The Principal Elements of a Project Profile
The project profile, as prepared with the applicants, consists of usuafive parts. The last part has two variations: one exclusively for income generating projects; and the other for non income generating projects. With the exception of Part 1 (the Introduction) it is not essential that the components be completed in the same order as presented. Many groups prefer to define the investment before tackling general costs or income, but this is not required. An example layout for the components shall be presented in Annex and can be used as a guide when drawing out the tables on a blackboard or large sheet of paper.
Part 1: Background Information: This section provides general information about the applicants, the location of the project and its characteristics, as well as a brief summary of the objectives and justification for the investment, including the demand anticipated for the product or service resulting from the project when operating. The purpose of Part 1 is to allow anyone not familiar with the project to understand – preferably in no more than 1 page – the background to the proposal. Agreement should be obtained from the applicants as to the general purpose and characteristics of the eventual project as well as who would likely be involved in its operation and management.
Part 2: Investment: In this section the applicants are asked to list the various elements that will have to be obtained (purchased or supplied by the group) for the investment to be realized. For each item (except land) it is also necessary to estimate the average working life of the item and who is to provide it (loan, donation, contribution of the community). A simple calculation is then made to determine the average annual cost of each item.
Part 3: Operating Costs and Income per Activity: This section describes income and costs directly resulting from carrying out activities made possible by the project, and which change according to the scale of activity (i.e. the greater the activity, the greater the costs and income). If the project is a simple one, there may only be a single activity, for example the grinding of grain (in the case of a local mill). However, in other cases there could be several activities; for example a dairy plant may produce cheese, butter and yoghurt. The section is primarily of relevance to income-generating projects, although there are some circumstances where it may prove useful to list operating costs and even income for other types of projects as well (e.g. where there is a user charge for a health clinic). To adequately complete this section, it is necessary for the group to understand the concepts of production units, sales units and production cycles, which are discussed further in the next section.
Part 4: General and Maintenance Costs: Some types of costs are not associated with the scale of production, but are a consequence of the project in general. These may include such expenses as: hiring a manager, nurse, or other employee; operating a vehicle; local land or property taxes; or office expenses. They will also include the costs of maintaining (but not replacing) equipment and other goods purchased or built at the investment stage – for example maintaining an access road, or repairing fences used to protect a reforested area.
Part 5a: Preliminary Estimate of Viability (income generating projects only): This section is used to perform the simple calculations required to make the preliminary estimate of project viability. The key calculations are:
Annual Net Income: To determine if projected income is higher than direct and general costs
Annual Net Income less Annual Investment Costs: To determine if annual net income (above) is sufficient to also cover replacement of the investment as it reaches the end of its useful life
Number of Years of Net Income Needed to Cover the Investment: To determine if the annual net income is high enough to pay back the investment cost within a reasonable period of time.
Part 5b: Preliminary Beneficiary Estimates (non income generating projects): This section relates the overall cost of establishing and running the project to the number of beneficiaries and also considers how operating costs will be paid for. Key calculations are:
Investment Cost per Beneficiary: The total expected investment cost divided by the number of direct beneficiaries (users and suppliers) and indirect beneficiaries (all those potentially affected by the project).
Annual Operating Cost per Beneficiary: The total annual operating cost (including maintenance and repairs) divided by the number of direct and indirect beneficiaries.
The preliminary identification of future sources of funds for project operation and upkeep is also a very important part of profile preparation for non-income generating projects. Obtaining investment funds is often much easier than finding resources to cover annual costs once the project is underway. Any part of this cost not assured from outside sources will have to be met by the users of the project and/or the surrounding community.