The project profile must be completed in a participatory manner, with the full collaboration of the applicants. This is vital for a number of reasons and the temptation for the local technician to prepare the project profiles on his or her own should be avoided. Equally, the technician should be wary of groups where only one or two people speak throughout the meeting. These people may be presenting the views of the entire group, but they may also simply be the most important people in the room, and thus deferred to by the other participants. In the same manner, women may not wish to speak up in front of men, or may not even be invited to participate in the group meeting. Where these sorts of problems arise, it may be necessary to have more than one meeting and create several possible profiles or develop a combined profile that is synthesised from the different meetings.

No elaborate materials are needed for the participatory preparation process. If no room can be found that is large enough for the entire group, the session can be held out of doors. A large blackboard or flip chart for writing on is useful so the whole group can see, but it is possible also to write on large sheets of paper and stick them to a wall with sticky tape or pins.

If using paper, the basic table formats with headers and columns covering background information, investment, operating costs and overheads can be prepared in advance, but again this is not essential. A simple calculator is often useful for multiplying quantities together.

If the profile is to be transferred later onto the computer by the local technician (often necessary if a formal report, or request to proceed to full preparation, has to be made), it is strongly suggested that the technician provides group members with a copy of the final computer generated report. This will ensure that they are kept fully informed of the application process, and avoids later misunderstanding if the computer profile differs slightly from the exercise conducted at village level.

Background Information

In the majority of cases, the technician working with the applicants to prepare a project profile should already have a good knowledge of the group or community, either as a result of undertaking phase 1, or through some other form of community diagnosis and planning exercise. The only exception to this rule would be where the applicant is an individual or single family. As a result, the technician should already have at his or her disposal the majority of the information needed to describe the proposed project in general terms.

Nevertheless, the following checklist may be useful in ensuring that all required information is noted. It is worth remembering that this information may not all need to be collected at the beginning of the session. Information on environmental impact or risks are, in fact, probably better discussed after the basic project design has been completed, as people will have a clearer picture of the project in their minds once they have been through such aspects as the investment and operation of the project.

  • Name of the proposed project;
  • Location of the project;
  • Exchange rate (to the U.S. dollar) at the time of preparing the profile;
  • The name of the main beneficiary group (otherwise assign a name or use name of the community);
  • Description of the beneficiaries, including: (i) when group established; (ii) purpose of the group; (iii) whether they are drawn from more than one community; (iv) what they have done in the past; (v) current activities; (vi) breakdown of the membership by men, women, children;
  • Identification of direct and indirect beneficiaries, divided into men, women, and children, where possible;
  • A description of the project, including its justification and principal activities;
  • The nature of the demand that will be met by the project or its output;
  • The possible environmental impact of the project;
  • Any other relevant information, such as related projects undertaken in the past, other possible funding sources etc.

The Investment

Although it is not necessary to start with the investment, and this section can be filled in after describing the operation of the project if preferred, most people are more comfortable by commencing the profile here. First list what will be needed to make the investment a reality. Generally, it is easier to break these needs down in to three categories – materials, labour and professional services – and this model will have to be followed if the information is later to be entered into the computer. Remember: at the profile stage it is not necessary to provide detailed information as to each investment item. In the case of an irrigation system, for example, instead of describing the number of lengths of each type of tubing, it is sufficient to state “irrigation piping” and put a single figure.

For each investment item the following information will be needed:

  • Description of the item;
  • The unit of measurement (item, metre, set, etc.). For labour, the unit of measurement should be a day, a week, a month or some equivalent period of time;
  • The number of units;
  • The cost per unit (which can then be multiplied with the number of units to give a total cost);
  • The contribution of the applicants to the cost of that item (if any);
  • The economic life of the item (the number of years it will function before being replaced)

Once this information is obtained (and most project profiles will have no more than 6-8 investment items) it is necessary to calculate the amount of money that would have to be set aside each year in order to allow the investment items to be replaced as they complete their economic life spans.

The ideal solution is to charge the cost of replacement to the year in which it occurs, as occurs in the detailed project analysis, but this is not possible for a project profile. Instead the concept of the ‘annual replacement reserve‘ is used. In this concept the initial purchase cost of the item is divided by the number of years of economic life, to determine the amount that would have to be put aside each year to provide for replacement. Thus:

If this is not done, the project would receive the use of the investment free of charge, and once the items wear out, there would be no reserves to pay for their replacement. This calculation, therefore, should be made for each investment item in the last column of the table, and the total of all the items added up at the bottom of the table. This sum will represent the entire amount to be set aside each year to ensure the investment can be replaced as the items wear out.

