Business plan efficiency example
Initial stage of investment project analysis
Significance of project implementation in a specific region of the country
At the first stage, the social and economic significance of the project is determined in this particular area. The number of new jobs and the salaries of the employees of the new company are calculated and registered. The relative indicators of wages are determined, such as comparing it with the average for a region or city. From the calculations of the planned profit from the project, deductions and payments to local, regional and federal budgets are calculated.
Also, at the first stage of assessing the effectiveness of a business plan, the scale of the future enterprise, the investments and funds attracted through its activities are clearly defined. Describes the initial production volumes and the market share of the enterprise in the region in the next few years.
Taking care of the environment is an important planning point
Everyone knows that enterprises during long-term operation can cause irreparable harm to the environment. Therefore, in the performance indicators of the business plan, it is imperative to include an item on measures to prevent air and water pollution. List all filtration and purification methods that are planned to be delivered in the next 5-10 years.
Second stage Calculating the effectiveness of the business plan
Based on the results of passing the stage of evaluating an investment project, a conclusion is made about the profitability and safety of investing money in it. Evaluation of the economic efficiency of a business plan
Calculating net present value
Discounted includes adjustments to projected revenues for inflation and time. Net present value (NPV) is the sum of all income from the implementation of the project, adjusted for the amount of the discount rate. Annual project costs are deducted from this amount. The formula for calculating NPV takes into account the initial investment as a negative value, to which is then added the net income for the year worked, divided by the sum of the unit and the discount rate. For each year worked, the ratio of income to the sum of the unit and the discount rate is added to this value.
An NPV value greater than zero indicates that the project will cover the costs of its implementation in the future. This can make it attractive to investors. But net present value is only one of the performance indicators that reflect the attractiveness of the project for investment.
Hello dear readers! When reviewing any business plan, special attention is paid to its financial part. After all, a person who is ready to invest in a project first of all needs to know how quickly his investments will pay off and what profit he will receive.
If the calculations show that the business project will not provide a good return, then the investor is likely to make a negative decision on financing. Would he be interested in risking his money? He can invest the same funds in a reliable bank at 9-10% per annum and receive stable income.
Can your project provide the same profitability?
To understand whether it makes sense to implement the conceived idea, it is necessary to analyze the effectiveness of the business plan. Thanks to him, you will understand whether it is worth offering this project to an investor at all. In other words, is it worth the candle.
How to analyze?
In any project there are basic economic indicators that you need to pay attention to first of all.
- The total amount of investments.
- Net profit per month, year.
- Payback period.
Let's take each point separately.
When you plan to implement a project, you need to calculate how much money you need. Let's say you need equipment and materials for your new production for a total of 2 million rubles. Is the investor or lender you are contacting to provide you with this amount?
If yes, then everything is great. But you understand that this is not a penny. And in case of failure, you will have to somehow return these funds. Therefore, you need to approach the implementation of the idea with a cool head, having previously made all the calculations for the effectiveness of the project.
Mastering the basics of economic literacy is a must for every novice businessman who is focused on building a stable and promising enterprise. Drawing up a plan for the implementation of a planned business undertaking is an understandable and necessary measure for everyone. One of the stages of obtaining information on how the planned business undertaking meets the expectations assigned to it is to evaluate the effectiveness of the business project.
Who assesses and how
In the post-Soviet mentality, formulating business goals and evaluating them for viability was, until recently, something not entirely mandatory. This is due to a number of reasons, the essence of which boils down to one thing: you will spend time and money on making forecasts, and there are no guarantees that the forecasts will come true.
There is, of course, some truth in this assessment of the situation. However, who, if not an entrepreneur, needs to try to raise the level of domestic business processes, improve their own professionalism and force the state machine to correspond to the modern socio-economic demand?
In this regard, the assessment of the effectiveness of their own business projects should be carried out primarily by the entrepreneur himself and on his individual initiative. Initial data for carrying out a comprehensive analysis can be ordered from specialized specialists.
A holistic approach
One of the most informative analytical studies of aspects of the effectiveness of a planned entrepreneurial venture is the analysis and comprehensive assessment of the effectiveness of a business project.
The essence of the approach is that the project is analyzed in several directions:
- economic analysis;
- institutional analysis;
- marketing analysis;
- technical and organizational assessment;
- social performance assessment.
Conclusions for each of these areas are the basis for the formation of both short-term and long-term strategies of the enterprise.
Despite the fact that in the process of its development a business needs to solve many different problems, the most important indicator of the effectiveness of an undertaking is its economic efficiency.
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- analysis of theoretical aspects of management in the field of business planning management;
- consideration of the essence of the business plan, its purpose and content;
- an assessment of the economic efficiency and financial viability of a business plan, according to the initial data for the course work;
- formation of conclusions based on the research results and development of recommendations.
The theoretical and methodological basis was made by scientific and practical publications that reveal the processes of business planning and highlight the issues of increasing the efficiency of business planning at enterprises and organizations.
Methods of analysis of the scientific and information base, synthesis of the obtained data into theoretical conclusions and practical recommendations were used as tools.
The scientific significance of the work is to clarify the relevance of the issue of the effectiveness of business planning in modern turbulent market conditions.
Theoretical aspects of management in the field of business planning
- an assessment of the prospects for the development of a company or project, which allows you to be ready for changes in the market and economic situation;
- improving the qualifications of the management staff, forcing managers to practically think about the capabilities of the company, its competitors and other problems, which leads to a more qualified decision;
8. Evaluation of project effectiveness
8. ... Investment project efficiency indicators
Evaluation of project performance indicators is based on cash flows from operating and investment activities of the project. The calculations took into account the cost of servicing loans. Cash flows were discounted in one month increments.
PERFORMANCE INDICATORS OF THE INVESTMENT PROJECT
The period for calculating integral indicators is 48 months (four years).
The discount rate in rubles is set at 22%.
The payback period of the project is 29 months. We can state a fairly normal payback of the project.
The discounted payback period is 36 months. This value shows the significant influence of the time factor on the cost of the project.
The average rate of return is 103.80%. This value of this indicator can be considered good.
The net present value for the entire duration of the project was RUB 9,223,890, which indicates the excess of the project's discounted net cash flow over investments and indicates the advisability of making a decision on financing and implementing the project.