How To Perform Basic Business Analysis

Whenever a high profile business comes crashing down, the number of business analyst jobs advertised rises sharply. But there’s no reason why you can’t do it yourself. So here’s how to perform basic business analysis for your business, whatever its size.

Business analysis is part data collection, part managing that data, and then using business intelligence and project management to put all the findings in a presentable format which demonstrates the most successful areas of a business and directions for growth and development.

We’re just looking at small business, so we don’t really need SQL, Prince2 or Scrum – we’ll leave that to the guys with real business analyst careers (check out the requirements, it’s scary!). We’ll stick to data collection, project management skills and a little bit of business intelligence.

Small Business Analysis Example

I’m going to use a bricks and mortar store as an example, because it’s easy.
  • employee salaries
  • cost of products
  • shipping costs
  • packing costs
  • profit margins
  • orders dispatched
  • stock value
  • turnover time
  • turnover volume
  • rent for store
  • marketing costs
  • number of orders
Now once you have all this data, you can start doing interesting stuff with it, from comparing the value of your employees based on how many products they ship, to working out the potential cash flow and growth of your business based on turnover volume, turnover costs and the stock value sitting in your warehouse each day/week/month.

For example, this data could show that hiring weekend staff could increase the number of orders dispatched, reduce the stock value sitting in the warehouse, get you a better bulk discount on your shipping and improve the cash flow of your business – provided order numbers remain high of course.

Business Model Mistakes

But it’s not just large firms that make mistakes with their business models, small businesses can equally succumb to staying the course until it’s too late to turn back.

Focussing on turnover, not profit

One online store I worked for decided they’d go for the ‘stack it high, sell it cheap’ approach to ecommerce. The extra hours required by the warehouse staff to ship orders outweighed the profits being made at a reduced margin despite the high turnover.

Relying on one revenue stream

Another online store I worked for gambled its entire business model on traffic generated by search engines. So when Google decided to put brand pages to the top of the rankings, our traffic and sales across 20 brands fell considerably just by from moving from 1st to 2nd position in the search results.

Erratic growth

A number of small businesses I’ve worked for throughout my career have struggled with growth. In the case of one agency, it was a juggling act between clients and employees. You couldn’t have an employee without a client to pay for them and you couldn’t have a client without an employee ready to work on their account.

All of these business model mistakes could have been easily avoided with some business analysis and forward planning.

The first store could have calculated the profitability of their new business model, the second store could have sought opportunities in other revenue streams, while the agency could have organised more work in the future from their existing clients to afford more employees for future clients.

So collect all the data you can and review it all regularly. That way you can create a really slick business model that can adapt to changes in your market and not get left behind.

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