Business Analysis Tools: 5 Proven Tools & Techniques

How can business analysis tools help your business?

Running a business involves making decisions every day.

Some are urgent. Some are important. Some feel important but turn out not to be.

The real challenge is finding the time and space to step back from the day-to-day, understand what is really going on and decide where to focus your time, money and attention.

That is where business analysis tools can help.

You do not need to be a qualified business analyst or work for a large company to use them.

Many of the most useful tools are straightforward enough for business owners and leadership teams to apply themselves.

Used properly, they can help you:

• see your business more clearly
• identify what is holding it back
• challenge assumptions
• make better decisions
• focus on the right priorities
• involve your team in solving problems
• turn ideas into action

The key phrase is “used properly”.

A tool on its own does not improve a business.

After working with hundreds of business owners in West Hertsfordshire, I've seen time and time again that the value comes from the quality of the information, the honesty of the discussion, the judgement applied and the actions that follow.

Here are five practical approaches that business owners and leadership teams can use:

Five best tools for business analysis

1. SWOT Analysis

What is a SWOT analysis?

A SWOT analysis allows business leaders to understand their business’s strengths, weaknesses, opportunities, and threats. It enables you to avoid ‘flying blind’ with your business process and helps you to focus on the right areas at the right time.

Most business owners have come across SWOT before. The danger is that it becomes a list-making exercise.

A team gets together, fills four boxes with bullet points and then moves on. The result may be interesting, but it does not necessarily lead to better decisions.

A useful SWOT analysis goes further.

How can a SWOT analysis be an effective tool that leads to effective business growth strategies?

When the SWOT discussions are specific.

As part of our business builder’s blueprint software tools, we at TAB use a much more detailed SWOT Analysis approach.

“Good people” is too general to be useful. Which people? What are they especially good at? How does that help the business compete or serve its customers?

“Poor marketing” is also too broad. Is the problem unclear positioning, a lack of leads, weak follow-up, low conversion or the wrong target market?

The more precise you are, the easier it becomes to decide what action is needed.

That requires honesty.

It may mean recognising that too much still depends on the owner, that the management team lacks capacity or capability, that margins are weaker than they appear or that the business has become too reliant on one customer, one employee or one route to market.

The purpose is not to criticise your business. It is to understand it.

Once the discussion is complete, identify the two or three issues that matter most. A long list of observations is less useful than a short list of priorities.

This specificity is part of our overall planning process; the personal vision statement shows an owner where they want to be, and the SWOT analysis provides a snapshot of the business's current state. Then, the strategic plan we create bridges the gap.

2. More, Better, Different, Less

What is the 'More, Better, Different, Less' tool?

More, Better, Different, Less is one of the simplest and most useful ways to review any part of a business.

This tool is a fantastic way for business owners to regularly review and refine business details, ensuring continuous growth.

It includes four main questions, which should always be completed with your business goals in mind.

The questions are:

• More: What should we do more of?
• Better: What needs to improve?
• Different: What should we change or try?
• Less: What should we reduce or stop?

This analysis tool is very versatile, and we recommend that you and your team ask these questions in all areas of your business, including:

• sales and marketing
• customer service
• recruitment and retention
• leadership meetings
• systems and processes
• the owner's use of time
• product or service delivery.

Rather than asking, “What could we do more, better, differently or less?”, ask:

What do we need to do more, better, differently or less to improve our sales conversion over the next 90 days?

The more focused the question, the more useful the answers.

3. PESTLE Analysis

What is a PESTLE analysis?

While the More, Better, Different, Less approach focuses primarily on internal factors, a PESTLE analysis helps business owners look beyond the business itself.

These fall into the following categories:

• Political
• Economic
• Social
• Technology
• Legal
• Environmental

The point is to identify the external changes that could materially affect your business.

These might include:

• changes in employment costs
• new regulation
• interest rates
• customer confidence
• advances in artificial intelligence and automation
• skills shortages
• changing customer expectations
• environmental requirements
• changes in how customers buy

A PESTLE analysis can be particularly useful when preparing a business plan, reviewing strategy, entering a new market or considering a major investment.

It can also help a business avoid becoming too inward-looking.

I've worked with owners and leadership teams who are often busy dealing with customers, employees and operational issues. And it's so easy to miss a wider change until it starts affecting sales, costs or margins.

A useful PESTLE discussion should lead to questions such as:

• Which external changes present the greatest opportunity?
• Which could create the greatest risk?
• What assumptions are we making?
• What should we prepare for now?
• What should we monitor?

