreneur.

What is the main difference between a feasibility study and a business plan?

Typically, a feasibility study is prepared for new projects at an existing enterprise, so blocks such as marketing research, market analysis, description of the enterprise and product are not described in such feasibility studies.

But sometimes a situation arises and additionally, the feasibility study provides detailed data on the analysis of technologies and equipment and the reasons for their choice.

Thus, a feasibility study (FS) is a shorter and more meaningful document than a full-fledged business plan.

Methodology for preparing a FEASIBILITY STUDY

When compiling a feasibility study, the following sequence of thematic parts is allowed:

Initial data, market sector information,

Existing opportunities for the current business of the enterprise,

Sources of raw materials, material factors for business development,

Capital costs expected to achieve the goal,

Operating costs for the implementation of the project,

Production plan,

Financial policy and financial component of the project,

General information about the future project.

In general, the feasibility study provides a description of the industry in which the enterprise operates and justifies the choice of territorial and geographical location operating and proposed business, as well as describes the type of products. Here it is necessary to describe and justify the prices for manufactured products. At the same time, the financial part of the feasibility study contains information on sources of financing and debt repayment terms, conditions for using borrowed funds.

The calculations in the feasibility study consist of tables that represent the movement Money and balance.

Such a feasibility study structure may not be the only correct one and may vary depending on the specific project. Also, it can be extended for large and complex business projects.

What is the difference between a feasibility study (FS) and a business plan?

IN modern business and office work, the terms business plan and feasibility study have become firmly established in the lexicon of terms of entrepreneurs and economists, but there is still no clear separation of such concepts. The material attempts to highlight the similarities and differences between a business plan and a business feasibility study.

Theorists offer the idea that a feasibility study is the result of a variety of studies, both economic and marketing research. But at the same time, a conclusion is made about the feasibility of the project, and a range of economic, organizational and other proposed solutions for optimization is determined. production process. At the same time, a feasibility study is often an integral part of a business plan.

At the same time, there is an opinion that a feasibility study, to some extent, is either an abbreviated version of a business plan, or, on the contrary, it is a regular business plan, which is called a feasibility study.

It should be noted that if the procedure for compiling and the structures of the business plan are clearly spelled out, then when compiling a feasibility study, you can find several different spellings that differ depending on the problems considered.

There are the following options for a feasibility study in practice:

Example #1

1. the real state of the enterprise;

2. market analysis and evaluation production capacity enterprises;

3. technical documentation;

4. the state of affairs with labor resources;

5. organizational and overhead costs of the enterprise;

6. estimate the duration of the project;

7. analysis of the financial attractiveness and economic feasibility of the project.

Example #2

1. the essence of the proposed project, the presentation of the basics of the project and the principles of its implementation;

2. a small overview of the market, a presentation of the results of various studies in order to study the demand for new service or product;

3. technological and engineering aspects of the project:

a) a description of the production process;

b) evidence of the need to purchase new equipment or upgrade the old one;

c) comparison of the new product with current quality standards;

d) a review of the strengths and weaknesses of the new product or service;

4. financial and economic indicators, including:

a) the proposed and required investments in the project;

b) estimated internal and external financial sources;

c) production costs;

5. Evaluation of the effectiveness and payback of the promoted project, guarantee of return of external borrowings;

6. the susceptibility of the proposed new product, service to the risks existing in the markets, as well as resistance to possible risks in future;

7. general assessment of the effectiveness of possible external borrowing.

