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Sample Business Plan
Sample Business Plan
business. However, determining the ideal survey sample size and population can
prove tricky. In other words, who will you be surveying and how many people? No
idea? No worries. Were here to help!
Say youre a market research manager at a furniture company and you are planning to
launch a new furniture line by the end of 2016. However, before you launch the new line
you wish to conduct an online survey on whether your line Fall 2016 is more or less
likely to be a hit or miss on the European Union (EU) market. So far, so good. Yet, the
following question will almost instantly arise: What is the population that I would like to
survey?. Or, who do you need to survey to gain valuable insights in the success of
your new furniture line? In this case the answer is rather straightforward. Assuming that
you are launching the new line on the European market, that minors do not buy furniture
and that your furniture is reasonably priced, your population consists of all adults in the
EU.
So, how large should your sample be? Should you survey 1%, 5%, 10%, of the adult
citizens in the EU? Well, this depends largely on how accurate you want your survey
data to be. In other words, how closely you want your results to match those of the
entire population. There are two measures that affect the accurateness of the data.
First of all there is the margin of error (or confidence intervals). In short, this is
the positive and negative deviation you allow on your survey results for the
sample. Or, in other words, the deviation between the opinions of your
respondents and the opinion of the entire population. An example will shed some
light on this statistical explanation. Suppose you set your margin of error on 5%.
If lets hope so! 90% of your survey respondents like the Fall 2016 line, a 5%
margin of error means that you can be sure that between 85% (90%-5) and 95%
(90%+5) of the entire population actually likes the Fall 2016 line.
Second there is the confidence level. This tells you how often the percentage of
the population that likes the Fall 2016 line actually lies within the boundaries of
the margin of error. Or, following on our previous example, it tells you how sure
you can be that between 85% and 95% of the population likes the Fall
2016 campaign. Suppose you chose the 95% confidence level which is pretty
much the standard in quantitative research1 then in 95% of the time between
85% and 95% of the population likes the Fall 2016 line2.
Below you find an indicative table on how to calculate your number of completes.
Remember that your population consist of approximately 400 million adults in the EU.
As a consequence, the appropriate number of completes will be found on the last row of
the table below. Depending on the confidence level and the margin of error, the
number of completes will vary. As we chose a margin of error of 5% and a confidence
level of 95% for our Fall 2016campaign, you need approximately 400 completes (it is
advisable to round to the nearest hundred) for your sample.
Alternatively, on the CheckMarket website, you find an easy sample size calculator to
calculate the number of completes
1 In some quantitative research, stricter confidence levels are used (e.g. the 99%
confidence level)
2 To put it more precisely: 95% of the samples you pull from the population.
COMMENTS:
Determining sample size is a very important issue because samples that are too large may waste time, resources
and money, while samples that are too small may lead to inaccurate results. In many cases, we can easily determine
the minimum sample size needed to estimate a process parameter, such as the population mean .
When sample data is collected and the sample mean is calculated, that sample mean is typically different from the
population mean . This difference between the sample and population means can be thought of as an error. The
margin of error is the maximum difference between the observed sample mean and the true value of the
population mean :
where:
is known as the critical value, the positive value that is at the vertical boundary for the area of in the
right tail of the standard normal distribution.
This formula can be used when you know and want to determine the sample size necessary to establish, with a
confidence of , the mean value to within . You can still use this formula if you dont know your
population standard deviation and you have a small sample size. Although its unlikely that you know when the
population mean is not known, you may be able to determine from a similar process or from a pilot test/simulation.
Lets put all this statistical mumbo-jumbo to work. Take for example that we would like to start an Internet service
provider (ISP) and need to estimate the average Internet usage of households in one week for our business plan and
model.
of = 0.025. The region to the left of and to the right of = 0 is 0.5 0.025, or 0.475. In the table of the
standard normal ( ) distribution, an area of 0.475 corresponds to a value of 1.96. The critical value is
therefore = 1.96.
The margin of error = 1 and the standard deviation = 6.95. Using the formula for sample size, we can
calculate :
So we will need to sample at least 186 (rounded up) randomly selected households. With this sample we will be 95
percent confident that the sample mean will be within 1 minute of the true population of Internet usage.
This formula can be used when you know and want to determine the sample size necessary to establish, with a
confidence of , the mean value to within . You can still use this formula if you dont know your
population standard deviation and you have a small sample size. Although it is unlikely that you know when
the population mean is not known, you may be able to determine from a similar process or from a pilot
test/simulation.