Before we can consider expanding the business we need to ensure that the various aspects of the business are operating efficiently, or at least as well as they can within existing financial constraints and management abilities. The process of performance review involves analysing in detail the organizational environment in which the business operates, as shown in Figure 2.1. That is, the internal environment within the organization itself, the trading status of the business, its finances, physical resources, staff and management skills, operational and control systems, policies and procedures, stakeholders interests, etc. These are essentially factors which are, or should be, within the control of the business. The market environment in which the business operates is an area over which the owner-managers have some influence but not control, e.g. the customers, suppliers, competitors, media, etc. The external environment consists of factors which are outside of the control or influence of the business, but which can still have a major impact on the way in which it operates, e.g. changes in legislation, social and political policy, economic trends, etc.

Figure 2.1: The organizational environment

The analysis involves finding answers to a whole range of detailed questions relating to the management and operation of the business under these three headings. By working through the questions, we should also be able to identify necessary changes that must be undertaken in order to create the right conditions for further development of the business.