Lesson 6: Market Research and Analysis, Part 1

How to Create a Business Plan Section 2: Describing Your Company
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Transcript

In Module Three, we spoke about the company and we spoke about the market that the company is going to operate in. when describing the market we presented to it and assumptions in terms of who our customers were and the sorts of things they might like to be buying. And it's really important that when we validate a business idea or a concept, especially when putting together a strategy or putting in business plans, it's just that the stuff we're talking about now is that a number of assumptions will will be made. And each of these assumptions carries risk and that needs to be really understood. So the more assumptions you make, the more the risks become compounded. And to use a cliche or an analogy.

What you don't want to be doing is building your business plan on a foundation. That's not solid So you don't want to build things on a foundation of sand that's easily going to shift. You want to be building your your business plan on some really, really solid assumptions. So how do we do this? What we want to do is that each of the risks that are associated with the assumptions we make need to be minimized. And the best way of doing this is by improving the accuracy of the assumptions that we make.

So ultimately, these assumptions are going to draw off the budgets or the financials that stand behind your business plan. And if you're seeking investment, these assumptions are definitely going to be questioned. That they will be there's no doubt about that, as any regular view of Dragon's Den on the BBC will attest to intrapreneurs are chewed up and spat out when their assumptions are questioned, and they can't substantiate them. So once this is done, your whole business plan is going to fall apart. Once the financials are or the financial aspects are dismissed the business plan in itself becomes useless. So how do we improve the accuracy of these assumptions?

Well, we do this by conducting market research and analysis. And there are two key approaches to conduct market research, or any type of research. Firstly, primary research. This is the research that you do yourself and you started from scratch. Like I say, either be by doing it yourself, or by contracting a third party, during which you collect data and you analyze it. The other one is secondary research.

And this is where you really use research that's been done by somebody else, whether it's student, a university and other company. It's stuff that's been done before and you really just reuse the results of this. Let's take a look at the two options in a little more detail and draw some comparisons. So primary research, as I've said, this is new research that you can you conduct specifically either by yourself or by someone you appoint and This can be an expensive exercise. And the reasons why it's expensive are because you need to cover off a number of things, including, firstly defining your research objectives. So what do you want to get out of this piece of research?

What are the questions you're looking to answer? What are the assumptions you're looking to validate? these need to be really clearly defined in order to make sure that the research that you're going to do is going to be able to hit these objectives? Secondly, you need to define your approach. So how will you be going about this research? Are you going to be doing surveys?

Will you be doing interviews? Will you be running focus groups? You know, are you going to be asking one on one questions? Will there be meetings etc, etc. Thirdly, how do you define your population size? So, again, if you're launching a business is the population you're thinking about?

Is it your county is your country is the world How big is this potential market that you're going to be addressing this potential market that you're going to be selling your product to? Once you've identified that, you need to define a sample size. So as an example, if you're going to be selling your product to everyone in the UK, arguably, you can't go and interview everyone in the UK, you need to decide on the sample size. So you need to narrow down that population and say, Okay, well, if we have 70 million people in the UK, realistically, I can probably interview or include 1000 in my sample size. Next, how you going to define your questionnaire or the data points you wish to collect? So one of the specific questions that you're going to be asking in order to achieve your research objectives that you specified in the first point?

And then finally, how do you collect and interpret the data? So, again, dependent on the number of questions and data points you're going to be asking or data According to collecting, multiplied by the sample size, this can be a fairly extensive exercise. Although it's expensive, there are a number of advantages to doing primary research. And these are one your objectives can be very specific so they can meet your requirements in terms of answering some very key or specific questions that you have, that either underpin your business plan or your financial model. And the research can be tweaked to to the specific question that you want to answer. The results that come out of the research are yours exclusively, they're yours and nobody else's, are either not going to be shared, you're going to have an exclusive access to this information.

Now, let's look at secondary research. And this is an attractive option, as it essentially relies on you reusing research that's already been performed by someone else. The big advantage to this is that the research data is less expensive, particularly compared to primary research. And in many cases, the information is free. With many research resources been online, it's convenient. But there's a number of things that you need to think about that are disadvantages when you use secondary research.

Firstly, the research results are usually not an exact fit to your requirements. So when we talked about primary research, we could really direct the research to answer the specific questions we had. When we look at secondary research, we probably don't look for something that's going to be an 80% fit, and might not be as accurate as we hope it to be. Sometimes the results are outdated. So we may find a study or some type of research that kind of answers the questions that we we've been asking or the information we're looking for, but it's a few years old and this is going to data results and Also the results might be skewed. This is particularly the case where an organization and again, pharmaceutical organizations bring to mind where a study might be directed towards a specific outcome.

And the results are skewed towards achieving achieving this outcome. So these are the things that that that you need to bear in mind. Ultimately, there, you might be able to use a combination of the both of the two of these these approaches, so primary and secondary resource. So for example, if you were launching a business that sold internet connectivity connectivity to home based office workers, you could, for instance, conduct a larger amount of research using secondary methods, such as information on the number of home based office workers available, for instance, from the Office of National Statistics, and you could be using competitive price data from other internet service providers. This would then be supplemented by primary data Perhaps gathered by asking acquaintances and previous colleagues to complete a customized questionnaire

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