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Table of Contents

Finance – Funding For New Business – Part 4


6. Research Methodology

The research will be conducted with the help of the primary and the secondary research methods. Primary research will be conducted with the help of electronic survey of 200 entrepreneurs with relation to the funding methods used by them to fund the activity of the new ventures. Secondary research will be based on the review of the relevant literature. On the basement of the results of the current research an appropriate conclusions related funding sources of the new venture will be made.

The choice of the companies is random, but only national companies are supposed to be analyzed. The group reflects a relatively small number of entrepreneurs will be interviewed. Thus, the current research is subject to certain limitations, namely: small sample number, inadequate data for analysis, and inaccuracy of the research methods used. The research will be conducted on the United Kingdom.

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After conducting a survey the funding patterns will be carefully analyzed with appropriate conclusions made regarding the preferable type of funding based on the theoretical and empirical research results. Examination of the survey questionnaires will help achieve the first research objective. The conclusions related the most popular types of funding from the cost minimization perspective will be made. Also, the business owners will be asked about the problems they faced when they had to choose the form of funding and benefits they received from chosen type of funding. The second research objective can be reached in this way. They will be asked about the industry they are operating to be able to answer the third research question. The data collected will be analyzed with the help of Excel.

The following data analysis techniques will be used: hypothesis testing, generalization, and summarizing. Aiming to make the research results more accurate, open-ended question interviews will be conducted with the participants on the phone to have a better understanding of the research results and to receive more detailed information for analysis. The main conclusions resulted from the interviews are supposed to be used in the dissertation to support the research topic.

As mentioned earlier, this study will focus on the discussion on the comparison (differences and similarities) between equity and bank loan financing options for funding a new small business. The objective of this paper is to be able to determine the major similarities and differences between these two new business funding options. The author of this paper will use both qualitative and quantitative research methods in achieving the research goals and objectives. This means that this research will be divided into two parts, the qualitative part and then the quantitative part.

For the qualitative part of this research, the author of this paper will use an exploratory research design to gather information from the subjects. Remember that in the data analysis portion of this paper, there were over 250 nationally recognized businesses assessed, focusing on their business structure and organization, and the way how they manage and obtain their funds for their business operations, expansions, and ventures. For the qualitative part of this research, we will not use a sample population that is sized at 250. The qualitative part of this research will only focus on a small group of three to five businesses.

Additionally, the sample population will be composed of the business owners or any executive level personnel (e.g. general manager, or business director, etc.) of the respective businesses that have been chosen to represent the sample population for this research’s qualitative portion. So all in all, there will be a total of three to five subjects that will be the focus of the exploratory study. The goal of an exploratory study is to investigate or check for a problem that has not yet been clearly defined. This problem may be an issue or a product of a research hypothesis-something which neither the researchers nor the public do not know a lot of things about.

Another possible goal of an exploratory study is to gather information so that the researchers can make conceptual distinctions or create an exploratory relationship between the different factors and variables involved in the study. This type of research conduct or design has been the one chosen for this part of the study on the different funding options for small and medium business enterprises because of the nature of the factors and variables involved in the study. Firstly, there is not real problem that we want to solve or research about.

The main goal of the qualitative part of this research is only to determine the qualitative aspects of the business managers’ (the respondents, part of the sample population) decision to choose either the bank or equity financing (on in some cases, both of the business funding options) to finance the expansion and initial capitalization needs of the business that they own and or manage. By qualitative aspects, we mean those issues and or questions that can be answered in an open ended way, or those things that can be expanded into a discussion. This way, the researchers will be able to identify any other related factors and or variables that they may have failed to consider during the early stages of the research’s conceptualization.

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To know why a certain percentage of the sample population (be it the larger or the smaller portion) opts to choose either the bank loan or equity financing option to fund their business capitalization requirements is an important aspect of this research, particularly of accomplishing the main goal because it would certainly not be enough to just know how prevalent one business financing option is over the other (because we are basically comparing just two of the most mainstream business funding options available that are the bank and equity funding options). To know the reasons why more people are choosing one financing option over the other or the others is an important question to answer as well.

Other researches about the same topic have, in fact, focused on determining one aspect of the problem only. For example, there are previously published researches that only focused on the quantitative aspect of the issue (i.e. the different choices in funding a business); and at the same time, there are also previously published researches that only focused on the qualitative aspect of the problem. The problem with those researches or studies is the fact that they only solved half of the problem. Those who opted to focus on the qualitative aspects only solved the qualitative-related problems; and those who opted to focus on the quantitative aspects only solved the quantitative-related aspects.

