Business Plan Element: Environmental Analysis

Now that I teach marketing and small business to both outdoors programs at Algonquin College in the Ottawa Valley, I spend a fair amount of time talking about business planning. How to perform an environmental analysis and why it’s important make up a vital piece of the planning process for any business owner.

What is an environmental analysis?

An environmental analysis is a dive into any external elements that could impact your business. You look to understand the consequences of the current climate on your business. You consider the impacts of any potential shifts in the climate, which can happen quickly and radically. Then you fill any gaps and take advantage of favorable circumstances. Control as much as you can control.

What should you consider for your business?

Look into any factor that could affect your business’s performance. At a minimum, consider the following four areas:

Socio-Cultural Environment

These are the public’s opinions and attitudes towards issues such as living standards, ethics, the environment, lifestyles, and quality of life. Will stand-up paddleboarding continue to trend? Will canoeing make a come-back? Who predicted how fast sea kayaking would take off?

Political, Legal and Regulatory Environment

These are the laws that already exist as well as how certain regulators interpret the laws. And of course laws change, usually with an incoming administration. What laws impact how you do business and how your customers buy from you?

Technical Environment

For any business that relies on the latest and greatest technology, this area can be a difficult one to predict. For those of us in the outdoors industry it may be related to what sort of new materials are going into the gear we use. We need not look any further than the Royalex “crisis” from a few years ago to know that this isn’t an area we can avoid.

Competitive and Economic Forces

These are the relationships we have with competitors. It’s also unemployment rates, purchasing power (how far does our dollar goes), and the general economic conditions such as whether or not we’re in prosperity, a recession, a depression, or recovery. If we go back to the example of whitewater rafting on the Ottawa, we can be sure each rafting company stays on top of what the others are doing as they plan for the upcoming season.

 

For more advice on business planning, check out our posts on the mission statement and SWOT analysis and stay tuned for future posts.

What do you think?