If you don’t have a business plan, especially one with PESTLE analysis included, you’re going to want one after reading this. Here you’ll find the answers to what PESTLE analysis is and how it’s used in companies by business owners, marketers, and business analysts. Plus where PESTLE analysis information should be placed in your business plan (and if you don’t have one, where to get started).
By the end, you’ll be fully ready to use and incorporate PESTLE analysis into your current or to-be-created business plan.
What is PESTLE analysis?
PESTLE analysis (also referred to as PESTEL analysis or the shorter form, PEST analysis), is a tool designed by companies to track how the environment impacts their business, product, or service.
PESTLE is the acronym for these six environments:
By understanding how these six environments influence the business world, it’s easier to make successful and strategic business decisions.
How do you use PESTLE analysis for a business?
When you’re doing a PESTLE analysis for your business, it’s beneficial to do it sooner than later. The environments can (and will) change. If you’re privy to the details, you may even be able to predict changes and respond appropriately.
But if you wait, and don’t see the changes coming, you’ll scramble to align your business with the newly changed environment. If the changes are negative, this can severely impact the profits and success of your company.
We want to avoid that. That’s why you’ll do PESTLE analysis first. Doing the analysis requires seeking sources for information. You’ll need to set aside time to go through each of the six environments.
Not sure how to start? Here are a few simple questions (at least one for each letter) to get the ball rolling:
- How is your industry affected by politics and policies?
- Is the economy good, bad, declining or improving?
- Do you understand your customers’ needs? Have they shifted?
- What technology are you using? Is it outdated? Is there new technology you can use that’ll give you a competitive advantage?
- How are regulations in your industry affecting product development? Are there new regulations you need to know before launching a new service?
- How does the environment affect your industry, if at all?
These are just quick, introductory questions. As you uncover the necessary information to answer each one, new questions may pop up. You can choose to answer them by researching further (recommended!) or not. The beauty of PESTLE analysis is that it’s as simple or intricate as you desire.
Your results can be used to shape your business plan and included in it too.
What is a business plan?
A business plan is a document embodying everything about your business — who you are, your mission statement, services or products, operational, and financial objectives.
If you run a business then it’s imperative to have a business plan. Whether you’re just starting your company, looking to expand, searching for a business partner, or on the lookout for new investors — your business plan explains who you are, what you do, and why anyone should care all in one place.
You may be surprised how many business owners don’t have a plan. Without it, those people are likely to struggle to run a successful business. In many cases, the owners jumped into starting a business without thinking it through. And that will slowly eat at the company.
You don’t want anything to stand in the way of your business being successful. If you need a business plan but aren’t sure how to start, this article explains how to create a business plan for any business.
Keep in mind, a business plan can have many moving parts — and not every part is as necessary as others (depending on your goals, industry, and type of business you run).
But you should use PESTLE analysis for your business plan. Use it to shape (or reshape) your plan, or included it directly within it.
By including it, you’ve shown that you are a professional. You understand your industry inside and out (thanks to PESTLE analysis). And you understand how to use the environments to your advantage.
When should you incorporate PESTLE analysis into your business plan?
A basic business plan outline will have the following:
- Executive summary
- Missions statement (or overview of your company)
- Marketing strategy
- Financial inquisitions
- Operation costs
Notice how PESTLE analysis isn’t listed. This is because PESTLE is often considered “extra” — but it’s good to be extra. If you don’t have the time (as in, you’ve 4 hours to make a business plan before meeting with swanky investors) this is the bare minimum your plan should have.
Another reason you may not see PESTLE analysis in any business plan samples: Many business owners don’t know about PESTLE. This gives you an advantage — you’ve something they don’t, something that can lead you straight down the path to profits and sales.
But since most don’t know it (and thus, don’t include it in their business plan) it may be difficult to see where it fits.
The truth is, you can fit it anywhere — but you’d rather your business plan flow. It’ll make more sense for anyone reading it.
In this case, you’d likely insert PESTLE analysis before your marketing strategy. The analysis will likely influence your strategy. Showcasing it before can explain the choices you’ve made for your marketing strategy.
If you’re adding more things to the business plan like HR info, a business exit strategy, or organization of management, still insert the PESTLE information before anything related to marketing. Your PESTLE analysis results may also include your exit strategy, HR decisions, and management choices — because all of them are connected to policies, laws, and economy (three of the six environments of PESTLE).
It’s really that simple.
Final thoughts about where your PESTLE analysis fits into your business plan
PESTLE analysis gives you a bird’s eye view about six major environmental factors influencing the success of your business. For that reasoning, it’s beneficial to include it in your business plan. It explains why you’ve made specific choices regarding marketing, financials, and other crucial aspects of your business.
If you’ve got the time to include your PESTLE analysis findings into your business plan, do it!
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