Operating Costs and Income per Activity

In many cases, a community level project will have only a single activity; for example a bus service connecting the community with nearby towns, or a day care that will look after the pre-school children of the village. However, in other cases a single investment may permit more than one type of activity. This would be the case for an irrigation scheme that allows several different crops to be grown, or a dairy plant that produces cheese, butter and yoghurt.

The first step in defining operating costs and (where applicable) income, therefore, is to decide whether separate activities will result from the investment. Where an activity has clearly separate costs (and if income generating, separate earnings) it should be treated separately. If, however, the costs and income of the different actions are inevitably mixed together (as would be the case for a village bus that sometimes goes to one town and sometimes another, but uses the same vehicle, driver and assistant) then it should be treated as a single activity. If there is any doubt, it is probably best, at the profile stage, to treat it all as a single activity, in order to keep the analysis simple.

It is to define with the group the unit of production, and determine the number of units involved. For crops, as we have seen, the unit of production is generally the hectare, acre or other measurement of area. So for tomato production we might have 2.5 hectares. For other activities, it is the unit by which the costs would be most readily measured. This may be the entire investment e.g. the school, the clinic (in which case the number of units would be one), or a part (a kilometre of the entire road of 8 km., or one pond of a community aquaculture project with 5 ponds).

Finally, the group must decide the length of the production cycle and the number of cycles per year. Again, for crops this is generally straightforward – the length of the cycle is the length of the growing period (including land preparation and harvesting), while the number of cycles is the number of times that the crop is to be planted during the year – typically once or twice. For other types of activity, especially those which are continuous, it is often easier to use as the cycle the period on which most costs are based – e.g. a week or a month – while the number of cycles will be the number required to fill the year (e.g. 12 cycles of 1 month)

Operating Costs by Activity

Once these basics are decided, the group must identify and write down the costs incurred in operating the activity per unit of production per production cycle. This is probably most easily explained using an example:

Community Poultry Operation (Broilers)

Unit of Production: Poultry shed (1,000 birds)
Number of Units: 3 Sheds
Cycle of Production: 3 months (including time to clean out and disinfect the shed)
Number of Cycles per Year: 4


Cost Item



No. of Units

Total Cost

Day old chicks




0.3 x 1,050 = 315


Bag (25 kg.)



12 x 95 = 1,140


Bag (10 kg.)



20 x 12 = 240





20 x 50 = 1,000

In the case of village level production, there may be few additional operating costs other than these, but other projects may have more costs to consider. If, however, the profile extends to a dozen or more costs, the profile is probably becoming too complicated and should be simplified.

Total Cost per Unit per Cycle:
(315 + 1,140 + 240 + 1,000) = 2,695

Total Cost per Unit:
4 cycles x 2,695 = 10,708
This includes all cycles

Total Cost:
10,708 x 3 sheds = 32,340
This includes all units

Income per Activity

Where a project generates income or earnings, income must also be included in this section. Remember, however, that income must be calculated on the basis of the same parameters (unit of production and cycle of production per activity), as the costs described above. In addition, the calculation of income requires one further parameter (or definition) to be determined – the unit of sale. For agricultural products this is generally a measure of weight; a kilo, a ton or a local measure such as a bushel. But even for crops, the unit is not always weight. Lettuce and some other crops are sold by the piece. For livestock it can also be per animal (price per chicken), or on a weight basis. For processed and manufactured items, it is typically per item (price per can of paste, pair of shoes, or loaf of bread), although weight can also be used (kilo of cheese, litre of drink).

For each unit and cycle of production (hectare/crop, etc.) we need to know the output in units of sale and the price received per unit. Again, this is generally readily understood for crops. Tomatoes may yield 4,500 kg. per hectare per crop, and sell at an average price of 1.2 units of local money (pesos, dollars, francs etc.) per kilo. For a juice plant with a production unit of a case of 12 x 1 litre containers, the sales unit is the same, so we need to know the price at which each case is sold. But where the production unit is per 1,000 litres of raw milk processed (as might be the case in a dairy plant), and the cycle of production is one day, then we must know: (a) how many sales units (kilos of cheese, etc.) are produced per 1,000 litres of input; (b) how many thousands of litres are processed each day (we needed this information to calculate total costs per cycle); and, (c) the price per sales unit.

Estimating income per activity is usually one of the weakest areas of an investment project proposal. Firstly, the fact that an investment has the capacity to produce at a certain level does not mean that it always (or indeed, ever) will do so. Many plants and factories work at less than full capacity, and many crops never reach the maximum yields seen in research station trials. Secondly, not all product that is produced is always sold. Some output may be damaged, and other output might not find a buyer. This is particularly the case for perishable items. Thirdly, prices used in estimating income are often optimistic, and sometimes wildly so. Remember that prices can vary considerably over the course of a year, especially for seasonal products such as are common in agriculture. Unless the project is specifically designed and operated to supply output at times of short supply, it is unlikely that it will obtain the highest prices for its output. These considerations are discussed in much more detail in the phase of ‘Detailed Project Formulation and Evaluation’. Here it is enough to insist that a healthy dose of scepticism should be applied to estimates of both output (yields etc.) and prices.