Example #3

1. a summary of all the main provisions of the feasibility study;

2. conditions for the implementation of the new project (who owns the authorship of the project, the source material for the project, what preparatory activities and studies have already been carried out, etc.);

3. analysis of prospective sales markets, an overview of the production capabilities of the enterprise, as well as the calculation of the peak capabilities of the enterprise and a number of other factors;

4. this section reflects everything related to the provision of production (required stocks and production resources), analysis of existing contractors and possible suppliers, analysis of possible costs for various production factors;

5. the section is devoted to the territorial location of the enterprise and the costs associated with this provision (rough estimate of where the enterprise will be located, preliminary calculations related to the payment of rent for a site for production or office space);

6. design and project documentation (assessment necessary technologies for a new project, evaluation of additional auxiliary facilities, without which it will be impossible to carry out production;

7. organizational and other additional costs associated with the new project (calculation of additional costs, as well as an outline of the proposed structure of future production);

8. analysis labor resources for a future project (estimate human resources, which will be needed to start a new project). The estimated number of workers and service personnel, the required number of engineering and technical workers. In addition, it is indicated whether only local workers or non-resident (foreign) specialists will be involved. The same section indicates the calculated labor costs, taxes associated with salary and a number of other points;

9. Progress schedule for the proposed project;

10. general assessment of the economic and financial viability of the planned project.

Note that many of the examples of feasibility studies given, especially the last example, resemble a detailed business plan.

There is a fine line between a feasibility study and a business plan, and this leads to big share We can say with confidence that if you are required to provide a feasibility study for the project, you can safely draw up a detailed business plan, while leaving unnecessary disputes to the theorists of economic science, but it is better to get down to business.

Methodology for preparing a feasibility study (feasibility study):

2. general description project, project input. Information about studies that have been carried out previously, an assessment of the necessary investments.

3. Description of the market and production. Assessment of demand and forecast of future sales, description of the enterprise's capacity.

4. Raw materials and resources. Calculation of the required volumes material resources, forecast and description of the supply of resources to the enterprise, analysis of prices for them.

5. Choosing the location of the enterprise (objects of the enterprise). Justification of the choice of location and assessment of the cost of renting a room or plot.

6. Project documentation. Description of the technology for the production of future products, characteristics necessary equipment, additional buildings.

7. Organizational structure enterprises. Description of the organization of the enterprise and overhead costs.

8. Labor resources. Assessment of the need for labor resources with division into categories (workers, employees, top managers, managers, etc.). Cost estimate for wages.

9. Timing of the project. Project schedule, cost estimates, trench sizes, etc.

10. Economic calculations. Estimation of investment costs, production costs, financial assessment project.

Marketing research is not included in it. The business case usually contains detailed description technologies and equipment, as well as the reasons for their choice.

When compiling an economic justification, it is necessary to observe a certain. It starts with initial data, information about the market sector. Then it describes the existing opportunities for the development of activities, sources of raw materials, material resources for expanding the business, the amount of capital expenditure required to achieve the goal, production plan, financial policy, and general information about the project.

Thus, the economic justification contains a description of the industry where the enterprise operates, the type of input products, and the price level for it. Financial part this document attracting borrowed funds, sources of their coverage. Calculations are given in tables that reflect cash flow.

When compiling an economic justification, it is necessary to study the current position of the enterprise, its place in the market, the technologies and equipment used. In addition, it is necessary to determine ways to increase the profitability of the company and develop the business, predict the level of profitability that can be achieved during the implementation of the project, study the necessary technical data, analyze the level of training personnel. You will also need to draw up a project implementation plan, cost estimate and cash flow plan, as well as give an overall economic assessment of the investment.

A business case is also called a financial-economic assessment, which is a form of impact assessment. It is used to evaluate changes in all net cash flows that arise as a result of the implementation of methods state regulation, establishing regulatory legal documentation, corporate programs that are aimed at changes in the economic and social structure.

Instruction

Introduce changes in technical regulation standards, as well as change industry norms, introduce various technical regulations. This will help you change and redistribute the benefits, costs, risks of the enterprise.

Make a forecast of changes in all existing factors (benefits, costs) at the stage of designing a change in technical regulation standards. Evaluate the financial and economic result of the implementation of these norms, ensure the optimization of costs for the implementation of the norms.

Adjust the direction for the standards development process and provide a simulation of the impact of all standards development in the position of enterprises and their industries. Create a plan for more effective interaction requirements for different structures of technical regulation.

Spend necessary calculations in the course of forecasting economic analysis associated with the transition to the action of all necessary changes in normative document, including: the amount of income, budget expenditures, costs of economic entities, costs of society, tax contributions, as well as efficiency.

