Getting Investment Ready
Needs analysis / rationale takes place at the start of the business planning process. It is necessary to determine the role your development will play in the local community.
Before a business case can be attempted you must establish the rationale for your development. What is the point? Who will benefit? What revenue will be generated?
Needs analysis goes hand-in-hand with defining purpose. It is a means of testing the viability of your plans. The aim is to collect data on the current market to outline demand for the planned facilities and services.
Independent evaluation of each part of the building must be undertaken. For example if the development seeks to include office space, a crèche and a gym then a needs analysis should happen for each element.
The key question when doing a needs analysis is identifying the unmet needs that you are meeting. The first step is to review potential competition in the area. If there are already empty offices, underused community centres or struggling crèches in the area then extra provision is unlikely to be viable. In these situations you must demonstrate how your development will be different (higher quality, lower cost etc.) or re-think your plans.
If the competition review indicates unmet demand then start to collect more data.
- What rents / prices do the local competition charge?
- Who will use the service and how much will they be able and willing to pay?
- How many users will you need to make the service viable? Is this realistic?
- Where will customers come from and how far will they travel?
- What benefits, if any, will users bring to the local community?
- Who are you targeting (events organisers, businesses, the voluntary sector, community organisers, the public sector etc.) and how will you reach them?
These are the types of questions a needs analysis should answer. Understanding what you want to know is the first step. How do you find it out in practice? There are a number of ways to do this:
- Market research. This means identifying all local competition and finding out their cost structure and what they offer. Charging more may be justifiable if you are providing higher quality but you must be able to justify this.
- Consultation. Ask people if they would use the service and if so what they would spend. Be careful with this data. People can miscalculate their future demand and surveys can be self-selecting.
- Comparison. Look at what similar developments in comparable areas have achieved. Having a successful example to tout is proof that the idea can be made to work. The limitation here is that every situation is slightly different.
- Discussion. Talk to others who have done similar projects. Find out what they charge and which facilities and services have proved most successful.
Once the needs analysis is complete take stock and evaluate the results. Needs analysis is an iterative process and should not be approached in isolation. If the data does not support your initial plans then rethink and start the process again. It is important to identify early if a project is not viable. This will save both time and resources down the track.
Sometimes it will be impossible to make a development work. There are a whole host of reasons why this may be the case. The building may be in too poor a condition or in the wrong location.
At each stage of the needs analysis test whether you are being realistic. Put your assumptions on paper and make sure you are comfortable with them. A needs analysis does not remove the risk from a project but it allows you to make a more informed decision. Take into account potential changes and analysise how they would affect the project (the current economic downturn is a great example of an unforeseen change).
Listen to what the needs analysis tells you. It may indicate that the building will only ever produce a modest profit that can be recycled into the community. If this is the case weigh up whether this potential benefit is worth the many volunteer hours needed to make the project work. Do not be afraid to halt the development at this stage if that is what the needs analysis indicates. There can be a bias towards development as owning a building can seem exciting. Going ahead with a project that is unviable is counterproductive and could undermine the whole organisation.
Try not to let anecdote dominate your analysis. This is susceptible to error. You should be led by data wherever possible, not feelings.
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