Introduction to Large Projects
No construction related project, especially those that are large in scale, can proceed without adequate financing. Additionally, this requires a proper development of a Business Plan for Large projects.
There are so many business ideas in Nigeria but these ideas must be tested through a business plan. The promoters and lenders to the projects would have to ensure the project throughout its building cycle will have to be able to cover the costs incurred by each participant in the project from breaking ground through completion. When seeking project financing for such a large capital investment, the objective is to borrow sufficient financing to bridge the time between making payments and obtaining revenues.
In Nigeria, there are some many projects that have been undertaking without essential planning and the development of a simple business plan. A well-written business plan is essential to the success of a Large project for several reasons.
It requires that the new project owner thoroughly think through all the steps that need to be followed to develop a successful project before construction starts.
It requires the new business owner to answer the critical questions: Who will manage the project upon completion and will they have all the skills and experience to make it profitable? Will there be enough customers who will buy the project’s products or services? How much can be charged for these products or services, and will the business be able to compete? Where will the start-up money come from? How long before the business/project turns a profit? What will be the risks and how will the risks be addressed?
The well-written business plan for large projects is also a tool to obtain financing for the business. It demonstrates to lenders, investors, or grant sources that the project idea has a good chance to succeed and that their money won’t be lost in a failed venture. And finally, a good large project business plan is the roadmap for the owners and managers to follow. If the new business project idea is falling short of its projected revenues or if expenses are exceeding what was predicted, it gives management the opportunities to make adjustments before it is too late.
The minimum elements of a good large project business plan outline are:
The Company and the Industry
This section demonstrates a thorough understanding of the Industry and how the proposed large project will be set up to operate within the Industry. It should also address the new project company’s strengths and weaknesses in the Industry.
Product and Related Services
This section should discuss how the proposed products and/or services the project would create will distinguish themselves in the marketplace. What is unique or better? How will they be produced? How do they address a market opportunity?
Market Research and Analysis
This section is critical because it is directly related to the sales projections in the pro forma financial statements. It addresses who the potential customers are and how much of your products/services they are likely to buy. Market research involves getting information from published sources, from surveys or questionnaires, and from Industry “insiders”. It is essential that these market gatekeepers be identified and interviewed extensively during market research. They will have the best knowledge of whether or not the proposed products/services have a good chance or not of successfully penetrating the markets and who the biggest competitive threats will be.
This section demonstrates that the project owner/sponsor team is fully aware of the competitive forces in the marketplace for the project products. It explains the new business’s strengths over the competition and how the new business will overcome the competitors’ advantages and compensate for weaknesses upon entering the marketplace. Once again, market gatekeepers can be extremely helpful in getting realistic information about the competition.
This section describes in detail the methods the new business will employ to successfully penetrate the marketplace. Will it require salespeople? What will be the market share goals for the first three years? How will these goals be achieved? What will be the costs of advertising and promotion?
Management and Ownership
The specific people who will be managing the new venture should be identified here. Complete resumes of key management people should be provided. If the owners don’t possess adequate management expertise for this particular business, it may be essential to find an industry partner who, in return for an ownership share, will provide experienced management to the venture. If so, identifying the industry partner is important, along with the provision to the venture specific expertise. Additionally, explaining the terms of the partnership is necessary here too.
Milestones, Schedule, and Strategic Planning
This section should discuss the schedule for the development of the new venture, along with key anticipated milestones such as financing completed, construction completion, the opening of business, achievement of breakeven, etc. Any strategic planning, such as an annual project or business objectives should be included here.
Critical Risks and Problems
A listing of critical risks, and discussion of anticipated problems and how to overcome them. Moreover, this section greatly strengthens the business plan because it demonstrates that the owner/management is fully aware of the various pitfalls that the new venture will likely encounter and how the management plans to deal with them.
Financial Data and Projections
This section should include the outputs of a Financial Modelling exercise it shows the Sources and Uses of Funds, Three years of pro forma profit/loss statements, cash flows and balance sheets, and a Breakeven Analysis. All the assumptions made in the pro forma should accompany them on a separate narrative sheet. The forecasts of revenues (sales) should tie in with the information learned in the Market Analysis.