Estimate in cash the incremental associated costs and identify the impact of the change on financial position interested parties. Then analyze the change in the structure of costs, risks and incomes and evaluate the redistribution of the benefits of all stakeholders.

Evaluate the previous business case analysis. In this case, you will receive data that was before the analysis, as well as after changing all the factors. Thus, evaluate the feasibility of this project in monetary terms and give recommendations for its improvement, based on the problems of cost optimization.

A feasibility study is a document that contains an analysis of the feasibility of creating a particular product or service. It allows investors to determine whether they should invest their own money in the proposed business project.

Instruction

Use the following structure when drawing up a feasibility study: - initial data and conditions; - market features and company capacity; - material factors production activities; - location of the company; - design documents; - information about the organization of the enterprise and overhead costs; - labor resources; - forecasting the timing of implementation this project;- financial and economic.

Write general data about the project, i.e. the general intent in the feasibility study. Specify the location and participants of the business project. Then compose brief description for the industry to which the project belongs. Next, analyze the supply and demand and evaluate the market capacity. After that, identify the main potential consumers of products (services), as well as the main competitors.

Write a rationale for the selected region for the project location from the standpoint of market conditions. Bring the main parameters in feasibility study: type and nomenclature of products (services), scope of services of the enterprise.

Enter capital cost data in feasibility study. Provide an estimate of the capital (one-time) costs required to implement the business project in question. Calculate the amount of operating costs. For this refer to feasibility study for an estimate of operating (annual) costs.

Write a production program feasibility study. Describe all types of products (services) that the company plans to produce as part of the analyzed project, indicating the volume of production activities and selling prices. Make a rationale for the main price indicators.

Indicate how the financing of the project is planned. To do this, draw up a scheme for financing a business project, which will contain a description of all sources of obtaining credit funds, their purpose and repayment terms.

Conduct an assessment of the commercial feasibility of implementing the created business plan. Make calculations of the main economic indicators based on the necessary initial data that are accepted for the economic analysis of the project. In turn, the calculation part of the feasibility study should contain the following calculation material: the company's cash flow table, balance sheet forecast.

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Justification stage project very important. During it, you can identify and, if possible, correct those points that may lead to failure in the future. Take special attention start at an early stage, and you will achieve better results.

Instruction

Determine the goals and objectives of the justification project. You need to answer main question: whether a project is needed. Based on how well you work out the idea and convey the benefits that a new business can bring, a decision will be made on acceptance or non-acceptance project.

Describe the essence project. Tell us exactly what is planned to be done and what goals are being pursued. Explain how the need for a new case arose and why this path was chosen.

Communicate to the reader or listener the main ideas and ways in which the result will be achieved. Convince him that the chosen methods are the most effective in this case.

Tell us how many employees will be required to carry out your project and what qualifications they should be. Give justifications that the labor composition should be exactly like this. Describe in detail the functions of each member of the team. If you already have candidates, please state their first and last names. In addition, committee members or your management should be aware of how participation in the project will affect the core work of these employees.

Establish a sequence of actions and announce deadlines project. Clearly list the main stages of its implementation. Then elaborate on each stage. A logical relationship should be visible between the actions so that it is clear why one item follows the other. Speak real terms, if this is problematic, do not give only a possible due date project, it is better to specify the maximum period. Explain what factors can affect the time it takes to complete a task.

Give a calculation of the material resources that will be involved in the project. Show what each item of expenditure consists of. Reread everything before the presentation. Remember that if you make an inaccurate calculation or omit some important article, it can blur the whole impression of the rest of your rationale and lead to rejection. project.

The feasibility study of the investment project is integral part any investment project, as a preliminary stage of assessing its feasibility. The feasibility study has much in common with other documents for evaluating the feasibility of investments in a project, with and.

The difference between a feasibility study and an investment memorandum is that an investment memorandum contains a justification for investing in a project and has the main goal of attracting investors to it, while a feasibility study is developed for “internal use” to determine the feasibility and feasibility of implementing an investment project.