While this may never be considered as a negative outcome, because after all, the researchers have managed to accomplish their research goals and objective, it may be considered as a research failure especially when we use the question whether they solved the real problem or issue at hand successfully or not as the primary metric. For the previously published studies that only focused on one aspect of the problem, the most likely answer to the question (the primary metric question) would be a not because how would the authors of these studies be able to answer the real socially-relevant question about the differences between the different funding options for businesses if they only focused on the numbers (as in the case of quantitative studies about the topic) or on the underlying issues, presumptions, and responses of the sample population without the aid of statistics (as in the case of the qualitative studies published about the topic).

In the case of the present study, the author will try to address both the qualitative and quantitative issues of the current issue at hand, that is the to identify the best form of funding a new business from a cost effective and cost minimization perspective; describe the advantages and disadvantages of debt and equity financing for a new business; and to ultimately determine which among the two types of financing or funding is better for starting up new businesses across a wide range of industries. The qualitative research part of this study will focus on these issues and these issues only. In order to gather qualitative information from the three to five target subjects for the qualitative part, we will use survey sheets and questionnaires. All the selected respondents will have to answer the survey sheets and questionnaires at some point during the implementation period of the qualitative part of the research.

The goal of survey sheets and questionnaires is to extract information regarding the rationales behind the company’s choice of funding option and strategies—why the company has decided to choose one funding option over the other. Basically, the more information that we can obtain, the better, because these qualitative information will make answer the why, how, and what questions, which as mentioned earlier, are important in solving the real issue behind the different choices of funding in the field of business.

Since the main goal of the survey sheets and questionnaires that will be used for the qualitative part of the study is to enable the researchers to extract as many information as possible from the limited number of subjects, the type of questions that will be used will be open ended questions, or those questions that one would often find and or use in essays. This way, the respondents—who are basically the managers and in some cases, the owners of the business themselves, would be able to perfectly describe the exact situation where they and the company were in during the crucial times when they had to create a plan on and choose what type of funding option they would choose for the business.

The qualitative portion of this paper only comprises half of the total work to be done. There is, in fact, another portion of this study that aims to correlate the responses of the respondents with numbers and other quantifiers. This paper will have a quantitative part wherein the researchers will analyze the respondents’ response using numbers. Unlike in the qualitative part of the study, a significantly larger size of sample population will be used. If the target number of respondents for the qualitative part of the paper is three to five respondents only, the target number of respondents for the quantitative part will be 2500.

This has, in fact, been mentioned earlier during the sample population selection process. In the sample population selection process, the researchers will create a short list of over two hundred nationally registered companies. Those who will be included in the short list will be analyzed and observed, focusing on their funding and capitalization structure, specifically whether they chose to choose bank financing or equity financing when they were considering for funding options during the initial stages of the development of their respective company. In order to obtain the objective results for the quantitative part of the paper, the researchers will have to get in touch with at least one representative for each of the over 2000 companies which will be analyzed in this study. In order to qualify for the role each representative must have played a key position during the time when their respective company was still choosing which funding option to consider.

This way, the researchers can ensure that the answers will not only be based on truth but will also be reliable. For the quantitative part of the study, a survey questionnaire will be used. The chosen representative for each company will then be instructed to answer all the applicable questions in the survey questionnaire. After making sure that all company representatives, who are basically the participants in the study, have already answered all of the questions in the questionnaire, the researchers will then collect all of the answered questionnaires and then tally the results.

The questionnaires that will be given to all of the respondents are the same. This means that person A will answer will be one hundred percent identical to the questionnaire that person B will answer, and so on. This has been made to establish a clear and definitive point of comparison between the responses of the different respondents because otherwise, it would be impossible to compare all of their responses, sort and or group them, and then generate conceptual findings. After the said procedures, the researchers will then create a table of all the results of the subjects’ responses. Creating a table is important because it provides a summary of the data that has been obtained from over two hundred samples or respondents.

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The researchers estimate that the data gathering or the implementation portion and the tabulation of the results would be the most time consuming parts of the paper especially when we consider that there will be at least or even more than two hundred individual responses to record and analyze; plus the fact that the questionnaire that will be used has more than twenty questions. In summary, the researchers, focusing on the quantitative part of this paper alone, will have to record the necessary data and then tabulate the data for thousands of items. After which, the researchers will have to analyze and interpret the results of the quantitative part of the paper.

Some of the possible questions that will be solved using the survey questionnaire for the quantitative part of the paper are: the possible effects of having a particular type of business legal status in choosing funding decisions (as in the case of corporations, sole proprietorships, partnerships, and cooperatives, among others; the effects of the company’s being a for profit organization or a social enterprise on its decisions that are related to funding and or financing options; the effect of the number of employees, the size of the organization based on the coverage of its operation, the origin of the business (whether it has been established by the current owners, the shareholders, purchased from another company, or inherited from parents and ancestors, among others) on the process of making funding option-related decisions. The quantitative part of this paper will focus on answering these types of questions. After completing both the quantitative and the qualitative part, the results for both parts will be compared and correlated.

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