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What Internal Factors Can Affect a Business?

What Internal Factors Can Affect a Business

What Internal Factors Can Affect a Business?

The performance and competitiveness of a business will vary depending on the optimisation of internal factors. Internal factors that can affect a business include financial management, organisational structure, its workplace culture, the technology used, strategic level planning, employee skills sets, the approach it’s leadership takes, process optimisation and how efficient its supply chain is.

Financial Management

Debt Financing

Equity Financing Fuels Business Growth

Businesses need to raise capital to fuel their growth. This can be done through equity financing which can help companies to strengthen their profits. Equity financing offers more than just additional funds, but also an opportunity to build valuable relationships with investors. The capital injected into the business can be used to improve lots of business areas including customer service, allocation of resources, business operations in general as well as overarching price points for products and services offered.

Balancing Risks And Rewards Through Debt Financing

Debt management is an important internal factor that can affect a business. Whilst debt financing provides funds needed to aid business growth, it can be fraught with risks too. If using debt financing, business owners should keep their employees in the loop about the financial health of the organisation.

Utilising tools such as automation and customer analytics can help with keeping debt financing efficient and identify gaps in the market so that services or products can be developed with end demand in mind.

The main benefit of equity financing is its ability to build relationships with investors who can in turn offer advice and support to the business.

Financial Planning For Stability

Overall, good financial planning is key for business stability. Without this, large variations in cash flow can really impact a business negatively, but keeping cash flow variances small can provide stability even through unexpected hard times, such as the pandemic.

Proper financial planning covers preparing budgets, sales forecasts, and keeping a close eye on operational and production costs. Always try to build contingencies into these areas so there is a cushion available should the business run into difficult times.

When reviewing your planning and forecasting, try to account for ‘worst-case scenarios’ so that you know you’re in a good position to manage market volatility.

Strategic Planning

Strategy Drives Business Success

Strategic planning plays a very important role in achieving positive business growth. It’s an internal factor that can impact long term goals, the challenges faced by the business, and the actions it may need to take in the future.

Having well thought out business strategies in place equips businesses with the plans needed to capitalise on new opportunities, minimise threats and improve business direction with key metrics.

Building Responsiveness Through Strategic Plans

Responsiveness is key in ever evolving business landscapes. The level of responsiveness within an organisation’s leadership team is key in remaining relevant to changing consumer needs, market developments, competitor movements or changes to regulatory requirements.

Being able to realign strategies from within is key to building resilience in times of uncertainty.

Strategy Implementation Through Change Management

Change management is crucial to ensure that new ideas and business processes are delivered effectively across teams and organisations with minimal push back or setbacks.

A well structured change management plan allows for company policies, processes, capabilities and culture to match up with the strategic targets that the organisation needs to meet by smoothly managing the transitions from old to new ways of working.

Whether its personnel, processes, suppliers, or leadership changes, managing these impactful changes effectively is a key internal factor for business success.

Employee Skill Sets And Training

Employee Skill Sets and Training

Skills And Training Boost Business Performance

Employees are the backbone of any business, so their training, skillset and on-going development is a key internal factor that can affect your overall business.

By strengthening knowledge, skills, processes and technology used, service delivery, customer satisfaction and market competitiveness can all improve which will have positive effects on the business in the long run.

As a result, businesses choosing to invest in development opportunities and improved training methods can consider this a strategic investment into the success of their operations. It pays to keep on top of changing trends in the sector you operate in so that you can stay ahead of your competition, remain relevant to your target audience and future proof your business.

Talent Development Framework

Whilst training existing employees is a great way to work towards a dynamic and evolving workforce, having a dedicated talent development plan is also a brilliant internal factor that you can use to control the skills available in your employee pool.

Taking a systematic approach to talent development that includes training needs analysis, headhunting, program design and delivery through key performance indicators like customer scores and workforce productivity, will create a positive culture of continuous learning.

Workplace Culture

Optimising Workplace Culture Is Vital

The culture set in a workplace impacts everything from employee morale, overall staff satisfaction and team dynamics. This means that taking positive steps to create a favourable workplace culture can only be beneficial to those in charge of company operations who are looking to enjoy the fruits of a productive and positive working environment.

Tried and tested ways to boost employee engagement and therefore morale and a positive workplace culture include;

  • Excellent communications
  • Rewards systems such as bonus payments, additional annual leave or flexible hours
  • Celebrating employee achievements
  • Team days, social events and activities
  • Celebrating diversity and inclusion

Using these types of initiatives can create a deeper sense of community in the workplace, rather than separate silos of workers that feel disconnected from business goals and growth aspirations.



Maintaining The Cutting Edge

Keeping up with new technology across business operations is an important business area that cannot be ignored. Making the best use of the technology available to you can cut processing times, save money and ultimately give a competitive advantage over your competitors.

Keep an eye on industry news sites for the latest developments in your area. Social media and digital marketing avenues are also great places to find new ideas to try.

If you’re not already using tech staples such as AI, cloud computing, data analytics and mobile optimisation then you’re already falling behind and it’s time to catch up!