The difference between a feasibility study and a business plan for an investment project lies in the degree of development of the project. A feasibility study, in fact, is an enlarged calculation of the main technical and economic indicators of an investment project, the purpose of which is to substantiate its feasibility. The business plan is based on a more thorough analysis of the investment project and, in addition, is a guide to its implementation. The structure of a feasibility study is not much different from a business plan. In some cases, the feasibility study does not contain a number of sections of the business plan.

A feasibility study of an investment project often appears as a response to a request from the management of an enterprise or a customer of an investment project for a preliminary assessment. The purpose of the feasibility study determines the composition of its sections. So, for internal use, the feasibility study does not contain the section "Marketing Market Research", since the company's managers first want to know what the effectiveness of the project is, the main financial indicators without market assessment. The feasibility study for the project customer contains all sections of the business plan, including marketing research of the product market.

Composition of the feasibility study

The feasibility study consists of sections reflecting the essence of the investment project and a description of the possibility of its implementation at a given enterprise.

1. Any feasibility study begins with a presentation of the enterprise, its general characteristics, the level of technical and technological equipment, place in the market of manufactured products, the overall economic assessment of the enterprise.
2. Since the feasibility study is primarily a technical justification, its most important section is the description of the technical and technological component of the investment project. If we are talking about the innovative component of the project, the idea of ​​the project and its technical implementation should be described in detail.
3. Description of the production structure of the enterprise and determination of the possibilities for implementing the project on this basis. Determination of necessary changes in production structure, including the purchase of equipment and technology for the production of new products.
4. Determination of requirements for resources: material and labor. The need for materials, raw materials and components is determined. Possible resource providers are considered. The quantity and quality of labor resources for the implementation of the investment project are determined. Sometimes the skill level of employees turns out to be an obstacle to the implementation of an investment project.
5. The level is determined running costs for research and production of products for the investment project. The factory cost is determined future products, based on aggregated calculations of costs per unit of output.
6. Determination of total costs per unit of production and calculation of the profitability of its production. Calculation of EBITDA and profit from project implementation.
7. Calculation of project performance indicators, including NPV indicators, project payback period and internal norm profitability of the IRR project.
8. An analysis of the environmental component of the project, its compliance with the requirements for protection is carried out environment and other environmental indicators.
9. Conclusion on the feasibility of implementing an investment project supported by indicators economic efficiency.

The feasibility study in accordance with the methodology of UNIDO (United Nations Industrial Development Organization), in addition to the above, contains the following sections:

• market analysis and marketing plan selection;
• location of the investment object on the ground and its environment;
• project implementation schedule;

The structure of this feasibility study is more like a business plan. And in fact it is also a business plan. This is being developed at the pre-investment stage of the project. Therefore, the term "Feasibility study" is less and less common in investment design documents. Most customers require a business plan for the project.

Below is an example of a feasibility study for the construction of a thermal power plant for an urban settlement.

Feasibility study for the construction of a mini thermal power plant in the town of "Oktyabrsky" at JENBACHER cogeneration units.

1. Capital investment

Capital investments in construction:

• equipment and construction and installation works — 1,756.647 million rubles.
• Networks - 47 million rubles.
• total -1,803.647 million rub.

Start of construction - 01.01.2011. Construction period 1 year.

2. Funding sources

Financing capital investments carried out through borrowing and investment funds.

The lending scheme provides for the attraction of credit funds at an annual rate of 9%.

Interest payments begin in 2011, and the loan is repaid after the equipment is put into operation.

The frequency of interest and principal payments is monthly.

Receipts, loan repayments and debt servicing are summarized in Table 1 below.

Table 1

Receipts, payments to repay the loan and service the debt (million rubles)

3.Production program.

The main product is electrical and thermal energy. Annual output:

• electricity — 306,532,800 kW/h;
• heat — 441 537 600 kW/h.

4. Production costs

Annual production costs were determined in accordance with chapter 25 "Corporate income tax" tax code Russian Federation, as well as current industry regulations.

