Analysis for Business Strategy and Business Management Decisions
Baseline surveys are an important part of any M&E process. This discussion, takes a look at the definition of a baseline study, its importance, when to conduct one and alternatives when there is no baseline. It also includes other considerations to make when conducting a baseline study.
What is a baseline study?
A baseline study simply put is a study that is done at the beginning of a project to establish the current status of a population before a project is rolled out. The Food and Agricultural Organization defines a baseline study as:
“a descriptive cross-sectional survey that mostly provides quantitative information on the current status of a particular situation – on whatever study topic – in a given population. It aims at quantifying the distribution of certain variables in a study population at one point in time.”
While most people confuse a baseline study and a pilot study, these two are not synonymous. A pilot study, unlike a baseline study attempts to establish whether it is feasible or worthwhile to undertake a project. In which case, pilot studies are undertaken so as to establish or verify a project idea. A baseline study on the other hand is done after a decision to implement a project has been made. In other words, pilot studies are conducted to identify project ideas, while baseline studies are done to act as a benchmark for measuring project success or failure.
Baselines surveys are important for any project for the following reasons:
Just like the name suggests, baseline surveys should be carried out at the very beginning of a project and for obvious reasons. Any manager wants to ensure that any possible impact of a project is captured at the evaluation. Where a baseline study is conducted after project activities have already been initiated, the accurate picture of the initial status cannot be reflected since the project is already having some impact, however little. It is therefore always best practice to conduct a baseline before project implementation.
Alternatives for baseline studies
If there is still a long way to go for the project and a baseline wasn’t conducted, managers can always consider conducting a study to act as a baseline. However, if at the end of a project there was no baseline study conducted, there are a few alternatives to consider for the purpose of measuring project success.
1. Indicators: Before conducting a baseline study, it is important to identify the indicators for the project. The indicators help in the designing of the questionnaire and also in determining evaluation indicators. The type of indicators could also dictate the type of data to collect and how the analysis of the data will be done.
2. Study population and sampling: The study population is most often the project target population. Establishing the boundary so as to ensure the sample is only limited to the target population is important. Also related is the sampling procedure. The most common one is the simple random sampling. However, sometimes this is not possible because of various reasons, which might mean that a different sampling procedure is considered.
3. Partners: In some cases, it could necessary to involve other organizations in the baseline survey. This is especially viable if “similar” projects share a starting timeline and share a target group, most often by projects sharing a donor. This normally saves costs an increases confidence in the baseline results.
4. Funds: Availability of funds will dictate the intensity and scope of the baseline study. More funds might also mean that both quantitative and qualitative methods are adopted, while limited funds might imply that an organization only goes for quantitative methods.
What is market research?
When boiled down to its essence, market research helps you better understand who your customers are and why they might want to buy your product or service.
Let’s put it another way: If you’re a writer, one of the first things you should know it who you’re talking to. Who is your audience? And what are you trying to tell them? Well, the same concept applies to market research for businesses.
Using both primary (talking to customers) and secondary (info on your customers from other sources) research, businesses gather data to answer the following crucial questions:
Market research can encompass everything from customer surveys to interviews to industry reports and even some agencies that will sell you credit reports on competing companies (no, we don’t recommend you buy those). Because of the depth and potential impact of all this data, solid market research is expensive—Fortune 500 companies happily spend many thousands of dollars on a robust market research report.
As a small business owner, that kind of cost can be prohibitive. But even if you don’t have wads of cash lying around, you can compile market research without busting your budget. And we’ll walk you through some ways to get started.
Before diving into doing your actual research, you’ll need to set aside some time to create a plan. One piece of market research can’t be everything to everyone in a company, especially when you have a limited budget. To help stretch your dollars further, spend some time honing your focus with these steps:
Now, let’s get to the meat of market research. As I mentioned earlier, there are two types of market research: primary and secondary.
Primary research is brand, spanking new information. It doesn’t currently exist anywhere else, and you get it straight from the source: your target customers. Primary research is meant to help business owners get direct answers to their burning questions, like defining customer product preferences, understanding their motivations, and getting a sense of their needs.
Some common types of primary research include:
Digging into primary research might take you outside your comfort zone. You might shy away from asking customers lengthy questions to avoid annoying them. Or maybe you’ll fret over taking too much of their time. But trust me: the long-term impact of a rigorous market research report is worth the discomfort.
When designing your survey questions, follow a few basic rules of thumb:
While primary research offers a more detailed view of customer needs and competitor profiles, secondary research offers a bigger-picture analysis.
As I mentioned before, secondary research uses resources that already exist. That could mean digging through government demographic data, industry reports, or pricing guides for data that can guide your research.
