Question

You are a consultant who has been approached by a company about to embark on a project (identify any project of your choice). The client would like to prepare a document to be used for the purposes of ‘selling’ the project to potential financiers. Prepare an information memorandum for the project to be presented to the potential financiers. Among others it should contain the following: 1. The full business description of the project. 2. An analysis of the key risks facing the project and the ways of mitigating the risks. 3. The proposed financing structure and justification for using that particular structure. not more than 6000 words required

Answer 1

For this kind of a question, it is always advisable to consider known categories of projects where multiple definable factors are available with publicaly available information and legit sources. A couple of examples that you can consider for this essay are:

1. Real Estate Project [ Example: A commercial complex in a developing area ]

2. Any Entrepreneurial venture you can think of

For ease of understanding, I am going to use the Real estate project as an example to understand the flow of this write-up. It is important to include the following in a project going out for the financers (remember, they are giving their money and need a valid reason to do so) :-

1) Cost of the project and Pay back period

2) Owner's equity in the project (this is important to understand the risk in the project- low owner equity means that the owner is less invested in the project and hence makes the project riskier)

3) Revnue stream and assured income projections (existing sales of units or timeline)

4) Deep analysis of the project [ in this case it would mean factors like vacancy rate, lease rules, prime rentals, competition, area analysis etc. ]

This kind of project will have the following HEADINGS in the PIM(project information memorandum)

Building Description: Inclues address, Legal details like registration, construction status, date of completion, condition, boundary laws , legal category of building, capacity, covered area, number of units etc

Owner details : Legal owner details with contact details in full

Project Description : It can include a lot of information like why was the building constructed, the vision in mind, plan of execution and sales, estimated value of the building, potential annual appreciation etc.

Project Details:

Project Calculations and Assumptions:

Key Risks and Mitigating Strategies

5.1 SWOT Analysis

5.2 Competitor Analysis

5.3 Key risks

5.4 Preventive and Reactive strategies

Close the PIM with a short feasibility study highlighting the prime reason for investment. To make it an effective sales pitch it is important to present it like a perfect investment likely to generated good returns.