When academic researchers present a project proposal, they know that their intended readers will have many questions; to this effect, it is imperative to provide as many answers as possible at the earliest stages. In general, research methodologies seek to answer three questions:
1 – Where does the data or evidence come from?
2 – How was the data collected or obtained?
3 – How was the information organized and analyzed?
Although research methodologies are more commonly seen in scientific papers, they can be applied to research projects in the social sciences and also for business purposes. Entrepreneurs whose projects may seem unusual should include research methodologies in their investment proposals and business plans. The most commonly used templates for business planning and proposals do not include sections for research methodology; therefore, if a cryptocurrency entrepreneur is seeking investors to participate in a fund that bets against the future value of Bitcoin, the proposal should include an explanation of the research that supports this idea.
Continuing with the aforementioned example of an investment fund that seeks to short Bitcoin, this is a financial proposal that will require a quantitative approach due to its monetary nature. Within this approach, the researchers or authors of the proposal will have to choose from one of the following types:
* Experimental: This approach relies on the scientific method and may not be adequate for an investment fund since investors are more interested in results than experiments.
* Causal or comparative: If there is existing research that supports shorting speculative commodities such as Bitcoin, variables may be chosen from the research for the purpose of establishing cause-and-effect relationships.
* Descriptive: This approach will likely enjoy the support of investors who are interested in fundamental analysis. There must be a hypothesis based on systematic data collection, which in the case of Bitcoin can be obtained from blockchain records as well as from established and reputable cryptocurrency exchanges.
* Correlation: Investors who follow technical analysis will very likely agree with this quantitative approach since it will determine relationships between market reaction and certain variables. The volatile nature of Bitcoin and the speculative behavior seen in futures markets will support this approach.
Once the type of approach is selected, the methodology can be written using the following five-step structure:
1 – Bitcoin market observations support the idea of shorting futures contracts as a potentially profitable activity. In this case, the observations may include data available from the Chicago Mercantile Exchange since late 2017.
2 – An explanation for the aforementioned observations can be hypothesized.
3 – Profitable outcomes should support the hypothesis, which in this particular proposal can be tested with paper trading records.
4 – Successful trades should be presented with clear data.
5 – Findings are presented and conclusions are made.
Individuals who incorporate research methodologies in their business plans and proposal should stay away from making pitches or using sales language in this section of their documents. Since proposals related to investments and finance always carry a certain amount of risk, proper disclosures should be included immediately before and after the research methodology.
Jim Treebold is a North Carolina based writer. He lives by the mantra of “Learn 1 new thing each day”! Jim loves to write, read, pedal around on his electric bike and dream of big things. Drop him a line if you like his writing, he loves hearing from his readers!