Some resources you can use for secondary research include:
If you’re still digging for more information (or maybe just a helping hand), there are a variety of other resources to use to inform your research:
No matter what kind of small business you’re running, it’s crucial to know everything you can about your customers. Knowing how your product or service meets a specific need—and then figuring out how to communicate that effectively—can make the difference between success and failure.
And now that you have a better grasp on the fundamentals of market research, you can start designing your own plan to better understand both your target customers and your competitors.
Increasingly stringent containment measures needed to slow the spread of the Coronavirus (Covid-19) will necessarily lead to significant short-term declines in GDP for many major economies.
Estimations showing that the lockdown will directly affect sectors amounting to up to one third of GDP in the major economies. For each month of containment, there will be a loss of 2 percentage points in annual GDP growth. The tourism sector alone faces an output decrease as high as 70%. Many economies will fall into recession. This is unavoidable, as we need to continue fighting the pandemic, while at the same time putting all the efforts to be able to restore economic normality as fast as possible.
“The high costs that public health measures are imposing today are necessary to avoid much more tragic consequences and even worse impact on our economies tomorrow,”Mr Gurría said. “Millions of deaths and collapsed health care systems will decimate us financially and as a society, so slowing this epidemic and saving human lives must be governments’ first priority.
“Our analysis further underpins the need for sharper action to absorb the shock, and a more coordinated response by governments to maintain a lifeline to people and a private sector that will emerge in a very fragile state when the health crisis is past.”
To “inoculate” economies to current and future shocks, Leaders should act immediately, to:
In all economies, the majority of this impact comes from the hit to output in retail and wholesale trade, and in professional and real estate services. There are notable cross-country differences in some sectors, with closures of transport manufacturing relatively important in some countries, while the decline in tourist and leisure activities is relatively important in others.
The impact effect of business closures could result in reductions of 15% or more in the level of output throughout the advanced economies and major emerging-market economies. In the median economy, output would decline by 25%.
Variations in the impact effect across economies reflect differences in the composition of output. Many countries in which tourism is relatively important could potentially be affected more severely by shutdowns and limitations on travel. At the other extreme, countries with relatively sizeable agricultural and mining sectors, including oil production, may experience smaller initial effects from containment measures, although output will be subsequently hit by reduced global commodity demand.
By definition, business analysis is the discipline of recognizing business needs and findings solutions to various business problems. In simpler words, it is a set of tasks and techniques which work as a connection between stakeholders. These help them understand organization’s structure, policies, and operations. They can also recommend solutions to help the business reach its goals.
Business analysis is about understanding how your organization functions to fulfill its purposes. It entails defining the abilities the firm needs to provide products to the external stakeholders. You will have to understand how the organizational goals connect to specific objectives. You will also have to make a detailed plan to help achieve the goals and objectives. In your business analysis, you will define how the stakeholders and different organizational units interact.
It is the Business analysts’ task to analyze and synthesize information provided by the immense group of people who interact with the firm. Customers, executives, staff and IT professionals send this information. The analysts do not only focus on the expressed desires but elicit the actual needs of stakeholders. The analyst facilitates communication between organizational units sometimes.
Below are 8 steps business analysts generally follow. Each of the steps is important for business analysis.
People expect business analysts to start contributing to projects as quickly as possible and make a positive impact. Sometimes, they get involved while the project is ongoing. It is essential to grant them some time to get oriented. They clarify the scope, requirements and business objectives. They spend some time to collect some basic information.
The following are the main responsibilities they have in this step:
Most business analysts start by defining the scope. This can cause problems. It is more effective to understand the business needs before defining the scope of the project.
Your responsibilities they have in this step are:
Define a clear and complete statement as scope. It will serve as a go-forward concept and help the team realize what the business needs. Remember, scope is not an implementation plan. It merely guides all the steps of the business analysis process.
In this step, the business analysts’ main responsibilities are:
The business analysis plan will provide clarity to the process of business analysis. The plan will answer several questions.
The vital responsibilities involved with creating a business analysis plan are:
Clear and actionable detailed requirements are important. Detailed requirements provide the implementation team with the information they need to devise the solution. The most important responsibilities are:
The technical implementation team builds, customizes and deploys software on a typical project. During this process, the key duties of the business analysts are:
Sometimes a business cannot use the solutions aptly. As a result, it will be difficult to attain the original objectives. The business analyst should be involved in this final step to support the business. The aim of this step is to ensure that all members are prepared to accept the changes.
The business analysts’ main responsibilities for this step are:
Throughout business analysis process, a lot of steps are involved. Business outcomes and details are discussed. Big and small problems are solved. Relationships are built, and changes are managed. Try not to lose track amid the steps. Stop and assess the value created by the solution.
