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Business Analysis: A Crystal Ball for Small Business Owners

Want to become an all-knowing soothsayer for your own company? Learn everything you can about the art and science of business analysis. The best way to unlock the secrets and predict the future of a small business is to have a clear vision of its current operation.

This post is a brief introduction into business analysis for small business owners. It's the number one tool that can provide you with the answers you need to set your business on the right path or keep it going to even greater heights. Yet it's one of the least utilized in small business.

Why is that?

As a small business coach who has helped hundreds of business owners, I believe that it's because it is one of the least understood out of all the executive tools a small business owner has.

What is a small business analysis?

A small business analysis is a review of your entire operation, or some portion of it, for the purpose of revealing its true operational or financial condition, the results of which will indicate the precise, immediate or long term actions that should be undertaken in order to achieve goals, prepare the business for sale, assign the business a value, etc.

In my opinion, it's really a crystal ball for the small business owner.

A proper analysis of your business can actually predict and change the course of its future, prevent catastrophe, and isolate growth opportunities which can help you achieve astronomical success. As a business owner, analyzing your business should be a regular part of your executive functions.

Are there different kinds of analysis for a small business?

Yes, there are many different kinds of business analysis with many fancy titles and acronyms affixed to them. Most of the time, the mathematically or theoretically complex type of analysis that can only be learned in college level courses are way too involved for the average small business owner. As one business analysis expert himself put it, “they can be fluffy.”

However, there is absolutely a time and a place for doing each type of expert business analysis. So the type you’ll want to undertake for your own small business will depend entirely on your reason for doing it.

In practical terms, small business owners usually find themselves needing a business analysis for just a couple of reasons:

1. To develop a realistic strategic plan.

2. To facilitate the sale of their business. This type of analysis is better known as a business valuation.

When you need to do an analysis for the purpose of getting your business on track, or maybe planning for the next year, learning to do it yourself is the best route. It’s not hard to learn and is very rewarding to have a deep understanding of the art and science of analysis. Your employees and associates will be amazed at your executive prowess when you resolve complex situations in the company, or share insights that no one else can see. It’s like being the company fortune teller.

In the case of selling your business, hiring an expert who is professionally educated in business valuation is the best way to go. Most business brokers are very experienced in delivering this type of service.

How do you analyze a small business?

Let’s start with the definition of analysis:

“a detailed examination of anything complex in order to understand its nature or to determine its essential features : a thorough study”

~ Merriam-Webster

A very simple definition (the best kind). And it demonstrates that you don’t have to be college educated in data analytics to become a master at analyzing your own company.

Here are the main steps to analyze a small business:

1. Ask yourself, “what problem am I trying to solve, or what goal am I trying to achieve by doing the analysis?” Write it down.

2. Conduct a direct observation of the area or subject you want to address in your analysis. Look with your own, unfiltered vision and take notes. Many times the true source of difficulties and their solutions will pop up just by observing what’s there (or not there).

3. Gather up the statistics or key performance indicators related to the company or area of the company.

4. Create a visual representation of the data you've gathered. For statistics and key performance indicators, line graphs are always best.

5. Organize the graphs and charts in a logical sequence, so that they tell a story about what is currently going on. Become an expert at reading these charts. It takes practice.

6. Write down any unanswered questions regarding what the graphs are telling you. For instance, if the New Leads graph is trending down and you had some recent personnel changes in this area, make a note to get more information from HR about this.

7. Write a summary of the results from the analysis.

8. Use the summary to formulate and write a strategic plan. Break it down into finite, doable steps that can be assigned to yourself or the appropriate employees and get them completed.

9. Once all steps are accomplished, review the whole business or sector of the business again and see whether you've attained the objective in #1 above.

10. Start over at #1 above to continue your progress.

What results should you expect from a business analysis?

A business is either in a good condition or a bad condition. It's either expanding and experiencing growth, or it's contracting and on a decline. If it's stagnant, you have to either push it up or prepare to watch it eventually fail.

The practice of business analysis gives owners much more prediction and control over their company’s future. Picture your hands hovered over the luminescent glow of the most accurate crystal ball imaginable. If you carry out regular reviews of your business, whether sophisticated or unsophisticated, your increasingly expert forecasts will help you avoid disaster and achieve your objectives a whole lot faster.

Conclusion:

To get information on which KPIs to track or how to design your dashboard of KPIs you can check out these posts here:

If you'd like to learn more about analyzing your small business, contact Mainstreet Mastery and we’ll be happy to give you some guidance, no obligation. You can also watch this video about our business analysis service.