Fuel component of production costs

The price of gas in 2010 is 3540 rubles. per 1000 m3 of gas

Specific and annual fuel consumption are shown in Table 2 below.

Table 2. Fuel consumption.

Depreciation component of production costs

The percentage of depreciation deductions was determined on a straight-line basis, taking into account the service life of the main equipment. Annual depreciation charges amount to 24.691 million rubles. in year.

Wage. Deductions from wages

The number of industrial and production personnel is 36 people.

The average salary in 2010 is 19,000 rubles per person. per month.

Deductions for social needs are accepted in accordance with the current legislation:

Direct insurance payments in Pension Fund, MHIF and FSS - 34% of the payroll.

The total cost of wages, taking into account direct insurance payments to the Pension Fund, the Compulsory Medical Insurance Fund and the Social Insurance Fund, will amount to 9.9 million rubles.

Repair costs

The cost of repairing the main auxiliary equipment carried out once a year, within 15 days of each of the individual blocks of TPP together with peak boilers, is an annual amount of 84.717 million rubles.

The total annual production costs in 2011 (beginning of operation) are shown in Table 3 below.

Table 3

Total annual production costs (million rubles)

5. Calculation of investment efficiency

Commercial (financial) efficiency was determined at a discount rate of 9%.

Calculations of investment efficiency were made for the financing scheme described in the paragraph “Sources of financing”.

Duration billing period taken equal to 5 years. The calculation step is 1 year.

When calculating performance indicators, we took into account those predicted in accordance with the “Scenario conditions for the socio-economic development of the country for 2011 and for the period up to 2015”, approved by the Government Russian Federation in March 2009. Forecast values ​​of price growth rates are shown in Table 4 below.

Table 4 - Forecast of growth rates of prices for electricity and heat in 2009-2015

Estimated zonal tariff for electrical energy in 2010: 2.6 rubles/kWh, heat tariff -0.896 rubles/kWh. The tariff is adjusted taking into account changes in price indices for these types of energy.

The tax rates are adopted in accordance with the current legislation and are:

• value added (VAT) - 18%;
• property — 2.2% of the residual value of fixed assets;
• on profit - 20%.

Table 5

Financial and economic indicators of the project

The economic efficiency indicators of the project are shown in Table 6.

Table 6. Indicators of economic efficiency of the project

These indicators demonstrate a high degree of investment efficiency.

6. Conclusion

The project deals with the pressing problems of the further development of the Russian small business - the provision of energy resources for the local market.

The project also has an important humanitarian and social significance - it is the creation, directly and indirectly, of new jobs at the station and in enterprises that consume energy resources.

In addition, the presence of a thermal power plant in the region will attract investors to other projects in the region, since investors will be confident in the energy security of the projects.

The annual average Net profit during the implementation of the Project (five project years) is about 80 million rubles. It should be noted that during the first four years after the launch of the station, the loan received is fully reimbursed. During the first year AFTER the loan repayment, the net profit on the project will be RUB 486.403 million.

So the annual net profit confirms its high efficiency.

undoubtedly an important and fundamental document at the initial stages of project initialization. The feasibility study is included in the package of documents that the project office provides to the potential Customer, substantiates the benefits and benefits of the implemented project. However, his correct spelling interestingly fewer articles are devoted to teaching materials than, for example, writing Terms of Reference (TOR) And Technical project (TP). In today's article, we will try to fill this gap and tell in more detail about the feasibility study document itself and how to properly compose it.

Let's take a closer look at the document itself in detail.

Every project starts with processes initialization, with the formulation of goals for solving production problems.

Feasibility study is compiled to analyze the technical and economic feasibility of project project initialization.

It is at the stage of formation and consideration of the feasibility study that the customer decides for himself whether he will continue to invest in the project or not.

Rice. 1. The process of making a decision to start a project

The main goal of training feasibility study (feasibility study) one is to substantiate the necessity and expediency of creating/modernizing any system (hereinafter referred to as the Project). But the target audience for whom the feasibility study is intended may be different.

