Project Charter Example for a New Product

This charter is for a “step-up” product and the associated financials (download here).

The product is an aftermarket airbag for light-duty trucks.

The template used for this example can be downloaded from our project charter Excel templates page.

New Product Charter Example
Financial Tab – New Product Charter

Describing the Project and Business Need

The header information includes the project description and business need, along with project ownership and approval status.

Project Description and Business Need

Note how concise yet informative the project summary and business need descriptions are. Anyone reading the project description and business need would be sold on the project right away:

The heavy duty option will include a 20 percent increase in wall thickness and a threaded valve connection… Market tests showed that 14% of consumers would step up to the premium bags when offered at a $20 markup.. Total product cost will increase $2.20, creating a $17.80 gross margin increase per heavy-duty unit.

Completing the Project Financials

A word of caution here – the financial tab in the Excel workbook is reasonably accurate but very basic. Your finance team likely has a standard Excel workbook or other program for calculating the financial return – use what they have.

The cash inflows include the profits that the heavy-duty product will generate. The calculation for the first year is: ($17.80 profit increase per item sold) x (54,000 units sold per year) x (14% of consumers that will step up to the heavy duty option). Years 2 through 5 show use the same calculation, but with different units-sold values based on market forecasts.

Also included in the cash inflows are the warranty savings that will come from the heavy-duty design. This amounts to $2,400 per year.

Cash inflows

The cash outflows include $214K for the initial investment and an additional $16K per year for added material costs. The $16K was put into the analysis as a conservative hedge, due to possible inflation on a couple of the components.

Cash outflows

All other values are calculated in the spreadsheet, the three NPV, IRR, and ROI values are carried to the charter tab via cell links.

These values are populated from the financials tab

The middle block in Financials and Milestones breaks down the $214.5K initial investment. $180K is for new molds (tooling), $20K is for engineering trials (prototypes and testing), and $14.5K is for marketing costs above and beyond the operating budget.

Breakdown of up-front project costs

Adding Milestone Dates

The project milestones are noted on the right. Funding will be approved by 15-Feb, tooling ready on 1-May, testing complete two months later, and the product will be launched 15-Sep.

Dates for project milestones

Internal Resources

Internal resources show what support will be needed from inside the organization.

In this case, engineering will need to put 100 hours into the project (90 + 10). Other support will include purchasing and marketing.

It’s a good idea to meet with the various functions, explain the project, and ask them for the time estimates, rather than making assumptions. Nobody likes surprises during the charter approval meeting.

Internal resources

External Services

External resources are usually not a constraint, because they are outside businesses that welcome more work. But it’s a good to note these resources in case other projects are competing for the same resources.

In this case, the team will spend $180K with Pro Tooling of San Diego and another $14.5K with a web marketing firm, Marketing Services Inc.

External services

Project Risks

This section notes any risks that the approvers should be aware of before approving the charter. In this case the only risk is that the thicker airbag material will make installation more difficult for the consumer.

Project risks

In cases where risks are identified, it’s a good idea to show a separate page with plans to understand and mitigate the risks. In the case, the engineering team came up with a new installation method and posted a video.