The key responsibilities involved in this step are:
A company’s capital structure is arguably one of its most important choices.
From a technical perspective, the capital structure is defined as the careful balance between equity and debt that a business uses to finance its assets, day-to-day operations, and future growth.
From a tactical perspective however, it influences everything from the firm’s risk profile, how easy it is to get funding, how expensive that funding is, the return its investors and lenders expect, and its degree of insulation from both microeconomic business decisions and macroeconomic downturns.
By design, the capital structure reflects all of the firm’s equity and debt obligations. It shows each type of obligation as a slice of the stack. This stack is ranked by increasing risk, increasing cost, and decreasing priority in a liquidation event (e.g., bankruptcy).
For large corporations, it typically consists of senior debt, subordinated debt, hybrid securities, preferred equity, and common equity. See exhibit A.
Exhibit A: Generic Sample Capital Structure
Senior Debt: A class of loans with priority on the repayment list if a company goes bankrupt. Holders of this form of financing have first dibs on a company’s assets. This means that in a liquidation event, lenders holding subordinated notes are not paid out until senior creditors are paid in full. Because of the minimal risk that accompanies this block of the capital structure, senior lenders loan money at lower rates (i.e., lower interest payments and less restrictive debt covenants) relative to more junior tiers.
Subordinated Debt: A class of loans that ranks below senior debt with regard to claims on assets. For this reason, this block of the capital structure is more risky than senior borrowings. However it also comes with commensurately higher returns, usually in the form of higher interest payments. For more, see our piece on drivers behind the rebounding popularity of subordinated debt.
Mezzanine Debt: A class of subordinated debt that blends equity and debt features. It therefore receives liquidation after senior capital and is generally used when traditional funding is insufficient or unavailable. Correspondingly, mezzanine firms lend at higher interest rates than traditional debt providers, and usually reserve the right to trade some of their debt for equity. Though mezzanine financing exhibits both equity- and debt-like characteristics, it’s usually classified as a category within subordinated debt. For more details, see our overview of mezzanine debt.
Hybrid Financing: A class of the capital structure in publicly-traded companies that also blends equity and debt features. By definition, hybrid securities are bought and sold through brokers on an exchange. Hybrid financing can come with fixed or floating returns, and can pay interest or dividends.
Convertible Debt: A class of hybrid financing. Convertible bonds are the most common type of hybrid financing, and usually take the form of a bonds that can be converted to equity. The conversion can only happen at certain points in the firm’s life, the equity amount is usually predetermined, and the act of converting is almost always up to the discretion of the debt holder.
Convertible Equity: A class of hybrid financing. Convertible equity usually takes the form of convertible preferred shares, which is preferred equity that can be converted to common equity. Like convertible debt, convertible preferred shares convert into common shares at a predetermined fixed rate, and the decision to convert is typically at the owner’s discretion. Importantly, the value of a firm’s convertible preferred shares is usually dependent on the market performance of its common shares.
Preferred Equity: A class of financing representing ownership interest in a company. As opposed to fixed income assets (e.g., debt), equity is a variable return asset. However, preferred equity has both debt and equity characteristics in the form of fixed dividends (debt) and future earnings potential (equity). Correspondingly, it gives the holder upside and downside exposure. Its claims on the company’s assets and profits come behind those of debt holders and ahead those of common stock holders. Generally, preferred equity obligates management to pay its holders a predetermined dividend before paying dividends to common shareholders. On the flipside, preferred equity typically comes without voting rights.
Common Equity: Also a class of financing representing ownership interest. Common equity is the junior-most block of the capital structure and therefore represents ownership in an business after all other obligations have been paid off. For this reason, it comes with the highest risk and the highest potential returns of any tier in the capital structure.
Any company’s capital structure serves several key purposes.
First and foremost, it’s effectively an overview of all the claims that different players have on the business. The debt owners hold these claims in the form of a lump sum of cash owed to them (i.e., the principal) and accompanying interest payments. The equity owners hold these claims in the form of access to a certain percentage of that firm’s future profit.
Secondly, it is heavily analyzed when determining how risky it is to invest in a business, and therefore, how expensive the financing should be. Specifically, capital providers look at the proportional weighting of different types of financing used to fund that company’s operations.
For example, a higher percentage of debt in the capital structure means increased fixed obligations. More fixed obligations result in less operating buffer and greater risk. And greater risk means higher financing costs to compensate lenders for that risk (e.g., 14% interest rate vs 11% interest rate).
Consequently, all else equal, getting additional funding for a business with a debt-heavy capital structure is more expensive than getting that same funding for a business with an equity-heavy capital structure.
