Understanding Your Business Environment

Get a big piece of paper. Get some coloured pens. Switch the phone off for an hour.

Doing this simple exercise using PEST or STEP analysis will help you to understand what’s going around you. I use it all the time as a business advisor with growing companies. Getting a clear view of the environment will mean that you can make the right choices for your business. And making the right decisions will lead to big savings in both time and money. Taking an hour out to do this could mean the difference between your business being a great success or failing.

We need to look at the PEST’s

On your big piece of paper draw four columns. Label each one:


We’re going to think about all the outside factors that affect your business.


If you run a nursery, changes to government on care of the under 5s will go under POLITICAL. If you are a printing company, think about new rules for health and safety.

ECONOMIC factors

Think about what’s happening in your market. If you export to the US, what’s happening with the exchange rate? If you run a village shop, what’s happening to house prices that might change who’s moving into the village.


What are the population trends in your area? What are the patterns within your target market? When I first moved to Brighton, I thought I’d be working with big companies, only to find that I kept getting asked for help by entrepreneurs from small but growing companies. When I finally got around to doing the research (yes, I know I should have known better) I found that there are lots of small businesses in Brighton (19271, to be precise.)

What changes are happening in how people buy things? What are the changes in your industry and the sectors that you sell to? Find out as much as you can.


What’s happening to change your sector? How does the internet affect you? If you’re a car dealer, what will happen to the fashion for 4WD vehicles as oil prices increase?

See how the different factors don’t fit exactly and discreetly into the categories; they’re quite often interlinked the more that you think about them.

Can you use text messages to keep your customers happy if you’re a courier service? Might this mean that you can charge more, or does it mean that you’ll get repeat business because people know when their parcels will arrive?

If you don’t have access to all this information, put in questions and areas where you need to find out more, put the big piece of paper on the wall to remind you, and go and find out.

What does this mean for your business

Now go and make a cup of tea, come back and consider what all this means for your business. Are you in the right market? What might happen to your business over the next few years? How will you take advantage of the opportunities and deal with the potential threats? What changes do you need to put in place now to start preparing for this?

The importance of strategic thinking

Try making a space in your diary each week to do some strategic thinking like this exercise. Maybe Friday afternoons are a quiet time, or you can use an hour on Monday mornings to reflect and help you set priorities. It could make all the difference to whether you survive as a business or really start to make things happen.

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Photo credit to Aquachara on Unsplash