The majority of companies expect an investment selection process from a business plan. Compared to the business plan for the whole of a company (or stand-alone project) should be convinced in the specific context of its business. It (business plan) is therefore should be in the context of the company goals and constraints.
Is the project aligned with the company’s strategy?
Some groups decline their strategic objectives up to 3-5 years and ask the project leader to explain how the project contributes to the achievement of one or more of these objectives. A project can be attractive in itself, but contribute to disperse the group’s resources.
In an industrial group with a strong technical culture, the parent leaves a strong autonomy to divisions in their investment choices. It noted that the subsidiaries which are mostly run by engineers, prefer industrial productivity projects, technically more sophisticated to the detriment of commercial development projects. It then sets a target that 60% of new projects are projects that contribute to increased sales of new products or markets. Low profitability project will be interesting for the company if it can develop a new skill.
Are operational action plans under control?
The project manager must demonstrate that he has a clear vision of its deployment. The business plan is a summary document where action plans are summarized. However, during the oral defense, the project manager must be prepared to respond quickly and accurately to the inevitable questions on the operational implementation. Communicate the names of those playing a key role in the project also helps to lend credibility to it if their expertise is recognized.
Is the project cost effective?
The company has an objective vis-à-vis its shareholders profitability or shareholders wealth. The company will not be profitable if profitable projects are selected beforehand. We will demonstrate the economic viability of the project, regardless of the choice of funding from the payback criteria (CD), net present value (NPV), internal rate of return (IRR) or profitability index (PI).
To assess the profitability of a project within the company, it should be taken into account that the additional flow does not exist in the absence of the project. The purpose of calculating profitability is indeed to show whether the project contributes, its duration, improve overall company cash position.
The company can improve its profitability by providing several uses of the same resource:
A company distributing industrial measuring instruments needed materials of the latest model to commercial demonstrations. This material is not used full time, it developed a parallel service activity for companies with insufficient activity to recoup the purchase of equipment. To assess the profitability of this new activity, no investment cost is taken into account because it does not require additional investment, the equipment being used in the low points of the business.
Was the Project developed considering different situations?
Groups require project leaders to develop several scenarios. These scenarios may cover different assumptions of turnover (high, medium and low, fallback scenario) or modalities of implementation (timing of investments, choices between outsourcing and investment etc). Presenting different scenarios requires expertise in the area. Any new project encourages an exchange opinions between policy makers and the project leader.
Will the project be fitted into the company’s management framework?
Companies require a minimum percentage of resource utilization and internal company resources.Preexisting internal resources would be sufficiently exploited to the detriment of the overall profitability of the company.