A feasibility study can be prepared both for internal use (for example, for coordination with the Management and further development of the project), and for external use (for example, to confirm the investment attractiveness of the project to interested parties, creditors and investors). Second case is the most common and in demand. The developer company prepares a package of documents, which, in addition to everything, includes a feasibility study, and transfers it in the form commercial offer potential customer.

Depending on for whom and for what purposes and tasks a feasibility study document is being prepared, the depth of elaboration of some sections may be different.

Here is a general summary table for the circle of potential stakeholders in the preparation of a feasibility study:

Once prepared, the feasibility study is agreed and approved by the Management. Management makes one of the following possible decisions:

• Reject the project as not expedient and economically unprofitable.
• Temporarily postpone the project with the need for further clarification.
• Approve the feasibility study document with further submission for approval
• Approve the feasibility study document with the authorization to implement the project.

If the project is agreed/approved, it is assigned a budget, and the Project Manager is given the authority to implement the project. Next, you canproceed with further implementation processes.

1. First option, in the case of a project within the company, the preparation of a feasibility study is directly involved Functional customer

Functional customer is a representative of the business unit who oversees further development project and responsible for the expenditure of funds for this project.

2. Second option when a feasibility study is prepared by a potential contractor planned to attract the implementation of the project. Also, third parties may be involved in the preparation of the feasibility study. consulting companies. It is generally accepted that the cost of work on the development of a feasibility study should be no more than 5-10% from the cost of the entire project.

A feasibility study is usually a separate document. However, it should be noted that in general terms, the feasibility study is similar to the business plan.

But the main difference between a feasibility study and a business plan is that the business plan directly describes the ways of implementing the strategy, goals and objectives of the organization in the context of the projects necessary for the implementation, and the feasibility study is more intended to justify specific project .

At the same time, a feasibility study can be drawn up in different ways, in some companies this short description on 1-2 pages of A4 format, and in some it is a set of documents, which are compiled by a group of dedicated specialists or even the entire department.

There is an official structure of the Feasibility Study according to the Soviet GOST 24.202-80:

In practice, each company prepares a feasibility study in its own format, describing only the main sections of the feasibility study.

Can be distinguished the main typical sections of the feasibility study, which are necessarily present in the feasibility study in one form or another:

• Project Summary
• Project idea. What is the idea of ​​the feasibility study of the project, what is it for. Project feasibility study plan with step by step explanation.
• Rationale. Why such solutions are offered, the reason for choosing this particular material, type of activity or equipment. It is also necessary to include all possible calculated risks in the calculation of the feasibility study.
• Need calculations for production (financial, raw materials, labor, energy). It is necessary to calculate how much funds will be required to launch this project. If you are preparing a feasibility study for obtaining a loan, you should also indicate all possible sources of income
• Economic justification(calculations that show the result of the enterprise's activities after changes)
• Conclusions and offers(summing up, conclusion, evaluation)

If you develop a feasibility study according to your own structure and format, be sure to include typical mandatory sections in the document. The wording of the sections may be different, but the semantic purpose of the sections should be reflected in final document.

The term for preparing a feasibility study depends on the degree of detail in the description of the feasibility study; the scope of the functionality planned for development and implementation; the number of processes under consideration; the readiness and relevance of the current regulations and other internal documents describing the provisions for the work of the processes under consideration; availability of ready-made infrastructure and dedicated personnel.

So the terms of preparation of a feasibility study, depending on the volume and complexity of calculations, from 3 days to several months.

For example, we will take the structure of the feasibility study according to GOST 24.202-80, because on this moment it has the most extended structure and is the official structure for the development of a feasibility study.

Why exactly SWOT analysis? First, it will most fully reflect the information of interest to us to describe this section. Secondly, this tool is the most common among Managers, because. displays the current state with strengths and weaknesses and allows you to identify the direction in which you need to move on, using strengths, in order to exclude weak sides and minimize risks.

Section 3. Goals, Criteria, and Limitations for EDS Implementation

These same indicators can be used later as key performance indicators. (KPIs, Key Performance Indicators).

