How to make an economic justification

The main purpose of economic justification is to bring to the investor the costs of the project, the timing of his return and the results. The difference of this document from the business plan is that it is made for new products of existing enterprises, so issues relating to market analysis; marketing research in it are not set out. In the business case usually contains a detailed description of technologies and equipment, as well as the reasons for their choice.

In the preparation of feasibility it is necessary to observe certain sequence. It begins with the original data, information about market sector. Then describe the existing opportunities for the development activities, sources of raw materials, material resources for business expansion, the capital cost required to achieve the objectives, production plan, financial policy, and General information about the project.

Thus, the economic rationale provides a description of the industry where the company operates, the intake of products, prices. The financial part of this document includes the terms of borrowing, sources of their coverage. The calculations are presented in tables that reflect the movement of cash flows.

In the preparation of feasibility it is necessary to examine the current position of the enterprise, its place in the market, the technology and equipment. In addition, determine ways to improve the profitability of the company and business development, to predict the level of profitability that can be achieved during the project implementation, to study the necessary technical data to perform the level of training of personnel. You will also need to plan the implementation of the project, a budget and plan cash inflows and also provide a General economic assessment of investments.