What is a Problem Statement in Business Analysis

Running any business isn’t an easy task. There’s almost every time a problem or two that needs your attention. As a business owner, you need to address these problems on the right terms to find a suitable solution. That’s where a problem statement comes in handy.

Most entrepreneurs know the necessity to write a business plan for their companies. However, they lack the proper tools and techniques to help them solve the problems. Using a problem statement in business analysis helps business owners analyze the problems and arrive at creative solutions to address them. 

Essentially, it makes a company’s approach more objective, measurable, and systematic.

What is a Problem Statement?

The problem statement of a business deals comprehensively with the problems and the issues the company’s facing. A complete problem statement would usually involve a meticulous analysis of the problem at hand, all the relevant details, and eventually a solution to address the problem at hand.

It’s an effective yet simple way of presenting a problem and relying on business analysis to arrive at a possible solution. In other words, you can also describe it as a communication tool that can help companies minimize the gulf between the ideal and real levels of business, i.e., expected performance and real performance. 

Problem Statements in Business Analysis

There’s more than one reason for writing a problem statement for business analysis. According to Harvard Business Review, a problem statement effectively serves as the perfect tool for communication. It’s crucial when you’re looking to improve the operations of companies.

Whether it’s the issue of developing new software or aligning the logistics of building a road, every team can benefit from having a concise problem statement to understand the issues that might arise and determine the viable approach to tackle them. It provides the team with details related to the decision-making process in these projects.

Out of all the problems in the statement, the most crucial goal for a problem statement is to etch out the issues precisely and clearly. The aim is to concentrate on the efforts made by the process management team and either direct or shape their scope.

A problem statement also becomes valuable to maintain focus and ensure the project stays on course. The statement gets re-evaluated in the end to make sure that the solutions suggested were adopted. A well-defined problem statement also helps with root-cause research. This makes it easy for the team to understand the causes behind the problem and how to avoid the same from happening again.

How to Identify and Create the Problem Statement

Before starting with your business problem statement, it’s vital to conduct a complete and intricate analysis of the issue and everything related. Proper research should equip you with the knowledge and the understanding to better explain the problem and suggest the most appropriate solution.

Five elements of a problem statement

A good problem statement needs to target five key elements for business analysis. The list includes:

Presenting the Ideal Situation

The first thing to target in your business problem statement is describing the situation if there weren’t a problem that required addressing. This is the ideal situation that should mark the beginning of your statement.

This section helps in identifying the goals and the scope of the statement. It also helps create a clear understanding of the ideal environment once all the issues get resolved.

The Reality of the Situation

This is the second section of the statement that should focus on the present reality of the organization. The section helps identify the problem, why that’s the case, and who’s been impacted the most. This section also pinpoints when and where the problem was first recognized and analyzes a scenario.

Consequences to Face

The third element of an effective problem statement aims at identifying the consequences that the problem might lead to. The section describes in detail the effect of the problem and quantifies the impact it has had on the people affected. Some of the more common consequences include loss of money, time, resources, productivity, efficiency, and competitive advantage.


The next element of a problem statement deals with providing a relevant proposal for possible solutions to the problem. It’s important to remember that the purpose of the section is to guide business teams in conducting their research and help them investigate and resolve their problems.

Expected Results

The last section you need to focus on is estimating the expected results. This section mainly deals with business analysts explaining the results that the solutions might be able to bring and how that can be made possible. 

Creating a Problem Statement

When it comes to creating a problem statement, the process starts with:

Describing the Situation, You’re Aiming to Achieve

For starters, you’d want to provide some context to make understanding the problem statement easier for all parties. That means it’s better to start by explaining the process in question and how it should work. A concise description of the functionality of the process makes it easier for your audience to understand better how it works and why it’s a good option.

For instance, you might choose to start by describing a hypothetical situation where the solution can be efficient and work towards your proposal from there. The key thing to remember over here is the 5Ws.

  • Who is affected by the problem?
  • What can be the outcome if the problem remains unsolved?
  • Where is the problem occurring?
  • When does it require fixing?
  • Why it’s important to fix the problem?

Picking the Biggest Problem to Solve

There’s no wonder that your solution will be capable of solving multiple problems. However, it’s better to lead with just one when describing your problem statement. Go with the biggest problem that needs solving.

When pitching the statement to investors, it’s important to remember they aren’t going to keep in mind all the solutions you put in front of them. However, they are most certainly going to keep in mind the biggest issue of their organization, and putting in front of them the solution to resolve that particular problem is bound to create the best impression.

Considering the Needs of Your Audience

For creating a precise problem statement, you need to first come to terms with the scope of the problem. So it’s better to speak with staff or review reports to ensure you truly understand what you’re talking about.

When preparing your problem statement, considering your audience’s experiences and needs can help your audience relate to the report better. This promises better comprehension and a thorough understanding of the solutions you’re looking to propose.

Providing Facts

Surveys and statistics always support a successful problem statement. Based on the issue your problem statement is looking to resolve, the statement might include staffing reports, references to external and internal reports, customer demographics, statistics, information about company resources, national trends, and every other such statistic if they contribute to preparing your report and better explain the severity of the problem. 

Explain Benefits from the Solution

By this point, you’ve already described the ideal scenario where the problem doesn’t exist. You’ve also identified the problem, explained the consequences of choosing to ignore it, and provided the approaches to resolve the issue.

This makes it a good time to explain why the solution will work and the possible benefits it might bring to the organization. This is also the perfect place to focus on the financial impact and the efficiency of the solution. Bring into focus the expenditure that the solution might decrease and how it can unleash the potential of the revenue streams, alongside the intangible benefits like better customer satisfaction it might bring.

Problem Statement Examples

When it comes to examples for problem statements, there are several to pick from. A strong example can be Netflix. The streaming service resolved the issues customers were having, from traveling to video stores to renting movies. 

They avoided the need for video stores altogether instead of delivering movies in an envelope to their customer’s mailbox. The customers could keep the movie as long as they wished. Netflix’s problem statement would have been something like this:

“Travelling to the video store is inconvenient. People don’t like driving back and forth for just renting a movie, and they detest paying late fees even more.”

Taking the example of Netflix, we can portray their problem statement as:

Problem:  “Having to go to the video store means getting stuck in traffic, wandering the aisles, and waiting in long queues just for a single movie.”

Solution:Netflix offers everyone to enjoy thousands of movies delivered directly to their doorstep.”

You can give investors an easy problem/solution statement within two sentences. An ideal problem statement focuses entirely on the issues, helping build a powerful case in front of the audience and making it easy to accept the solutions provided.


The function of a problem statement is to describe the problem an organization might be facing and identify what might be the perfect solution. It can also set up the foundation to build a strong business operation. However, before advertising a solution to the customer, first, make sure they are aware of the issue you’re looking to solve, and a problem statement helps you convey that effectively.