General and Maintenance Costs

General and maintenance costs (sometimes referred to as overhead costs) refer to those costs that are incurred by simply undertaking the project. They will have to be paid whether the chicken sheds are full or empty, or whether there are fifteen patients a day attending the community health clinic or none. As they do not vary according to the scale or size of the activity, they do not appear in operating costs.

At the level of the profile there are usually few general costs. One of the most important is maintenance. Maintenance often has to be undertaken whether the machinery or equipment is used heavily or lightly. Roads will often have to be maintained due to damage by weather, irrespective of the number of vehicles travelling along them. Equally, buildings, other structures and many types of machinery must also be maintained.

Typically, it is easiest to estimate a simply percentage of the initial investment for maintenance. Thus if maintenance is estimated at 5% per year and the initial cost is 50,000, the annual maintenance would be 50,000 x (5/100), or 2,500. Below are included indicative maintenance levels for different types of investments. These are intended as guides only, and may need to be adjusted for your particular circumstances.

Stone, brick or metal buildings and structures; major water channels; wells; settlement ponds


Lighter wooden buildings, heavy machinery (including tractors and trucks), secondary water channels, fish ponds


Light machinery (including cars), and general equipment


Electronic and laboratory equipment (computers, printers, testing equipment etc.), outboard motors


Note that there are some types of investment that have no maintenance costs at all, for example most furniture. Generally, a desk or table is simply used until it is too old, when it is replaced.

A second important type of general cost is that arising from permanent staff. While casual labour may be hired and paid on a daily or weekly basis as needed, technically trained and qualified staff, or those with important skills, must be kept on permanently – even if there is no work – otherwise they will not be available when they are next needed. This might include teachers, nurses, mechanics, supervisors, administrative staff and managers. As long as the project is still functioning, these categories of staff will have to continue to be paid.

When calculating their costs, do not forget to include (if applicable) social security contributions and other payments that the project (as employer) will have to make. Remember, at the profile stage it is not important to be very accurate about salaries and related costs. As long as they are realistic estimates, this is acceptable at this stage.

Other types of general cost are less common at the profile stage, but might include: local and land taxes; electricity and water costs; vehicle operating costs (especially where the vehicle is used across more than one activity, and hence can not be assigned as a specific operating cost); fees for periodic audit, accounting and general technical assistance visits; and office operating costs (where a fairly large commercial activity is planned). At the profile stage, attention should only be given to such costs if it is believed that they may be a significant part of the overall costs.

Preliminary Estimate of Viability (Income Generating Projects Only)

In addition to looking at general factors, such as the overall project concept, the proposed beneficiaries, and the way in which the project would be organised, three principle measures of project viability are calculated at the community level for income generating projects. These are the net income per year, the number of years of net income required to pay back the investment required, and the net income after allowing for replacement of the original investment. Together they provide a simple but useful guide to whether the profile is worth developing into a detailed project proposal.

If a profile produces a positive result for each of these tests, and if it also responds to the priorities and needs of the applicants, then the project is probably worth developing from the profile to the full project stage. Each of these three tests is discussed briefly below:

Project Net Income per Year

Net income is a very simple concept – it is the income left after all costs (both operating and general) have been paid. Even if the applicants are largely illiterate and with little or no previous experience in projects, they are generally fully aware that an activity that costs more than it makes, is not a good proposition. A profile that yields a positive figure for Net Income has thus passed one test.

If the profile tables have been laid out according to the guidelines provided here, the calculation of net income is simply a matter of taking the total income figure from the costs and income table and subtracting from that figure the total operating cost and the total general cost.

Number of Years Required to Repay the Investment

While it is necessary that an income-generating project earn more than it costs to operate, this is not enough. The applicants must also have some measure of whether a positive net income figure is sufficient or too small to be worth having. This can be measured by looking at how many years of the net income are needed to cover the cost of the original investment.

Typically, investment costs provided by the community are included in the total investment amount, but if the community or applicant is confident that this contribution can be repeated in the future without difficulties, it may be worth excluding it, if only to provide an idea of the difference.

The calculation is simple:
Total Investment / Net Income = x years
10,000 / 3,000 = 3.3 years

In all cases, the smaller the number of years required to repay the investment, the better. Clearly, a risky project (that is one involving activities new to the group, or where demand is difficult to estimate) should have a shorter number of years to payback compared with an activity well known and understood by all involved, in order to compensate for the risk. As a rule of thumb, no income-generating project that requires more than 7 or 8 years to repay the original investment should be selected for further development, unless there are strong social or other reasons to proceed. Where the project is acknowledged to be risky, this figure should probably drop to 4-5 years.

