Before launching your project, do a feasibility study.
This study should cover different aspects: commercial feasibility or market study, technical feasibility or technical study, financial feasibility or financial study, economic feasibility or economic study.
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What is the financial study
The financial study is an important phase before starting your project and it must decide on its profitability and on the possibility of financing it, therefore:
Evaluate the estimated cost of the project;
Identify the financial risks of the project;
Develop its financing plan;
Analyze its financial balance;
Evaluate its profitability;
Identify sources of funding (internal and / or external).
That said, before embarking on a financial study, first establish a strategic analysis in order to properly identify your strengths and your opportunities.
The financial study must include 3 essential parts:
1 An investment plan
2 A forecast income statement
3 A cash flow statement
Let's find out in more detail what these shutters should cover:
The financial plan
The financial plan is the document which must summarize the estimated cost and the sources of financing for these needs.
Evaluate the estimated cost of the project
If similar projects have already been done and documented within the organization, the project manager should use them as a basis for making his estimate of the projected costs for this project.
It is also interesting to estimate not only the estimated costs of the project, but the maintenance costs once the project is completed, so that they are also taken into account in the decision to launch or not the project.
In any case, this is what the PRINCE2® project management methodology recommends when filling in the costs section in the opportunity study, not to forget the maintenance costs linked to the implementation of the project. .
If no similar project has ever been costed and the project is completely new, one method of estimating costs is to get a better estimate because several people will have validated it.
An estimate can then be requested from participants with different levels of experience and expertise.
In addition, this technique promotes exchanges between the project manager and the team that is likely to work on the project.
Ask yourself the right questions.
For the total duration of the project, what will be the:
Operating expenses (purchase of goods, raw materials)
Purchase of supplies (electricity, water, etc.)
Maintenance supplies (stationery, small supplies)
External charges (rents and rental charges, leasing rents, insurance, maintenance, cleaning, etc.)
Other external charges (Legal costs, fees, postage, telephone, advertising, transport and travel costs, travel, etc.)
Taxes and duties (business tax, other taxes except IS, taxes, etc.)
Staff costs (salaries and charges on salaries, service providers)
Financial charges (interest expense)
Exceptional charges (any unforeseen charge)
If human resources are working on the operational and the project, a percentage must be applied to expenses in proportion to the estimated time spent on the project.
Sources of funding
Depending on the nature of the project, the sources of funding can be diverse:
Equity,
Bank loan,
Venture capital (Business Angels, ...),
Aid / subsidies,
Crowdfunding, ...
Sources of funding
Depending on the nature of the project, the sources of funding can be diverse:
Equity,
Bank loan,
Venture capital (Business Angels, ...),
Aid / subsidies,
Crowdfunding, ...
For the viability of the project, it is important that the financing plan is balanced, this means that the total estimated cost must be equal to the allocated resources, whether they are own resources (your contribution) or external (aid, credit, loan ..).
After you've established your initial financial plan, it's time to find out if your business will hold up over the years, because that's all the point!
It will then be necessary to establish a financial plan over 3 years.
The provisional income statement
The provisional income statement is a financial table that includes fixed costs and variable costs, and estimates the turnover, the average cost of a service or product ...
The cash flow statement
The cash flow table, also called the cash budget, is a plan that shows all the cash flows (expenses and income) realized and to come.
This provides detailed visibility on liquidity in order to be able to honor its commitments.
Conclusion
By doing your financial feasibility or financial study you are taking one more step towards finalizing your business plan, and you are ensuring the viability of your project.