What do you mean by project selection

Project Selection
After formulating project idea, the same should be translated into project profiles. A project profile contains the following elements:-
a) Economic size
b) Status of industry or scope
c) Raw material availability
d) Cost of production
e) Capital cost
f) Utility requirements
g) Infrastructure facilities needed
h) Profitability
i) Government Policy

Now, a large number of project profiles are available for an entrepreneur. He has to select the appropriate project profile for his project. The following can be used as tools for selecting the appropriate project profile
a) Investment size
b) Location
c) Technology
d) Equipment
e) Marketing
f) Power & Water
g) Others’ performance
h) Working Capital Requirements
i) Labour Component
j) Economic Viability

a) Investment Size – The size of the investment depends upon the capacity of the entrepreneur to mobilize the resources from various sources viz., big financial institutions, commercial banks, issue of equity and preferential shares, borrowings from friends and relatives etc. If the entrepreneur is able to pool in the resources from all the above sources, he may reduce his own contribution towards resources considerably. Now a days, bigger financial institutions and commercial banks are insisting on lesser margin as promoter’s contribution for financing any project.
b) Location – A smart entrepreneur will like his project to be located at a place which will be closer to either the district headquarters or state headquarters for the reason that all the Government Offices, State Financial Corporations, State Industrial Development Corporations, Electricity Board and other government agencies can be easily accessed by him at the time of implementation as well as execution of his project. He will give importance to the location in such a manner that it is well connected by road, rail and sea. This makes the transportation of goods to the buyers easier and also for bringing the inputs whether it is indigenous or imported to the site of the project. In short, the location having very good infrastructure facilities like road, rail, port, airport is more important for any project at the time of implementation and execution of a project.
c) Technology – An entrepreneur will always prefer to have technology which is locally available i.e. indigenous for the reason that foreign technology is more expensive and may pose a lot of problem such as non-availability of expertise, higher dependence on skilled labourers who may not be locally available which in turn increases the cost of labour, machinery indigenously made may not be suitable for any project which involves foreign technology etc.
d) Equipment – While selecting the equipment for any project, the entrepreneur should take the advice of the experienced technical consultant so that he need not compromise on quality of the equipment which he will employ in his project. In short, the entrepreneur should not enter into any
sort of understanding with the equipment manufacturers sacrificing the quality of the equipment.
e) Marketing – An entrepreneur should always avoid a project which is facing cut-throat competition. It is always advisable for an entrepreneur to have a limited network of customers for his product. The limited customers may be big industrial customers so that they may procure his products in large quantity and the payment also is an assured one. Big industries always purchase the products on cash basis without demanding the purchase in credit.
f) Power & Water – The entrepreneur should ensure that the supply of electricity for the machines and water is not disrupted at any cost. These should always be available in abundance.
g) Others’ Performance – The entrepreneur should always assess the performance of other existing units in the same industry. He should be in apositionto judge as to how well the other entrepreneurs are running their units. It is always advisable for any entrepreneur to choose such a line of activity which has shown to be successful to the existing entrepreneurs as well.
h) Working Capital Requirements – The entrepreneur should always avoid a project that involves long operating cycle and that which requires huge working capital. This is absolutely necessary for an entrepreneur who is dealing with Government Agencies where he has to make advance payments for procuring materials and while selling his products to them, settlement of payment will be delayed beyond the reasonable period.
i) Labour component – As far as possible semi-skilled and unskilled labourers should be avoided by an entrepreneur. Manpower required for handling materials can be avoided through automated machines. For example, the exercise of bringing the raw material from warehouse to the manufacturing site can be handled with the help of cranes, conveyer belts, etc.
j) Economic Viability – The entrepreneur should always go in for projects which will break-even in a shorter period. He should ensure that hisprojects will break-even within a shorter period of 6-8 months and at any cost his project should earn profit within a period of 1 year. Then only, his project can be considered as an economically viable one.