Project Identification Process: How to Choose the Right Business Project

Project identification is the stage where a loose set of business ideas is narrowed to one project worth studying in detail. It takes six steps: collect ideas, state the need each one answers, screen for fit, check public data, score the survivors side by side, and write a one page project profile for the winner. You stop there. Costing machinery, taking supplier quotations and building bank ready numbers belong to the next stage, the feasibility study, and doing them for an idea that has not been screened is a quick way for a new entrepreneur to spend money too early. The aim at this stage is to find out cheaply which ideas are not worth proving.

What are the six steps of the project identification process?

The steps run from wide to narrow, and each one ends with something written down.

Ideas come from four places that work for a new entrepreneur: what you know from a job, a raw material that is cheap or wasted near you, a product India imports that could be made nearby, and a buyer complaint you have heard more than once.

At step 2, naming the substitute matters more than naming the buyer. If buyers already get an acceptable product from a trader down the road, your idea has to beat it on price, quality or delivery.

A SWOT sheet (strengths, weaknesses, opportunities, threats) suits judging one idea at step 3, but it cannot rank three ideas against each other. Step 5 uses a scoring sheet for that.

Which public data can you check before spending anything?

Step 4 needs no consultant and no machine quotations, only free official data. The United Nations Industrial Development Organization (UNIDO) describes this early stage in its manual for preparing industrial feasibility studies as an opportunity study that works from rough estimates and takes costs from comparable existing projects, not from supplier quotations.

Write each answer as one line with the date you checked it.

How do you score and shortlist business ideas?

Fix the criteria and weights before you score anything, or you will bend them toward the idea you already like. This starting set gives demand evidence the most weight. Founder fit covers your skills, contacts and time, plus anyone whose money or approval you need.

Scores run from 1 (poor) to 5 (strong). On approvals and competition, a higher score means a lighter load. Multiply each score by its weight, divide by 5 and add the results. The scores below are made up to show the mechanics; yours must come from your step 4 notes.

Idea A leads. Idea B shows the usual trap: a high price and heavy imports draw people to an idea long before anyone has a buyer. Idea C stays alive at 67 only if you can name how you will beat the makers already there.

Add one drop rule: a score of 1 on demand, founder fit or affordability removes the idea whatever its total.

Where does project identification stop and the feasibility study begin?

UNIDO splits the pre investment phase into four stages. Project identification covers the first two.

Steps 1 to 6 above are the opportunity stage, and the profile from step 6 feeds the pre-feasibility check. Our guide to the manufacturing feasibility study covers what comes next, and the detailed project report guide explains the document that carries those findings to a lender.

Which mistakes send a shortlisted idea back to the start?

• Choosing by margin. A high profit figure in a brochure says nothing about whether buyers near you will pay, which is why demand carries the heaviest weight on the sheet.
• Collecting machine quotations at step 2. Quotations go stale and use up your time before the idea has passed screening.
• Reading imports as local demand. Imports prove that a product sells. They do not prove that buyers will leave a brand they trust for a new local maker.
• Leaving approvals until the land is bought. A pollution category or a product licence can change the site or the product, so check them at step 4.

What should you do after choosing a project?

1. Write the project profile on one page: the idea, the buyer, the substitute, the evidence from step 4, a rough investment band and the approvals involved.
2. Talk to a few real buyers or traders and note the price and quantity each would commit to.
3. Compare your rough investment with ideas of a similar size among our manufacturing business ideas and business ideas under ₹25 lakh.
4. Read the feasibility study guide, then look at startup funding options before you commit money.

The rest of this series is in our business guides.

Frequently asked questions about project identification

What is the difference between project identification and project formulation?

Identification decides which idea is worth studying, and formulation works the chosen idea out in detail. UNIDO describes formulation as the feasibility study stage, where capacity, location, technology, inputs, costs, revenue and expected return are fixed. Identification ends with a go or no go on that deeper study.

How many steps are in the project identification process?

There is no fixed number. The count changes from one textbook or website to the next, and UNIDO describes four stages for the whole pre investment phase. This page uses six steps. The order matters more than the count.

What are the five steps of a project?

The Project Management Institute lists five process groups: initiating, planning, executing, monitoring and controlling, and closing. They cover running a project once it has been chosen. Project identification comes before them, as the decision on which project to initiate.

Who should carry out project identification in a new business?

The promoter does it, together with anyone putting money into the business. Every check in this guide uses free public data, so no outside expert is needed at this stage. Paid help starts to make sense at the feasibility study, where costs and quotations have to be exact.

Not part of the page. Everything below this line is for the editor and the publisher.