As a business owner, you need to be aware of how well or badly your business is doing. That way, you can know where you need to make changes to make your venture more successful. To do this, you must do regular business portfolio analysis. But what is a business portfolio analysis? Continue reading to learn more about this type of analysis and its importance.
What Is Business Portfolio Analysis?
Portfolio analysis is a methodical way of analyzing the products or services that make up your business portfolio. Through this analysis, you can make sound financial investments and discard the fallacious ones. It also helps you emphasize the right business activities and ignore the wrong ones. Business portfolio analysis is an organizational policy formulation method based on the idea that businesses should develop policy, even though they handle investment portfolios.
In today’s highly competitive market, businesses without portfolios experience a lot of challenges when trying to grow or attract more customers. A business portfolio is a set of a business’s products, services, and strategic business units. Nevertheless, you should not confuse a business portfolio with a product portfolio. Apart from using your business portfolio analysis to make business-level decisions for the entire company, you can also treat each portfolio unit as an asset.
How to Do a Business Portfolio Analysis
To perform a successful business portfolio analysis, you need first to identify your business’s contents, including all products, services, and holdings from all the departments within your company. Next, you should consider how well these departments are performing. This is where you will consider how well your departments are competing with others in the industry and how much sales they are making. This step is vital in pinpointing where your business is succeeding and where it might be performing poorly.
The next step involves projections and proposals. Knowing where your company is underperforming enables you to decide what needs to be done to either improve in that area or what you might do in the future if you suspend the product or service altogether. You will also be able to identify where you need to invest more money to improve performance and where you should minimize spending.
The last step is to take all the gathered information and decide what to do to change how you do business. You can implement these changes permanently, for several months, or just for the next business year.