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Why undertake an investment project, benefits and risks

A investment project It can be a good idea especially in times of crisis when entrepreneurs and even companies need financing.

However, to undertake it you need to know several data about the project that must fundamentally have a clear viability, as it will not be viable if it fails to demonstrate a satisfactory profit.

Do you want to know what it is about and know examples with its different types so that you can enter this world that can be as fascinating as it is chaotic if you do not know it? Then keep reading …

Elements of an investment project

The investment project is an essential part of a project that needs financing to be started, for example to expand the size of a company and even to reestablish its course in a circumstance such as going through an economic crisis.

In these cases you can get financial resources if you present an investment project so clear that the individual accepts your proposal. Then you must have:

  1. A review on the development and use of the product and the factors that will intervene in its consumption.
  2. Establish who may be the person interested in your project, taking into account the social and economic conditions of the moment in which its production will take place.
  3. It raises the objective with a synthesis of the particular and general details of the product.
  4. Study the market. Define what your product is, what is the usefulness of the product, establish its measurement, that is, if it is measured in kilos, liters, you will sell it by piece, etc. and then analyze what is your demand, who is it directed, that is, who can buy it, what is the area covered within the market and how much of a similar product is sold in your city.
  5. When you finish studying the demand for the product, start with the study of its offer in the market, since it will be your competition.

The study of supply and demand will give you the sales budget, it will be a budget for the future because it will give you the supply and price.

  1. Design the production of your product, because you have an idea and therefore you have found out or will find out how it can be produced. You will be conducting a technical study and as such requires you to think about the location of the company, the obtaining of the raw material, the machinery, the processes and the personnel that you will need to start the project.
  2. You will establish the process and costs for the production and sale of the product. It will be the investment budget and expenses.
  3. Taking into account the expenses, investment and sales budget, you will be able to demonstrate how profitable your idea is.

You can even tell art if there is a viable project in your mind, if you need any modification in the previous studies, such as estimating more sales, buying lower-cost machinery, etc.

  1. Define the aspects of the company that you want to form or if it is already formed, assign the changes that you can make, such as changing the tax regime, what to do to start the project or the organization of the company when it begins to operate.

Ultimately, an investment project aims to generate profitability and that is why the success of a project or its failure will depend on how its evaluation has been carried out.

What to evaluate in an investment project

The investment project begins with the hiring of an analyst by the investor, in order to carry out a pre-investment study. For which it will make a systematic evaluation of the ideas and will demonstrate its viability or non-viability. The result of this analysis will lead to invest or not invest

What is an investment project

The investment project It has elements or phases that are generally fulfilled when approaching its process, such as:

  1. It is necessary to evacuate, study and identify the demand that exists in the market, the project’s niche, which will be the study or analysis of the market.
  2. It requires technical analysis that includes everything that has to do with the requirements so that the project can function as computer equipment, machinery, etc.
  3. It also requires an administrative analysis to identify existing resources in the administrative sector such as administrative processes and human resources.
  4. It requires a financial analysis that will lead to the evaluation of the profitability of the project.

There are 4 important phases for the project to be successful because they mark the viability or non-viability of the project by starting from elements that are verifiable and concrete.

In short, it is an investment proposal with the aim of obtaining future economic benefits.

It includes the description of the estimate of future income and performance measures such as the internal rate of return, the net present value.

It can be intended for the development of new products, the expansion of new markets or the replacement of the existing assets of a company, whether they are real or personal property or machinery.

Investment project definition

  1. An investment project is a plan with all the details that gives rise to a possible future investment, that is, its preparation is the procedure prior to the project. Their evaluation determines if the investment is suitable to start a project.
  2. It is defined as the mere fact of deciding to undertake from the use of resources considering obtaining profits.
  3. It is reaching a representative goal of monetary benefits. That goal is developed through an action plan with strategies so that it can be accomplished.

Investment project example

An example could be the construction of a new hospital that will allow the care of patients residing in the area with its consequent reduction in transportation costs.

Investment project types

It can be public or private investment. When it comes to public investment, it is the one made by the state or its contractors, such as the construction of a port, school or hospital, on the other hand, private investment is made by a company or individuals.

While private investment aims to obtain and improve economic benefits, public investment aims to increase the well-being of the entire community.

When it comes to social investment, it aims at social benefit without seeking an economic return and measures the sustainability of the project in the future, that is, today’s beneficiaries can continue to benefit society after the project has been executed.