The Executive Summary
To enhance the clarity of a feasibility study, it is very important to begin with a brief summary of the proposal. This brief summary is usually referred to as the “executive summary”. It provides a glimpse into the contents of the study and tells the potential investor whether the project is worth investing in or even whether the proposal is worth reading. Another purpose of the executive summary is to attract the attention of the reader, particularly the appraisal officer of a bank or lending institution to read on and internalize the contents. The summary should therefore be very short and certainly not more than one or two pages.
It should state clearly the unique features and factors that will enable the project to succeed in a highly competitive social and economic environment. The summary should contain essential and brief information on the background, character and competence of the core promoters and the management team. This is borne out of the need to ensure that those behind the project are not only competent but are also worthy in character to provide honest and transparent leadership in the management of the project resources. A brief description of the products or services to be undertaken including the market, promotional strategy and information on the location, site, infrastructure and how the raw materials and other inputs will be sourced should also be provided.
Other essential information in the executive summary include, the type and source of technology and the production process, the source and type of raw materials, a summary of total project costs, key assumptions made in the financial analysis, financing arrangements, highlights of financial projections especially the sales and profit forecast, profitability ratios and project performance indicators projected for at least give years should be included.
Importance of Presentation
The physical presentation of a feasibility study is equally important in determining its usefulness and impact. To do this effectively, the project promoters should provide a table of contents and tab each section for easy reference. This approach will enable potential investors to easily identify and concentrate on those areas they are most interested in. If the financial projections and project performance indicators are likely to prove a critical part of the study, they should be included as an appendix to enable the appraisal officer have easy reference to the data, while reading the main body of the feasibility study.
It should also be emphasized that the use of an appendix on a loose leaf to package the study will facilitate any subsequent revisions or insertions the promoters may find necessary. The importance of presentation will be further enhanced by the use of bar charts, graphs, diagrams,.photographs of products, production facilities etc. as a critical tool to inform, educate and facilitate the appraisal and the actual project implementation.
The project background should provide a description and analysis of the product to be manufactured or services to be rendered. The operating environment should be explained in a concise manner. This should include the range of elements and forces outside the proposed project that will affect or are affected by the organisation. The operating environment should include government, business in the same or related industry, cultural and technological innovations, social, political and other relevant institutions.
The promoters should also discuss the nature of the proposed industry in general and the prevailing situation of other industries in the economy. The project background should be described in detail and the project sponsors identified together with the reasons for their interest in the project. The chapter should also include the project ideas and other reasons that serve as the guiding principles before, during and after the preparation of the study particularly why the promoters want to establish the project.
The historical development that necessitated the decision of the promoters to undertake the project should be discussed. This will highlight the motivating force, the compelling factors, the vision and mission of why the promoters want to establish the project. Among other things, the vision should describe the anticipated future of the project being proposed and its socioeconomic impact on its immediate community in particular and the nation in general. In the same vein, the mission of the project should also be discussed. For this purpose, a mission statement that explains what functions the proposed business will perform, how it will perform these functions, the clients the business will serve and how it intends to accomplish these goals.
For any project being proposed, it is necessary to identify the individuals or any corporate body behind its establishment. This is in line with the maxim that says that “for a project to be successful, individuals who are competent and worthy in character should be recruited to manage it’s affairs”. Therefore, financial institutions and other investors place a very high premium on the background and character of the promoters since long term loan and equity financing is a more risky venture than normal bank lending.
The names, titles, present and past occupation, address, etc of the chief promoters and other project sponsors should be included in the study. As much as possible, the profile should be written in prose form with highlights on the social and professional accomplishment of each promoter. The chapter should also explain the specific role or function the promoters will take in project implementation. Other information to be provided include their contribution in cash or kind and any other relevant information that will convince investors of the credibility and competence of the promoters and the need to invest in the project.
Incorporation and Legal Status
Another major background information is a brief description of the legal status of the proposed business. Under the Nigerian Law, a business could be undertaken either as a sole proprietor, a partnership, a cooperative or a limited liability company. The promoters should explain the current or proposed legal status of the business. In doing this, it should be realized that institutional investors are mostly interested in investing in limited liability companies established under the Nigerian Law through the Corporate Affairs Commission.
For a company that is already established or incorporated, the date and form of incorporation should be provided along, with evidence of the company’s share capital (authorized and fully subscribed, the Memorandum and Articles of Association, the Directors of the company, their shareholding profiles and other information that will protect the interest of external investors. If the proposed business is not yet incorporated, the promoters should explain the efforts they are making in this regard.
A brief description of the activity of the company since incorporation that is relevant to current finding, application should be given. This information will help external investors to evaluate the past performance of the company and its future potential. The comment should be brief. Nevertheless, it should point out any past successes or failures of the company in terms of products or services developed which will enhance its future.
Author of Feasibility Study
The feasibility study should provide information on the author(s) of the study. However, the information provided should be very apt and possibly not more than one or two paragraphs.
Shoe Making Business Plan In Nigeria | Feasibility Study (2019 PDF/Word)(Opens in a new browser tab)