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Errors of Project Report formulation

A project report is not a document covering precise details especially in respect of financial and
economic viability. It is essentially a projection of performances based on certain assumptions.
Most of the long term projections have some weaknesses and suffer from limitations. Similarly,
project report may have certain limitations and should be used carefully. The entrepreneurs often
make common errors while formulating project reports and business plans. The errors widely
noticed are
i) Product selection: It is noticed that some entrepreneurs commit mistakes by selecting a
wrong product for their enterprises. They select the product without giving due attention to
product related other aspects such as size of the product markets, its future demand, competitive
position, life cycle, availability of required labor, raw material and technology. Hence while
selecting a product, take a comprehensive view.
ii) Capacity utilization estimates: The entrepreneurs usually make over-optimistic estimates of
capacity utilization. Their estimates are completely based on a completely false premise. The
estimates are made in complete disregard of present enterprise performance, prevailing market
conditions, competitive atmosphere, the technical snags, etc. A business plan formulated as such
falls prey to financial jugglery.Hence avoids such temptations while estimating capacity
utilization for the enterprise.
iii) Market study: Product production is ultimately meant for eventual sale. Hence, market study
of the product assumes importance. Market study continues to be a grey area. But, there are some
entrepreneurs who pass this component of their business plan completely. Based on their
nebulous ideas and scanty and scattered information on demand and supply of their proposed
product, they conclude that market is just there waiting to be tapped. This is a wrong attitudinal
block.
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iv) Technology selection: The requirement for technology differs from product to product
depending upon the nature of products. Swayed by the reported profit margins, the entrepreneurs
sometimes plan for a technology not possible to set up within limited financial resources. Thus,
in the absence of technological feasibility, enterprise is foredoomed to failure. Hence make sure
of the technological feasibility.
v) Location selection: The entrepreneur often makes two types of errors while selecting location
for their enterprises. First, they are completely swayed by the Government offer of financial
incentives and concessions to establish industries in a particular location. This becomes their sole
and overriding concern completely disregarding other factors like market proximity, availability
of raw materials, man power and infrastructural facilities. Second, the entrepreneurs select a
location for their enterprises merely because it is their hometown or they own ancestral land
there which is, however, not an appropriate location.
vi) Selection of ownership form: Many enterprises fail merely because the ownership form of
enterprises is not suitable. Hence, select a suitable form of ownership taking a comprehensive
view of the factors affecting the selection of a form of ownership.