Smaller businesses do not need to analyse every category in equal detail. Focus on the factors that are most likely to affect your plans.

The CIPD provide a fantastic overview of a PESTLE analysis, including a step-by-step guide.

4. Data, market and stakeholder analysis

Business owners have access to more information than ever before.

The challenge is no longer simply collecting data. It is working out what the information means, which patterns matter and what decisions should follow.

Useful information may come from:

• sales and margin data
• customer profitability
• conversion rates
• project performance
• recurring revenue and customer retention
• complaints and online reviews
• customer interviews
• lost-sales reviews
• employee surveys and conversations
• market trends
• competitor activity

Looking at this information can help you move from instinct to evidence.

For example, overall revenue may be rising while the profitability of certain customers, products or services is falling.

A healthy sales pipeline may disguise poor conversion. Strong customer satisfaction scores may sit alongside weak retention or low referrals.

The purpose of analysis is not to create more reports. It is to uncover the questions that need to be asked.

These might include:

• Which customers and services generate the best returns?
• Where are we losing margin?
• Which sales opportunities are most likely to convert?
• Why do customers choose us?
• Why do we lose business?
• Which parts of the market are growing or changing?
• Where are competitors positioned differently?
• What concerns or frustrations appear repeatedly in customer or employee feedback?
  

Using AI to support analysis

Artificial intelligence has made many forms of analysis more accessible to smaller businesses.

AI tools can help you:

• summarise large volumes of customer feedback
• identify common themes in surveys, reviews and meeting notes
• spot patterns in sales or operational information
• compare competitors and market positioning
• research sectors, trends and changing customer behaviour
• explore different scenarios
• test the assumptions behind a plan
• turn data into useful questions for the leadership team

This can save considerable time and help a business examine information that might otherwise be overlooked.

However, AI should support judgement rather than replace it.

The quality of the answer still depends on the quality of the data and the questions being asked. AI-generated information can be incomplete, inaccurate or out of date. It may identify a pattern without understanding the context behind it.

Confidentiality also matters. Business owners should be careful about entering sensitive customer, employee, commercial or financial information into public AI tools without understanding how that information will be handled.

The most useful approach is to combine technology with experience.

Use AI to analyse, summarise and challenge. Then apply human judgement to decide what the information means for your business.

Listening to customers and employees

Customer and employee feedback remains an important part of this analysis.

Business owners often believe they know what their customers and employees think.

Sometimes they are right. Sometimes they are hearing only part of the story.

Customers may be satisfied but not loyal.

Employees may appear engaged but be frustrated by unclear priorities, poor communication, excessive workloads or a lack of authority to make decisions.

Surveys and questionnaires can help, but they are only one part of the picture.

For customers, useful questions might include:

• Why did they choose you?
• What do they value most?
• What frustrates them?
• What almost stopped them buying?
• What would make them recommend you?
• Why do some customers leave?

For employees, you might explore:

• whether priorities are clear;
• whether they understand how their work contributes;
• whether they have the authority to make decisions;
• whether workloads are manageable;
• whether communication is effective;
• whether they see opportunities to grow;
• whether the company lives up to its stated values.

The most important part comes afterwards.

There is little value in asking for feedback if nothing changes as a result.

Communicate what you have learned, what you are going to do and what you are not going to do. People do not expect every suggestion to be accepted, but they do expect to know that they have been heard.

5. Personal and Company Vision

Probably the most important way to analyse your business is to start with you as the business owner.

At TAB, one of our central beliefs is:

Start with the business owner, not the business.

Therefore, we recommend developing your personal vision statement and working on a thorough and well-communicated company vision.

Let’s take each of these in turn.

How does a personal vision analyse your business?

A business should support the life the owner wants to lead. Yet many business owners spend years building a company without stopping to consider what they want it to give them.

The business grows, but so do the demands on their time.

Revenue increases, but their freedom reduces.

They employ more people, but more decisions still come back to them.

They may eventually reach a point where they own a successful business but do not have the life they expected it to create.

A personal vision helps the owner step back and think about the future they want.

It may include:

• the work they want to be doing
• the work they no longer want to be doing
• how much time they want to spend in the business
• the income and financial security they want
• the role of family, health and relationships
• experiences they want to have
• the contribution they want to make
• whether they want to grow, sell, pass on or retain the business
• what they want their role to become over time

This is not simply a wish list.