KPI, Key Performance Indicators (Key Performance Indicators) - these are the performance indicators of the unit (enterprise) that help the organization achieve strategic and tactical (operational) goals.

Section 4. Functions and tasks of the implemented Project

Section 5. Expected technical and economic results of the implementation of the Project

The section provides a list of expected costs, economic efficiency, sequence and stages of implementation of the Project with the distribution of the necessary resources. If the project is calculated for more than a year, then the indicators are calculated both as a total and for each year separately.

Index ROI it is necessary to calculate at the stages: preparation of a feasibility study based on preliminary expert assessments; at the end of implementation based on assessments, taking into account the optimization of processes; during the period of operation of the System on the basis of actual indicators. Thus, the dynamics of changes and the actual effectiveness of implementation are monitored.

Also, in the feasibility study, calculations are given NPV and financial and economic indicators EBIT, NOPLAT and others.

NPV, Net present value ) is the sum of the discounted values ​​of the payment stream adjusted to today. Used materials:

1. UFK-Invest, Feasibility Study
2. Laboratory of business ideas How does a feasibility study differ from a business plan
3. Osnova.ru, We develop a feasibility study for the implementation of an EDMS (part 1)
4. Guidelines for the preparation of industrial feasibility studies

The business case is the reason that motivates an organization to undertake a particular project. This concept includes consideration of the benefits that the enterprise will receive from the results of the project. In addition, the business case considers various alternatives and also analyzes the project from a financial and economic point of view. The latter allows assessing the investment attractiveness of the project. How to write a business case? An example is in this article.

The essence of the concept

The business case is similar to the kind of analysis we do when planning a major purchase. For example, your own car. Suppose that we can allocate 35 thousand US dollars from the family budget for this purchase. The first step is to find out exactly which automobile concerns produce cars of the class we are interested in. Then we decide on the main technical specifications and agree on the final price with the company that sells this product. But that's not all. How to write a business case? An example in the question of choosing a payment scheme.

At the same time, there may be another situation when, first of all, the buyer is interested in the total amount that will have to be paid for new car. This is especially true in a situation where the final price is affected by the amount of interest when it comes to buying on credit. In this case, it is advisable to choose exactly the option that provides the lowest interest rate. Another way is to find the offer with the lowest monthly payment. Such an acquisition will allow you to stretch payments for as long as possible. Wherein monthly amount such a payment will not hit hard on your pocket. When carrying out a financial and economic justification, attention is paid to similar aspects.

Components of a business case

There are no clear rules documentation economic justification. Its main task, as in the case of the feasibility study of the project, is to determine the tangible or intangible results of its implementation. Material outcomes are those that can be measured.

Below is a list that gives an idea of ​​those material components that are important in the process of formalizing the financial and economic justification of the project. It would be nice to say that not all of them require mandatory documentation. The need to fix them on paper depends on the complexity of the project, the cost and the number of risks for the enterprise.

Tangible Elements of the Business Case

In summary, the main tangible components of a business case are savings, cost savings, the likelihood of ancillary income, gains in market share, customer satisfaction, and cash flow estimation. In addition to the material components of the economic justification, it must also contain non-material components.

Intangible Business Case Elements

Among them may be probable, but not planned in advance costs of the company. Key intangible elements of the business case include transition costs, operating costs, business process transformation, and employee reorganization. In addition, recurring benefits are among the intangible components of the business case. How to write a business case? An example is below.

Other components of the business case

It should be emphasized that, along with the benefits and the assessment of the cash flow in the EA, attention must be paid to alternative approaches and methods for implementing a particular project in practice. How to write a business case? An example in the following situation.

It is known that the market has a large number of manufacturers of various products. However, each of them sets its own price for its own products. What to choose? The option, which is turnkey solution worth US$2 million. Or an alternative solution that provides for partial acquisition from a third-party manufacturer and, to some extent, the use of its resources?

Actually, aspects of just this nature often have to be considered when compiling the economic justification of an enterprise. Any of the proposed options should include the previously listed tangible and intangible components. At the end of the business case, it is necessary to indicate proposals and conclusions. In addition, additional materials can be added to it.