Reviewing business 

Once your business is established it is vital that you regularly review your performance to enable you to maximise your opportunities to grow. 

This guide will take you through the process of how to assess your business both externally (the environment that your business is trading in) and internally (your current products, customers, structure, systems, resources, and results) allowing you to understand how well your business is performing. This is an essential step to take prior to developing a growth strategy for your business.

Conducting an external analysis
The purpose of conducting an external analysis is to identify opportunities and threats in your business’s external environment. This is important as the environment that your business trades in can strongly influence what your business does and whether it will survive and develop. It is very difficult to predict the future with absolute certainty, which is why when you are looking at external factors which may affect your business you should do so with an open mind considering things like competitors entering or leaving the market, new technologies being discovered or governments changing their policies.

A frequently used model that can help you consider environmental factors affecting your business is the PESTEL Analysis. Using this model allows you to focus your mind on six key areas (the starting letter of each makes up the acronym PESTEL):
• Political factors e.g. regulations, government stability, policies
• Economic factors e.g. interest rates, unemployment
• Social / demographic factors e.g. age distribution, lifestyle changes
• Technological factors e.g. new discoveries, developments in other industries
• Ecological factors e.g. sustainability issues, natural resources, pollution
• Legal factors e.g. competition legislation, employment law

Conducting a competitor analysis
Once you have been running your business for a while you will naturally have more of an idea about who your competitors are and how they differ from you. It is however important that your regularly undertake an element of competitor analysis to keep you up to speed with what they are doing. Questions you should be asking and research you should be doing should include who they are; what they offer; what prices they charge; what share of customers they have; what their competitive advantages and disadvantages are compared to yours; and how they respond to new competitors entering the market. You can do this by researching what they say about themselves in their marketing material, on their website, or in advertisements or by finding out what other people say about them through customers, the internet, or newspapers.

Conducting an internal analysis
The aim of conducting an internal analysis is to review the business as a whole where you question how well the business is performing in terms of its products, customers, staff, resources and whether the business structure and systems are best placed to move the business forward.

Reviewing your business against each of the nine sections below will help you to complete a well-rounded assessment of your business and allow you to identify where your strengths and weaknesses lie:
Materials - What are the costs of your materials? Can you get a better price? What security of supply is there from your suppliers?
Men and women - What skills do your staff have? Do their skills match what the business needs to move forward? What is the level of morale?
Management - What management skills do you have/your managers have? What capacity do you/your managers have to manage the business effectively?
Machinery - What is the age of your equipment? How efficient is it?
Money - What are the sources of funds for the business both short-term and long-term? How does the business ensure it remains solvent? What is the cash flow situation?
Make-up - What brands/patents does the business own? How valuable are they? What is the structure/culture within the business?
Management information - What ideas/innovations does the business pursue? What systems do you have in place to record data about performance of the business/to enable you to make decisions?
Markets - What products does your business offer and are these the right products for your customers? What customer groups do you target?
Methods - What processes and activities are in place within the business? How are these monitored to ensure they are as efficient as possible?

Another framework that can help you assess the products your business offers, and the segments of the market you cater for is the BCG Matrix.

Download guide to using the BCG matrix (32kb)

Conducting a SWOT analysis
Once you have reviewed both your external environment and the business as a whole, you can bring your findings together in a simple SWOT (strengths, weaknesses, opportunities, threats) analysis enabling you to use the strengths of the business to exploit opportunities whilst avoiding threats, and minimising the impact of the business’s weaknesses.