Non-profit projects

This chapter has been aimed at the revenue-earning project, the amounts of revenue leading to an annual cash flow, from which profitability, and hence economic feasibility, can be determined. But what if there are no revenues A new public service investment, such as a major (non-toll) road, or an overseas aid project, such as a water pipeline system for a sub-Saharan country, generate no revenues - yet may have huge investment costs. 

These kinds of project must still undergo a stringent appraisal process, to ensure that each is the best way of spending the money required. It follows that some kind of revenue must be calculated, and this can be done on the basis of savings on other expenditures, or benefits to the community. Such calculations are not easy, but they can be done, and cost benefit analysis is a well-practised technique. 

---

The project schedule is also a big driver. In a typical two-year project, most of the investment occurs in the first year. That means another year goes by without any return for the investment. If a project can be speeded up it usually means that the rate of return of a project increases. Typically a three-month schedule improvement could mean 3 to 4% better return on the project. This can mean the difference between a profitable and non-profitable project. In many industries being the first to market a new product could have a huge impact on the long-range profitability of the project. 

---