What’s your favorite sports team?
How’s their offence? What about defense? Who’s their star player? What do they need to work on for the upcoming season?
I’m not well traveled I’ll admit, so I don’t know about the rest of the world, but in the US about 90% of people can answer all those questions. In fact, if you ask someone those questions they can usually go into great detail and run through hypothetical scenarios. They get fired up and you can see excitement and passion bubbling out. Not only that, but hey have ideas and feel vested. Also, they want everyone around them to be as excited as they are.
So why aren’t business owners like that when it comes to their businesses?
The first reason is that people often monetize what they do well, not what they are passionate about. And they became good at what they do by working a job they hate.
The second reason is that business can be complicated. You learn sports from childhood. But we don’t grow up learning the ins and outs of business. We don’t buy tickets to watch businesses compete and have accountants sign our jerseys.
Running a business is a long game and the “rules” change often.
Look back 20 years ago and very little business was done online. If you look back 15 years, cell phones weren’t that big of aspect of business. And just 10 years ago giving customers Wi-fi access was a competitive advantage.
What I’m saying is, you need to constantly take stock of where you are. You should examine your business like you would break down your NFL team. The technical way to do this is with a SWOT and PEST analysis. They can help you to break down your business and dig deep into where you stand.
What are SWOT and PEST?
SWOT stands for Strengths Weaknesses Opportunities and Threats. PEST is similar and sometimes the two overlaps in some areas. PEST stands for Political, Economic, Social, and Technological and it examines external factors that can impact your business.
You can get pretty deep into these if you want, and you really should, but for now I will run though a simpler look to give you a feel for how to do your own.
So, lets make up a crazy business to exaggerate things and drive each concept home.
Scenario: We’ll say you exclusively sell swim wear for house cats. Your supplies come from China and you primarily advertise via flyers, word of mouth, and local newspapers.
|– Your business is unique|
– Low sales volume allows for greater focus on customer service
|– Little demand|
-Cats generally do not like water/swimming
-Limited customer reach
-Major debt from purchase of inventory
-Holding far too much inventory
|-Low competition allows for a large percentage of the market share|
– Expansion to online sales
– Inclusion of online marketing
|-If popularity grows it could lead to competition entering the market|
-Supply chain issues may limit ability to purchase inventory
For strengths you’ll need to ask yourself what your business does well, or “What does it have going for it?”
Weaknesses is the other side of that coin. This is what is holding you back or needs improvement.
Opportunities and threats are usually externally focused. In its simplest form, it’s what you can do to improve, vs what you may have to face.
Sometimes weaknesses compound or create threats. Sometimes your strengths can do that as well. Its a balancing act which is why you need to lay it out. Teams have players on the sidelines waiting to jump in if they are needed. That’s because not everything goes to plan all the time. Weaknesses, and setbacks arise, but you cant ignore them. You have to plan for what to do when they come up. Knowing where they may arise is half the battle.
PEST is primarily external and a bit more obscure in some ways. Each category may have positives and negatives as well, unlike SWOT.
|– Relationship with China is becoming strained|
– Imports/Export regulations may harm ability to obtain inventory
|– Minimum wage increase may allow greater disposable income|
-Inflation may counteract the wage increases
|-Some may consider cat swimsuits unethical due to cats aversion to water|
-Select social media communities may offer support and growth opportunities
|-Your business is not currently utilizing technology to its fullest|
-Consumers may be able to find overseas direct ship suppliers online as well
This is a hypothetical business I made up in about 2 minutes, but when you examine your own business, you will be amazed at what you find. You know your business better than anyone, but when you start to really break everything down you start to see beyond the day to day. You’ll start to get an idea of the competition’s playbook and what your offense and defense are up against.