Solution:

What is Project formulation?

• Project formulation is as important as not so easy. However, the entrepreneurs often make errors while formulating project reports or business plans.

The errors widely noticed in project formulation are:

1. Product Selection:

• It is noticed that some entrepreneurs commit mistakes by selecting the wrong product for their enterprises.

• They select the product without giving due attention to the product for their enterprises.

• They select the product without giving due attention to product-related other aspects such as the size of the product markets, its future demand, competitive position, lifecycle, availability of required labor, raw material and technology.

• Hence, when you are selecting a product, take a comprehensive View.

2. Capacity Utilization Estimates :

• The entrepreneurs usually make over optimisitc estimates of capacity utilization. Their estimates are based on a completely false premises.

• The estimates are made in complete disregard of present-enterprise performance, prevailing market conditions, competitive atmosphere, the technical snags, etc.

• A business plan formulated as such falls prey to financial jugglery.

• Hence, avoid such temptations while estimating capacity utilization for your enterprise.

3. Market Study:

• Product production is ultimately meant for eventual sale. Hence, the market study of the product assumes importance.

• The market study continues to be a grey area. But, some entrepreneurs pass by this component of their business plan completely.

• Based on their nebulous ideas and scanty and scattered information on the demand and supply of their proposed product, they conclude that the market is just there waiting to be tapped.

• This is a wrong attitudinal block. Avoid it.

4. Technology Selection :

• The requirement for technology differs from product to product depending upon the nature of products.

• Swayed by the reported profit margins, the entrepreneurs sometimes plan for technology not possible to set up within limited financial resources.

• Thus, the enterprise is foredoomed to failure in the absence of technological feasibility. Hence, make sure of your technological feasibility.

5. Location Selection :

• The entrepreneur often makes two types, of errors while selecting location for their enterprises.

• First, they are completely swayed by the Government offer of financial incentives and concessions to establish industries in a particular location.

• This becomes their sole and overriding concern completely disregarding other factors like market proximity, availability of raw materials, manpower, and infrastructural facilities.

• Second, the entrepreneurs select a location for their enterprises merely because it is their home town or they own ancestral land there, which is to an appropriate location.

• Make sure you do not fall prey to such temptations.

6. Selection of Ownership Form :

• Many enterprises fail merely because the ownership form of enterprises is not suitable.

• Hence, select a suitable form of ownership by taking a comprehensive view of the factors affecting the selection of a form.

• The project report/business plan is a blueprint of all those activities that an entrepreneur proposes to engage in.

• It is not only a guide frost for business’ activities but also an essential exercise for developing cost and benefit estimates resources planning, and feasibility testing of the proposed business activity.

• The project report is required for purposes of obtaining funds from financial institutions and banks. The project report for an entrepreneur is what a guide map is for a traveler.

• To complete the project within a stipulated period and cost, all activities involved in the project are scheduled in a sequential relationship called a network or schedule of activities.

• The common errors made by the entrepreneurs while formulating project reports/ business plans are also highlighted.