Murat Yulek, Ph.D.
Managing Partner
PGlobal Global Advisory and Training Services
Identification
Preparation
Appraisal
Negotiations/Internal
Decision Process
Implementation
Physical completion
Impact assesment
Post-Completion
Evaluation
Identification
Project preparation
/ Internal Checks
Preparation of
bankable document
• Identification of possible
financiers
• Sharing bankable document
with them
Negotations with
financiers
Implementation
Bankable Documents
 Why do we need them?
 Types
 Feasibility Studies

A report that describes a project from various angles
in such a format that is generally required by
financing entities in order to make the financing
decision:
 To whom the products / services will be sold, why
and how
 How the products/services will be
acquired/produced and delivered to the market
 Financial summary and returns
 Risks involved and mitigating measures
Projects owners need “external financing” to implement their
projects
while,
Financiers need “bankable document” to judge if a project is
worthwhile to finance, i.e., if it is “bankable”
thus:
Project owners need to prepare bankable documents to attract
financing or equity investments
Bankable documents provide a common language between
project owners and financiers
Two related types

Feasibility Report
Description of viability aspects of a project by an existing entity
 Projects (Greenfield, expansion, ...)

Business Plan
Blueprint of an action plan and evidence of viability of a new business
 Starting up businesses

Feasibility study is an analysis of the viability of a
project. Feasibility study helps answer various
questions:
 Should we proceed with the proposed project?
 How much are we expecting to earn?
 What are the risks and how are we going to
mitigate them?
Market Situation
Technical ability
Future trends
Company resources,
tangible and
intangible
Financing conditions
Feasibility
I. Description of the Project
II. Market Study
III.Technical Feasibility
IV. Organizational/Managerial Feasibility
V. Financial Feasibility
VI. Conclusions

Define the project
 Type and specifications of products / services to be brought to the
market
 Outline the general business model (i.e. how the business will make
money)
 Describe the technical processes
 Specify the time plan and milestones in reaching the full capacity from
the start
This section defines where and to whom the
products/services will be sold in order to maximize revenues:
 Who are going to be my clients and sources of my
revenues:
▪ Description of the Industry
▪ Analysis of the Market and Competition
▪ Future Market Potential
 Sales Projections

Industry Description
 Describe the size and scope of the industry, market and/or
market segment(s).
 Estimate the future direction of the industry, market and/or
market segment(s).
 Describe the nature of the industry, market and/or market
segment(s). Is it stable or going through rapid change and
restructuring?
 Identify the life-cycle of the industry, market and/or market
segment(s). Is it emerging, growing, mature, declining?

Current Market Analysis
 Identify whether the product will be sold into a commodity




market or a differentiated product/service market.
Identify the demand and usage trends of the market or market
segment in which the product or service will participate.
Examine the potential for emerging, niche or segmented
market opportunities.
Explore the opportunity and potential for a branded product.
Assess market usage and your potential share of the market or
market segment

Competition
 Who are your competitors (direct / substitute products) ?
 Describe the industry concentration. Are there just a few large
producers or many small producers?
 Describe the major competitors. Will you compete directly against
them?
 Analyze the barriers to entry of new competitors into the market or
industry. Can more competitors enter market easily?
 Describe the price competitiveness of your product/service.

Potential Buyers and Sources of Revenues
 Your current key customers including governmental clients and the
potential for new or renewed contracts.
 Any sales leads that may generate new customers or clients.
 A list of market segments you intend to target such as seniors citizens,
working mothers, organizations, specialty retailers, etc.
Keep these to a logical detail and preciseness. Do not give strategic
information openly. However be ready to share this information at later
stages of negotations.

Sales Projections
 Specify main assumptions (prices, capacity utilization and
physical production amounts) and project sales (sales of key
products categories as well as the total sales)
This section describes the technical processes to be utilized in order to
produce and deliver the products to the market. Explains



How the production will be done (technology)
Where the production will be done
Why the production will be done there
 Ease of access to raw materials, energy, markets
 Ease of access to manpower with necessary qualifications
How the products will be delivered to the market (distribution
channel)
 Cost structure






Materials
Labor
Transportation or Shipping
Other production costs
Administrative costs

Materials
 Estimate the amount of raw and intermediate materials (and
their specifications) needed
 Explain current and future availability and access to raw and
intermediate materials.