Strategy Not Tools

It’s never enough to simply invest in the latest technology. Business leaders must ensure that they have a technology strategy that ensures the tools they buy into are able to directly align with their business goals and help them in achieving them quicker than they otherwise would. Remember, technology aids the implementation of your business plans, rather than being them.

Building Technology Synergy

Consider technology roadmaps and governance frameworks to ensure the core use of the tech that you bring into the business aligns with your business culture and aims. If you can foster a culture of collaboration and innovation, you’re more likely to succeed in managing the risks that new business tools can throw up whilst staying relevant in an evolving business space.


The Power of Prediction

Nobody can accurately predict the future, but it pays to be as prepared for what the future might bring as possible. This is where forecasting comes in. Being able to forecast likely business trends and seasonal challenges means you can effectively predict likely sales figures, adjust staffing levels and expenditure accordingly. Taking these steps ensures you have a good basis for long term financial stability.

Leadership Styles

Leadership Shapes Culture And Performance

Leadership styles are a big internal factor that can affect a business. It’s an area that can completely change the culture, atmosphere and efficiency of the firm.

Whether your team is made up of autocratic, democratic, transformational or laissez-faire styles of leadership, aligning the right kind of approach with the business goals is key.

For example, aggressive growth goals may require more transformational leadership approaches than if the goal is to maintain current levels of operations.

Each leadership style has its pros and cons and the right one for your business will depend on the direction and culture that you want to achieve.

Adaptive Leadership Stimulates Progress

Adaptive leadership is great for a dynamic business environment. It’s an approach that centres on flexibility and collaboration to generate solutions for evolving challenges. The idea is that rather than directing employees on what to do, leaders will coach their staff on complex problem solving techniques.

This means they will be well equipped to move forward in times of difficulty and it’s been shown that accountability, experiential learning are key for adaptive leadership techniques.

Supply Chain Efficiency

Supply chain management

The Power Of Streamlined Supply Chains

Setting up a streamlined supply chain that allows for smooth product or service delivery is crucial for business success. Missed deliveries or lack of stock really impacts customers’ perception of a company, so being able to keep your customers happy with a reliable supply chain is one internal factor that’s worth getting right.

Taking time to regularly review your supply chain for inefficiencies and taking steps to streamline them is a worthwhile task for every business and is a step that can improve your ability to price competitively, increase profits and reduce costs.

Organisational Structure

Structure Impacts Efficiency

Operational efficiency is heavily impacted by the overall structure of the organisation. If a business has lots of approval levels, red tape, and takes a long time to rubber stamp new ideas or process changes, it can derail overall operational progress.

Hierarchical structures promote control and flat decentralised structures can empower employees to get on but it’s important to choose the right style for your business’s operating model and strategic vision. Hybrid structures that combine functional and project teams can offer a mix of rigidity and more dynamic structure.

Business Processes

Business processes are the gears that keep an operation running. Being able to run efficient processes that are repeatable, efficient and useful can ultimately impact customer satisfaction, productivity and profit margins.

Therefore, it’s important to regularly review and refine processes that aren’t working. Business process management software can help you to map, analyse and optimise workflows allowing you to stay agile and competitive.

Lean and Six Sigma and process excellence models that provide businesses with a structured approach to improving their processes and are widely applauded for the process improvements and operational responsiveness they can bring.

Further reading: The importance of a strong work ethic in business 

The Role of Innovation

Innovation means bringing new ideas, experimentations and creative problem solving to the business place. Being able to innovate, develop and tailor solutions and products that meet evolving market needs is an important internal factor that affects business success.

Leadership teams have a key part to play in cultivating this kind of workplace culture. Encouraging smart risk-taking, providing resources for teams to develop new ideas and supporting successes can all nurture innovation in business.

Sustainability and Social Responsibility

Sustainability and social responsibility are hot topics that are important to employees, customers and leadership alike. Being able to present your business as one who takes these issues seriously can only improve the perception that external stakeholders will hold of you.

When a company’s sustainability efforts resonate with its customers, it’s likely that customer satisfaction and engagement levels will improve which can ultimately improve brand loyalty and business bottom line figures.

Getting on board with this approach can also help to future proof your business against tightening regulations and climate change risks surrounding sustainability.

The Customer Focus

Internally putting your customers at the heart of your business planning is a great way to ensure timely delivery of products and services that will meet their needs and wants. Businesses that know exactly who they are helping can improve customer loyalty, brand perception and more.

Start by mapping out your customer journey from the first touch point with the business to the last. Then use customer analytics data from customer relationship management software, social media, website visitor analytics or telephone system data to build your services and delivery processes around what your customers are looking for and expect at every stage of their journey with your company.


To recap, when considering what internal factors can affect a business, it’s important to take a holistic approach to reviewing your business operations. From top level strategy for finances, growth and delivery, to business culture, employee training, technology usage and using data driven insights to exceed customer satisfaction needs, there are plenty of internal areas of a business that can impact its overall sustainability and profitability.

Taking the time to analyse your business operations and improve any areas that are hindering its growth will ensure a structural and process alignment that can work to enhance continuous improvement.



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