A good personal vision helps the owner make choices.

For example:

• Does the current business model support the life I want?
• What must change if I want to work fewer hours?
• Does the business depend too heavily on me?
• What capability must be built in the leadership team?
• What level of profit, cash or business value will I need?
• What must happen before I can step back or exit?

Here are a few examples of a personal vision:

• I want to sell my business in 5 years and live on the profits
• I want to pay myself a better income to buy a Tesla
• I want to balance my existing business with starting a new one
• I want to work less than 60 hours a week and play more golf
• I want to get out of the day-to-day running of the business so that I can do more for myself
• I want to free up one day a week to spend with my young kids

Once the owner is clearer about what they want, the company vision can be developed around it.

The importance of a compelling company vision

A company vision describes an organisation’s mission and aims for what the company will be like in the future.

The vision includes key areas such as:

• the customers it will serve
• the problems it will solve
• the markets it will operate in
• its size and profitability
• the culture it will create
• the strength of its leadership team
• the owner’s future role
• what will make the business valuable and less dependent on individuals

Articulating your vision is important for many reasons:

• A vision provides a guiding principle to help prioritise goals and plans
• It brings meaning to peoples’ work, mobilises them to action and helps them decide what to do and what not to do
• It helps to make sure the team is aligned and working towards the same goals
• Alongside your personal vision, a company vision can be crucial to the running of a successful business

Without a clear vision, priorities can easily become a collection of urgent tasks, individual preferences and short-term opportunities.

With a clear vision, decisions can be tested against the future the business is trying to create.

Turn analysis into action

All five approaches can help you think more clearly, but none of them has value unless something happens afterwards.

Every useful business analysis exercise should lead to:

• a small number of clear conclusions
• two or three priorities
• specific actions
• named owners
• timescales
• a date to review progress

This matters because business owners rarely suffer from a shortage of ideas.

The difficulty is deciding which ideas matter most and following them through.

A long action list can feel productive, but it often creates more noise.

It is usually better to choose fewer priorities and complete them properly.

A useful final question is:

What will we do differently as a result of this discussion?

If the answer is unclear, the analysis is not yet finished.

FAQs about business analysis

Which business analysis tool should I use first?

Start with the end in mind. Be clear about the outcome you want, the problem you are trying to understand or the decision you need to make, then choose the business analysis tool that best fits that purpose. There is no one-size-fits-all answer, although for a whole-business review, it's best to begin with the owner’s personal vision and a SWOT analysis.

What is the difference between SWOT and PESTLE analysis?

SWOT looks at both the business and its wider environment. Strengths and weaknesses are usually internal, while opportunities and threats are external. PESTLE focuses specifically on external political, economic, social, technological, legal and environmental factors.

How often should you carry out a business analysis?

A full business analysis would not normally be carried out more than once a year unless there has been a significant change in the business or its market. The strategies, projects and actions that follow should be reviewed monthly, or at least quarterly, to check progress and identify when something may need to change.

Why should business analysis start with the business owner?

A privately owned business should support the life and future the owner wants. Starting with the owner’s personal vision helps ensure the company vision and strategy are designed around their aims, rather than allowing the business to grow in a way that creates more pressure and less freedom.

What makes business analysis effective?

Effective business analysis starts with a clear question, reliable information and honest discussion. Most importantly, it should lead to a small number of clear priorities, agreed actions, named owners and regular review.

Final thoughts

Business analysis does not need to be complicated.

Simple tools, used honestly and consistently, can help business owners understand where they are, where they want to go and what needs to change.

SWOT helps you understand the current position.

More, Better, Different, Less helps you challenge how things are done.

PESTLE helps you consider the outside world.

Data, market and stakeholder analysis help you base decisions on evidence rather than assumption.

AI can help you examine information more quickly, provided it is used with care and judgement.

Personal and company vision help you decide what you are trying to build and why.

The real value comes from bringing these different views together, making choices and taking action.

The Alternative Board helps business owners do this through practical tools, one-to-one support and peer advisory boards.

Sometimes the most important step is simply creating the time and space to stop, think and talk through the decisions that matter.

Posted by Martin Munro

Martin Munro works with SME business owners in West Hertfordshire and has worked with business leaders in the UK, Middle East and Scandinavia from start-ups to companies listed on AIM. Martin has expertise in mergers and acquisitions, business planning and stakeholder alignment and having run businesses with between 5 and 100 people appreciates and understands the challenges that business owners face in the running of their businesses.