PEST is a helpful tool you can use to understand external factors that might impact on your business. It helps you identify  outside influences that could help your business boom… or bellyflop.

It takes a bit more time and research than its sister – the SWOT analysis – but it is a powerful and proactive way to work towards a bright future.

What is a PEST Analysis?

A PEST analysis helps you understand the market you’re operating in by identifying macro-economic factors that can affect your business. Macro-economic factors are the big things happening in the economy at any time. Things like unemployment, inflation and exchange rates.

PEST stands for:

  • Political
  • Economic
  • Societal
  • Technological

Conducting a PEST analysis

To conduct a PEST analysis you’ll need a pen and paper, time to focus, and knowledge about your business and sector.

With PEST, you’d be forgiven for feeling like you need your crystal ball; it is a bit like predicting the future. But keeping an eye on possible development in the external environment helps you prepare for changes and challenges in the future.

Try to develop habits that will help you stay abreast of relevant developments.

  • Tune in to current affairs programmes on TV
  • Read a quality newspaper
  • subscribe to trade newsletters to give you the heads-up on important issues

On your paper (or on screen if you prefer) draw a square and divide it into four quarters / columns; one each for P, E, S and T.

Pick one to start with and write down everything you can think of that is relevant to your business success. Here are some questions to get you started.


Think about things that can affect your business like:

  • government policy
  • political changes and priorities
  • trade policy
  • consumer protection law
  • new funding initiatives


Consider economic issues that impact buying power such as:

  • interest rates
  • exchange rates
  • consumer confidence
  • disposable income
  • inflation


Think about trends in social attitudes that affect how people live and spend their money. For example:

  • environmental considerations
  • health campaigns
  • changing demographics
  • changes in how people shop


Look into advances in technology that can impact your product or processes such as:

  • consumer access to tech for research, purchase or service delivery
  • new channels to promote your product to customers
  • improvements to production processes that can reduce cost or streamline services
  • legislation around technology, such as GDPR

Using your PEST analysis

Now you have your PEST analysis, what do you do with it?

  • Set strategy: In an ideal world, your PEST informs your business strategy, as it helps you think of ways to take advantage of opportunities and overcome weaknesses.
  • Make changes: Use it to prioritise and take positive steps to advance your business, such as harnessing new technology to drive sales, or shifting from products or services that have fallen out of favour
  • Refer to it: Don’t forget, your PEST is a living document. Society, technology and the political environment change all the time. You should refer to your SWOT regularly to remind yourself of opportunities available and update it at least once a year.

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