Prior research helps add solidarity and credibility to a business plan as it shows investors and stakeholders a thorough analysis of what can be expected in the coming years. The research conducted should give relevant data on the business model and a fair representation of how the business is going to be received by the market.
The type of research one needs to undergo when preparing a business plan largely depends on what kind of business one is looking for a startup. An online business would require different types of research compared to a business plan involving a retail shop. For example, an online business or e-commerce business plan would typically include research relating to top-ranked keywords, domain and hosting solutions, and other technical and market-related research. Whereas, a retail store would require research about the location, rental fees, customer density, etc. The type of research needed when creating a business plan depends on your business. However, research remains consistent regardless of what type of business designation on which a business plan may be based.
SWOT Analysis
A key part of any business plan is well thought of SWOT analysis. SWOT stands for strength, weakness, opportunity, and threats, and these needs are to be highlighted in any business plan, no matter the type of business or industry. This form of analysis looks at both internal and external factors that could affect the business operations in both the long and short-run. When researching SWOT, a good practice is to utilize data from established businesses in that industry. Using a well-reputed company as a benchmark showcases two things; it proves the model is successful and demonstrates that you have studied your competitors well.
Competitor Analysis
Understanding your competition before the start of your business can be a huge advantage. Competitor analysis helps identify key competitors in the industry and highlights just how successful the business model can be when executed effectively. Having a well-compiled competitor analysis can also differentiate yourself from the rest of the competitors by stressing the competitive advantage your business model would have compared to the rest of the competition.
Market Analysis
Possibly the most critical component of a business plan is market research. Any successful business needs to have a thorough understanding of its desired target audience. Before starting on compiling a business plan, appropriate market research needs to be conducted that helps identify and answer questions such as; who would be the business’s potential customer base (demographics)? What would be the desired market share? What type of demand exists for the product, and at what price? These are but a few of the questions that would require answering before starting a business plan. The better a business understands the market in which it operates, the more successful it is likely to become.
Financial Analysis
This type of research can be conducted by studying competitors’ financial statements. Finance is the heart of any business. Ensuring that all financial components are thoroughly researched makes for a well presented and realistic business plan that is likely to generate interest from investors. Financial ratios are a quick and easy way to form an idea about a particular business or industry. Preparing realistic and credible financial forecasts for the business can add a lot of weights to your business plan as numbers are much better when it comes to presenting a business opportunity than words. Facts and figures make up the lifeblood of any business plan. Financial discipline and proper research can help in compiling forecasted financial statements that are realistic and attainable, making it a worthwhile investment to most.
Conclusion
Starting up a business is like buying a house or a car; only a million times harder. One needs to research to figure out the best available deals in the market and attain knowledge regarding all the different options available. A well-articulated decision can only be made when all necessary and relevant information is brought forth, and this is no different when it comes to formulating a business plan.
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