Net Income after Allowing for Investment Replacement

One further financial test of the profile is important. It is possible that a project will generate an attractive positive net income, but that the costs of eventually replacing the investment involved will reduce that income significantly, or even make it negative. For this reason, it is worth considering how the net income will be affected if the ‘annual replacement reserve’, calculated as part of the Investment costs table, is charged to the net income used above.

To calculate the net income after allowing for investment replacement, simply subtract the annual replacement reserve from the net income calculated previously. If the figure is still positive, the net income is large enough to also provide for the eventual replacement of the current investment items.

Preliminary Beneficiary Estimates (Non Income Generating Projects Only)

Perhaps the most important difference between income-generating and non income-generating projects is that the latter are not selected or justified on financial grounds, but rather on the basis of the contribution that they will make to the social, cultural or productive life of the group or community. Clearly such aims are much more difficult to measure and assess that those relating to financial success. In fact, many financing agencies tend to focus primarily on the process within which such proposals are developed (to ensure that they are indeed representative of the needs of the community), and at their cost per beneficiary. While neither of these measures tells an outsider whether the project is a good one or not, they do at least ensure that qualifying projects are a priority for their community, and do not absorb more than their fare share of resources.

The cost of investment calculation is relatively simple. The total cost of investment, calculated in the investment table, is divided; first by the number of direct beneficiaries, then by the total number of beneficiaries (direct and indirect). This provides the average investment cost per direct beneficiary and per all beneficiaries. This measure is frequently used by funding agencies to ensure that one group or community is not receiving more than its fair share of available resources. It is often useful to make this calculation also in terms of the amount of the investment that derived from the group or community’s own resources and those for which a donation is required. Taking the example of a community health clinic:

Basic Information from Profile:
(a) Total investment cost for proposed clinic: $50,000
(b) Total value of community resources to investment: $10,000
(c) Total donation required: $40,000
(d) Estimated number of direct beneficiaries (per year): 200
(e) Estimated number of indirect beneficiaries: 1,000
– Total investment per direct beneficiary (a/d): $200
– Total investment per direct + indirect beneficiary (a/e): $50
– Investment cost (own resources) per direct beneficiary (b/d): $40
– Investment cost (donated resources) per direct beneficiary (c/d): $160
– Investment cost (own resources) per direct + indirect beneficiary (b/e): $10
– Investment cost (donation) per direct + indirect beneficiary (c/e): $40

What do these calculations tell us? They tell us that although the total investment cost is $200 per direct beneficiary, this is reduced to $50 is all beneficiaries (direct and indirect) are taken into account. It also tells us that if one looks only at donated resources, costs per direct beneficiary are reduced to $160 and costs for all beneficiaries to only $40. These are important numbers for the funding agency to know, but may also be of interest to the applicants themselves in helping them understand the costs that they will have to bear to make the project a reality.

A second set of calculations are similar, but use the total operating cost. If this total operating cost, comprising operations, maintenance and any other fixed costs, is divided by the number of direct and indirect beneficiaries, it will reveal the level of resources that will be needed to keep the project functioning for each beneficiary. Although users may not contribute directly to covering these costs in all projects (for example in the case of an access road) this figure is very important in showing the relative expense of keeping the project going. These calculations can be made still more useful by dividing the costs into fixed (maintenance and overhead costs) and variable (those which depend on the level of use of the project). For example:

Basic Information from Profile:
(f) Total estimated cost of clinic functioning: $5,000/year
(g) Fixed cost (maintenance and overheads): $3,500/year
(h) Variable cost (dependant upon number of patients): $1,500/year
– Annual operating cost per direct beneficiary (f/d): $20
– Annual operating cost per direct + indirect beneficiary (f/e): $5
– Fixed cost per direct beneficiary (g/d): $14
– Variable cost per direct beneficiary (h/d): $6
– Fixed cost per direct + indirect beneficiary (g/e): $3.50
– Variable cost per direct + indirect beneficiary (h/e): $1.50

Here we can see that the project managers will need an estimated $20 per direct beneficiary per year, or $5 for each person in the area (direct + indirect beneficiaries). However, only $14 per direct beneficiary, or $3.50 per local inhabitant is needed to cover fixed expenses (the nurse, upkeep of the building etc.). The remainder of the costs ($6 per direct beneficiary) occur only where there are patients to treat (to cover medicines, linen etc.). This might suggest, for example, that patients should pay at least $6 per visit, to cover these variable expenses, although if they could afford more (say $10 per visit), this would reduce the amount the community or local government would need just to keep the clinic operational.