The dynamics of today's business environment have changed rapidly as risks and uncertainties have increased. As a result, it is critical for businesses to outperform their competitors by providing value and efficiency to their customers.
To survive in this arena, you must first conduct accurate planning and analysis before entering the industry.
The Techno Economic Viability (TEV) study is the best example of this type of analysis. The study considers the project's historical context, project description, accounting statements, operational and management details, marketing policies, financial data, legal requirements, and tax obligations.
In this stage, you evaluate the desired project using pre-defined procedures to gather technical and financial data. You also have pertinent information about the country's technological and economic environments. After considering all of these factors, you decide whether to accept or reject the project.
Components of Techno Economic Viability Study
Evaluation of the promoter
Even though promoters will be running the project, credit appraisal of the promoter is critical. The promoters' personal and financial profiles are required for the Techno Economic Viability study.
To understand the financial capacity and competence of promoters, you must conduct a personal profile assessment. This includes resourcefulness, previous trip record experience, financial stability and support, family history, stake in other companies/firms, and so on.
Select a capable management team
Your management must have disciplined experts from various industries to assist you in the success of your project. Every team member should have vast experience in:
Production
Marketing
Human resource development
Finance
Project implementation
Depending on the size of the project, the designated person should have the necessary skill and expertise in their respective discipline. A meaningful Techno Economic Viability study requires all of the elements, such as organizational structure (both existing and proposed) and key personal profiles, as well as their designation and experience in the specific field.
Technical evaluation
This one entails extensive research into the most recent technology and resources needed for the project. You must also investigate the suitability and adequacy of the production process in order to achieve the projected output, the adaptability of project location selection, project rationale, project implementation schedule, project status, and so on.
Market analysis
It is essential to evaluate the project's future growth and outlook. To evaluate the demand and supply of the products used in the project, you must have a future outlook in your industry. Keep an eye on whether your product supply covers market size, such as the competition scenario, consumer trends, and so on.
Deep industry research
Business owners and other individuals conduct industry analyses to assess the current business environment. Understanding the various economic aspects of your industry and also how they can be used to achieve a competitive advantage is beneficial.
This is a critical component in the Techno Economic Viability study, as it is in other businesses, where you compare various key parameters such as operations, products, services, and financial growth trends with your similar projects.
It also takes into account the geographical landscape of other industry leaders in the same line of business.
The project's financial viability
While preparing one, keep the following points in mind: This means that the project should be able to generate enough cash flow to provide a risk-adjusted return on investment. Your project should be able to repay the debt and generate good returns. This is what everyone wants.
This component is assessed by examining the project's ability to generate a desirable profit using realistic financial projections. To determine the project's financial viability, you must consider factors such as ratio analysis, working capital requirements, term loan requirements, and so on.
Simulation and sensitivity analysis
In this method, you perform infinite calculations to determine the possible outcomes and probabilities of any action. This financial model is frequently used to forecast the outcome of a decision based on a set of variables.
In this case, you examine the impact of changes in key assumptions such as selling and raw material prices to determine the project's financial viability.
SWOT Analysis
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. It is a strategic planning tool that involves identifying internal and external factors as well as highlighting project objectives to find the positive as well as negative elements to achieve the desired goal. These are some variables over which you have some control and can alter to achieve the desired outcome.
Risk Assessment
Finally, but not least, risk assessment is required. It is carried out by identifying operational risk, market risk, financial risk, resource mobilization risk, project execution risk, regulatory risk, and political risk. The simple reason for including this study is to mitigate the identified risk and develop preventive measures to deal with issues shortly.
About Sapient
Sapient is an independent network of Chartered Engineers/Valuers that provides certification/valuation services for plant and machinery, land, and buildings. Advisory Services.
TEV studies, due diligence, compliance consulting, acquisitions as well as mergers advisory, and other financial and business-related issues are among the services we offer. We offer a wide range of valuation and consulting services to corporations and individuals for the reporting and recognition of liabilities and assets in financial statements.
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