Are you in the right business, are you doing it right?

So, you want to start a business! Or you are already running one. No matter whether it is intended to be a global top 500 company, or a local comer shop, some form of analysis is needed to ascertain that it is viable and sustainable.

A Happy Business

For businesses that are already in existence, you need to periodically review performance and carry out a detailed analysis. This is even more relevant where there may has been or there is an anticipated major change in any of the key variables associated with operations. Is it the right business? Are you doing it right?

There are numerous well established models and approaches to business analysis. Critical to any analysis is to determine what precisely the desired outcome is and whether you can get or stay there. Do you want to be a Fortune 500 company; do you want to be the best in your field; country; state; neighbourhood or just your street?

The Michael Porter framework is excellent in looking at the influences on a line of business that must be considered and responded to in order to sustain competitiveness. Porter is famed for his work in the area of company strategy and competitiveness. He believes that the key to being profitable and outperforming the competition is in preserving difference, your unique selling proposition.

His five forces framework examines the forces that are most likely to impact a business’ sustainability. These are: The bargaining power of customers and suppliers; threat of new entrants and substitute products and competitive rivalry.

I also like the P.E.S.T.L.E framework for conducting an environmental scan that sets the context for whatever business is being established or reviewed. Every area that affects the stakeholders of your business should be considered.

For instance, a furniture manufacturer will need to think of the issues as they also relate to, say, suppliers or raw material (wood); customs regulations if the goods are for export; weather and climate concerns of the target market. Many businesses supporting telecommunications; oil services or the food and beverages sectors have witnessed major changes in legal, technological and environmental factors that have had significant impacts on their survival. Without an analysis, there may be a possibility of business discontinuity.

Analysing your business from a broader perspective rather than solely a financial view is valuable. The broad overview places management in a position to understand the context for their operations. Success today may be wiped out by a regulatory change; a new environmental standard or the cost of the technology required for starting a new line or replacing existing assets.Areas covered in this analysis are:-
Political: What are the current political dynamics at national and global levels?
Economic: What are the trends in macro and micro economics of your industry, country and globally.
Social: What are the social, cultural and demographic assessments and trends in your business?
Technological: What is the current and anticipated technological requirement?
Legal: What are the regulatory; statutory and legal requirements? What are trends and timelines?
Environmental: What are the concerns for degradation; pollution; safety; atmospheric preservation and how these can impact you and your stakeholders’ costs or operations?

SWOT
A business can use the SWOT analysis to look inwards and evaluate the strengths, weaknesses, opportunities and threats that its operations may be subjected to. A business and its owners need to be sure that the company strengths and available opportunities can be realistically exploited and should have viable alternatives and responses to the threats and weaknesses identified.

Cost/benefit analysis
A cost benefit analysis is also fundamental in assessing and reassessing options, and as useful input in management decisions. Some products and services are unique, exceptional and desired by customers. However, the costs of producing or delivering some products make the proposition unviable. Even where a business is a social service for which a commercial return is not essential, there will be a break-even point below which it may not make sense to make the investment.

Critical success factors
Research has shown that many entrepreneurs do not invest a lot of time or money in investigating or analysing the potential viability of their ideas and simply dive in with whatever resources they have. The longer-term consequences can be devastating at both a business and personal level. Investing your life savings or retirement fund in a business venture or drawing on family resources to fill the eternal black-hole the business seems to be in is not desirable. There are a couple of critical pointers for the budding, serial or perpetual entrepreneur to take note of in analysing their business to minimise risks and losses.

Speed: Timing is everything. Determine if the business idea can come to market in a reasonable period of time. Too many delays and a long gestation period may mean a number of the stakeholders and assumed factors may have changed. Innovation: You should be bringing something new/unique in benefit to the consumer. Innovation is a trigger to leap-frogging the competition and developing sustainable competitive advantage.

Flexibility: The ability of the business to be able to maneuvre and adapt to a change in external or internal pressures, enhances the likelihood of success in a highly dynamic environment with information overloads and highly demanding customers with alternative choices.

Wisdom: You do have to be smart to contend with all the forces that you will be exposed to. So, having gone through your PESTLE, SWOT and Cost/Benefit analysis, owners and management need to be honest with themselves and confirm that the business is right for them and that things are being done right. ‘’It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change” - Charles Darwin.