Most likely you have already identified a business ideas, so now it's time to balance it with a little reality. Does your idea have the potential to succeed? You will need to run your business idea through a validation process before you go any further.
In order for a small business to be successful, it must solve a problem, fulfill a need or offer something the market wants.
There are a number of ways you can identify this need, including research, focus group, and even trial and error. As you explore the market, some of the questions you should answer include:
You need a plan in order to make your business idea a reality. A business plan is a blueprint that will guide your business from the start-up phase through establishment and eventually business growth, and it is a must-have for all new businesses.
The good news is that there are different types of business plans for different types of businesses.
If you intend to seek financial support from an investor or financial institution, a tradidional business plan is a must. This type of business plan is generally long and thorough and has a common set of sections that investors and banks look for when they are validating your idea.
If you don't anticipate seeking financial support, a business plan can give you clarity about what you hope to achieve and how you plan to do it. In fact, you can even create a working business plan on the back of a napkin, and improve it over time. Some kind of plan in writing is always better than nothing.
Starting a small business doesn't have to require a lot of money, but it will involve some initial investment as well as the ability to cover ongoing expenses before you are turning a profit. Put together a spreadsheet that estimates the one-time startup costs for your business (licenses and permits, equipment, legal fees, insurance, branding, market research, inventory, trademarking, grand opening events, property leases, etc.), as well as what you anticipate you will need to keep your business running for at least 12 months (rent, utilities, marketing and advertising, production, supplies, travel expenses, employee salaries, your own salary, etc.).
Those numbers combined is the initial investment you will need.
Now that you have a rough number in mind, there are a number of ways you can fund your small business ideas , including:
You can also attempt to get your business off the ground by bootstrapping, using as little capital as necessary to start your business. You may find that a combination of the paths listed above work best. The goal here, though, is to work through the options and create a plan for setting up the capital you need to get your business off the ground.
Your small business can be a sole proprietorship, a partnership, a limited liability company (LLC) or a corporation. The business entity you choose will impact many factors from your business name, to your liability, to how you file your taxes.
You may choose an initial business structure, and then reevaluate and change your structure as your business grows and needs change.
Depending on the complexity of your business, it may be worth investing in a consultation from an attorney or CPA to ensure you are making the right structure choice for your business.
Your business name plays a role in almost every aspect of your business, so you want it to be a good one. Make sure you think through all of the potential implications as you explore your options and choose your own business name.
Once you have chosen a name for your business, you will need to check if it's trademarked or currently in use. Then, you will need to register it. A sole proprietor must register their business name with either their state or county clerk. Corporations, LLCs, or limited partnerships typically register their business name when the formation paperwork is filed.
Don't forget to register your own domain name once you have selected your business name.
Paperwork is a part of the process when you start your own business.
There are a variety of small business licences and permit that may apply to your situation, depending on the type of business you are starting and where you are located. You will need to research what licenses and permits apply to your business during the start-up process.
Small businesses run most effectively when there are systems in place. One of the most important systems for a small business is an accounting system.
Your accounting system is necessary in order to create and manage your budget, set your rates and prices, conduct business with others, and file your taxes. You can set up your accounting system yourself, or hire an accountant to take away some of the guesswork. If you decide to get started on your own, make sure you consider these questions that are vital when choosing accounting software.
Setting up your place of business is important for the operation of your business, whether you will have a home office, a shared or private office space, or a retails location.
You will need to think about your location, equipment, and overall setup, and make sure your business location works for the type of business you will be doing. You will also need to consider if it makes more sense to buy or lease your commercial location.
If you will be hiring employees, now is the time to start the process. Make sure you take the time to outline the positions you need to fill, and the job responsibilities that are part of each position. The Small Business Administration has an excellent guide to hire your employee first that is useful for new small business owners.
If you are not hiring employees, but instead outsourcing work to independent contractors, now is the time to work with an attorney to get your independent contractor employees in place and start your search.
Lastly, if you are a true entrepreneur hitting the small business road alone, you may not need employees or contractors, but you will still need your own support team. This team can be comprised of a mentor, small business coach, or even your family, and serves as your go-to resource for advice, motivation and reassurance when the road gets bumpy.
Once your business is up and running, you need to start attracting clients and customers. You'll want to start with the basics by writing a unique selling propositional and creating a market plan. Then, explore as many small business marketing ideasas possible so you can decide how to promote your business most effectively.
Once you have completed these business start-up activities, you will have all of the most important bases covered. Keep in mind that success doesn't happen overnight. But use the plan you've created to consistently work on your business, and you will increase your chances of success.