Labor
 List the number and types (and qualifications if necessary) of
employees needed to run the business (blue and white collar)
 Evaluate the potential to access and attract qualified
management personnel

Transportation or Shipping
 Explain transportation and shipping services and resources that
will be required to conduct the production and delivery of
products to clients;
 Determine capital expenditure needs (if applicable such as
trucks, vehicles etc)

Production Premises
 Describe necessary production facilities including auxilliary
buildings
 Determine capital expenditure needs

Location of Production Premises
Explain ease of access to
 raw materials
 Logistics/transportation services
 Energy and utilities (electricity, natural gas, water, etc.)
Identify
 Environmental requirements
 Other regulatory requirements
 Economic development incentives provided by the government

Technology
 Explain the selected technology / supplier; advantages over
alternatives
 Discuss reliability and competitive power of the selected
technology / supplies (access to spare parts and technical
support, has the technology been tried elsewhere; references?)
 Explain limitations or constraints of the technology.
This section describes the human resources and the structure of the company
by presenting

Brief biographical sketch of key shareholders, top management and the
team responsible for the project:
 Business track record
 Educational and professional qualifications
 Awards, social aspects (e.g. President of business association etc)

Organizational Chart

Related corporate qualifications (ISO certification etc)

Existing human resources
 Numbers and skill categories (blue collar, white collar and sub
categories)

Estimate the total capital requirements and relevant timetable

Estimate equity to be invested from your side

Estimate external equity / financing needs and repayment
schedules

Project Income Statements

Project (Free) Cash Flow Statements

Calculate Financial Returns

Estimate the total capital requirements
 Estimate and schedule capital expenditure requirements for
facilities, and equipment
Project Cost
Total
in euros
Total Capital Expenditure
Item 1
Item 2
Item 3
Contingencies (10 percent)
21.111.135
12.409.932
2.773.794
4.008.215
1.919.194
Financing
Project Owner
Financing
11.241.728
7.445.959
2.773.794
1.021.975
9.869.407
4.963.973
4.008.215
897.219
2009
Project Implementation
2010
2011
7.388.897
4.343.476
970.828
1.402.875
671.718
6.333.340
3.722.980
832.138
1.202.464
575.758
7.388.897
4.343.476
970.828
1.402.875
671.718
 Estimate and schedule working capital needs (cash, inventories,
receivables and payables)
 Include contingency capital needs due to construction delays,
technology malfunction, market access delays, etc.

Estimate equity and financing needs
 Estimate external equity needs.
 Estimate financing (bank credit) needs.

Project Income Statements and (Free) Cash Flow Statements
 Use Information generated in earlier sections
 Project Income Statements
▪ Revenues
▪ Expenditures including depreciation
 Project (Net) Cash Flows by aggregating the following
▪ Investment Outlays
▪ Capital Expenditures
▪ Working Capital Needs
▪ Operational Cash Inflows
▪ Profit + Depreciation
▪ Equity and Financing
▪ Specify schedule fo equity injection
▪ Specify schedule of financing and its servicing (principal + interest/mark up)

Assess financial viability
 Project IRR
▪ The project’s own viability (i.e., independent of the way it is
financing). This is equivalent to Equity IRR when the project is 100%
equity financed. To calculate the Project IRR, simply calculate net
cash flows of the project with no bank financing.
 IRR (Equity)
▪ The return to the equity investor when part of the project is
financed by bank/debt. To calculate the Equity IRR, simply
calculate net cash flows including the cash outflows due to
repayment of bank financing.
Note that Equity IRR > Project IRR when bank financing is utilized.
IRR is the value of the variable r that satisfies the following
condition:
n

t 0
Ct: net cashflows
n: number of years
Ct
(1r )t
= 0

Other methods used in financial analysis
 Net Present Value
 (Simple) Payback period
This section analyses risks associated with the project implementation
and the operational phase, as well as the mitigating measures
 Identify key risks; assess their importance for the success of the project
 Explain mitigants you will employ
Summarize the project and its viability indicators.

PGlobal Global Advisory Services: Corporate Valuation Training Materials, Ankara, 2009

Development Bank of Turkey, Evaluation of Capital Investment Projects: Training Notes (in Turkish) Ankara, 2009.

Dr. Ertan Yülek, Handbook for the Preparation of Feasibility Reports (in Turkish), Sakarya University, Turkey, 1982.

UNIDO Manuals

Covello A. Joseph and Brian J. Hazelgren. The Complete Book of Business Plans. Illionis: Sourcebooks, Inc., 2006
Various web resources including:
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Thompson, Alan. Enterpreneurship and Business Innovation, Successful Business Start-ups and Business Planning. Murdoch
University, 2005. Web. 14 December 2009
Easterbrook, Steve. Requirements Engineering. Department of Computer Science, University of Toronto, 2005. Web. 16
December 2009
Hofstrand, Don and Mary Holz-Clause. New Business Development - Starting a Business. Agricultural Decision Maker Iowa
State University, Web. 10 December 2009.
Wolfe, Lahle. Guide to Women in Business, A Comprehensive Feasibility Study Supports Business & Marketing Plans. Web. 10
December 2009.
Thank you …