One of the first things would-be entrepreneurs are told to do with their new idea is to write a business plan. Why? In many ways, a business plan sets the stage for reaching your goals – whether you’re just starting out in business or you’ve been running your business for years – and acts as a roadmap for getting there.
Of course, writing a business plan may sound like a bit of a long and unwieldy task, but it doesn’t have to be! Yes, we’ll admit – it’s a thorough task – and that’s why we thought you might appreciate a few analysis tools to help you understand the landscape and identify what distinguishes your brand from your competitors.
- PESTLE – the macro analysis
The PESTLE analysis is a way to analyse the bigger picture trends and changes within your industry, to identify potential growth opportunities in areas of:
- Political – i.e. what is the political situation of the country in which you are operating and how can it affect the industry and your product or service? For example, if you’re a local, depending on where you’re selling your products or services, you’ll need to think about how local government agenda changes, state government legislation or international free trade agreements might affect you.
- Economic – i.e. what are the main economic factors? The Aussie dollar, Chinese markets, the price of Iron Ore, anyone?
- Socio-cultural – i.e. what is the importance of culture on the market? Are there any significant trends that could potentially impact demand for your product/service? The trend of the health-conscious, kale-eating, smoothie-drinking, Nike-wearing, active Aussie is becoming a force to be reckoned with!
- Technological – i.e. are their any current or future technological advancements likely to affect the market or your product/service? Social media, paperless offices, cloud technology! The digital landscape is constantly changing. Have you considered replacing your paper with pixels?
- Legal – i.e. what is the current legislation regulating your industry or country of operation? Is there likely to be any changes to that legislation in the near future? If you’re operating in Australia, the ATO (Australian Taxation Office), theACCC (Australian Competition and Consumer Commission) and your applicable state’s Department of Fair Trading are generally a good place to start.
- Environmental – i.e. what are the environmental concerns and trends surrounding the industry? Did you know industry and motor vehicle exhaust are the number one environmental pollutants? If your business has a fleet of cars on the road, how are you going to offset your emissions?
While your PESTLE analysis offers a macro-level analysis of the competitive environment, the SWOT is used at the micro-level to analyse your specific business, product or service. Conducting a SWOT analysis won’t take much time and doing so can open your eyes to a new way of looking at, and thinking about, your business as a whole.
The SWOT can be broken down into two parts – internal (strengths & weaknesses) and external (opportunities & threats). Here are a few general examples (note the word ‘general’, some of these may or may not apply to your individual set of circumstances and it’s best to be as specific as possible and have them reflect your business in its entirety).
Strengths – these are why your customers prefer your product/service, e.g.
- Have an excellent staff for handling sales
- Solid ongoing customer relationships
- Strong internal communications systems
- Well-designed and successful marketing strategies
Weaknesses – the aspects of your business that can detract from the value you offer and potentially put you at a competitive disadvantage, e.g.
- Missed deadlines
- Unable to maintain pending work load
- Infrequent cash flow
- High fixed costs, e.g. rent
Opportunities – this is where you identify reasons your business is likely to prosper and leverage your strengths, e.g.
- Free trade agreement with the US means you can export more easily
Threats – these are external factors beyond your control that could place your business or strategies at risk, e.g.
- Large number of new competitors entering the market with similar product offerings
- New advertising campaigns launched by competitors
- Downturn in the economy resulting in less money available in the economy
- Technology replacing service offerings
- 7S model – the internal analysis
While the PESTLE and SWOT analyses are generally used for examining the external environment of your organisation, McKinsey & Company’s 7S model sets a framework for thinking about your organisation’s internal effectiveness.
The 7 S’s (pictured right) highlight why organisations operate best when working as a network of interconnected parts. You can think of the 7 S’s as individual elements. However, as you can see, shared values are placed at the centre of the model, because well, they’re shared. Each element is both independent of the others, yet a change in one affects all the others.
Writing your business plan doesn’t need to be an agonising task. In fact, writing your business plan through the perspectives of PESTLE factors, SWOT analysis and the 7S model can reveal insights that you may not have previously considered.
But of course, it doesn’t matter which tools you use, as long as your business plan is a living document (i.e. isn’t in a dusty drawer somewhere). Make sure you refer to yours, update it and check in with it from time-to-time – at least quarterly.