Maybe your company is at a crossroads. Or perhaps you’re considering what strategies to implement for the year ahead. Maybe you want to evaluate how your current systems are working or whether you should go ahead with a new product launch.
There’s no doubt that these can be overwhelming issues and decisions for business owners to tackle. The good news is that there’s a helpful tool you can use to facilitate your decision-making process: a SWOT analysis.
You may have heard the term before and wrote it off as something that was too complicated or not a fit for your small business. But, in reality, a SWOT analysis is an assessment tool that’s simple to use and provides a big picture view of your company’s overall status. You can use it to set goals, determine risks, plan ahead, and identify critical issues that impact your business.
Wondering how to get started? Let’s dig into why a SWOT analysis should be in your business toolkit and how you can conduct one. We promise—it’s not nearly as eye roll-worthy as you think it is.
A SWOT analysis can and should be performed by businesses of all sizes. Whether you’re just starting out or well-established in your industry, you can benefit from performing a SWOT analysis.
SWOT is an acronym for:
You’ll identify topics under each letter of the acronym to get a grasp on the internal and external forces that can impact the success and well-being of your company.
Developed in the late 1960s, SWOT is a well-respected and highly-practiced business analysis process. Often included as part of an overall business plan, it can also be used throughout a company’s lifespan for strategic planning, to prepare for significant changes and to support business growth.
When you’re faced with a strategic decision or looking for ways to improve your business, conducting a SWOT analysis is an essential place to start. Depending on your industry and your activities, a SWOT analysis can be completed every 6 months to one year or as needed to address critical decisions and shifts in your industry.
Companies may want to complete a SWOT analysis for many different reasons, and there are numerous benefits associated with performing one. A regular SWOT analysis can help you:
Needless to say, that handy little acronym can reveal a lot about your business.
Before you get to work on your own SWOT analysis, let’s first take a closer look at the elements you’re analyzing.
In a SWOT analysis, there are 2 types of factors: internal and external. Generally speaking, the internal ones are elements you have control over—like your resources, people, and operations. In contrast, external elements are out of your control and would be there with or without your business—like your industry, competition, and market.
Here’s how that plays out in your SWOT analysis:
Make sense? Great. Now, let’s break down each of the 4 pieces of the acronym.
What makes your company strong? What are you doing right? These are some of the queries you’ll want to answer when considering the strengths of your company. As the name implies, strengths focus on the elements of the company where you excel and stand out from the competition.
EXAMPLE: Our high-quality customer service is unmatched in our industry.
Weaknesses are where your company falls short. It can sting a little to pick apart all of the things that you aren’t doing right, but it’s important to figure out where you could improve and areas where your competitors are performing better. After all, these weaknesses stand in the way of you achieving your business goals.
EXAMPLE: We struggle with retention and have high staff turnover.
Opportunities are where you tap into possibilities that could help your company grow. Think about what gaps in the market you could fill in or what trends you could take advantage of. Don’t limit yourself here—this piece is all about dreaming big.
EXAMPLE: Our customers have been requesting a new product that we could easily launch.
Here’s where you’ll really need to have a thick skin. Is your company at risk? It’s not a fun question to answer, but it’s an important one. Threats are elements that could harm your company and could range from changes to regulation or legislation to an economic downturn.
EXAMPLE: We have a lot of new competitors cropping up, and the market is becoming saturated.
You won’t just identify one topic for each letter of the acronym—this is all about thinking critically and generating as many ideas as possible. Aim to come up with at least 3 answers for each letter of your SWOT analysis.
You’re probably picking up on the fact that a SWOT analysis doesn’t need to be overly complicated, and you don’t have to be a big corporation with many different departments to conduct one.
In fact, even solo entrepreneurs will find this to be a useful tool. Here are a few more tips to help you get started on the right foot:
Once you’ve completed the above steps, it’s time to analyze your findings. While a SWOT analysis offers a useful review of what’s working in your company and what isn’t, its real value lies in combining the results.
The process of combining elements of a SWOT analysis is known as matching, and it can help you look at the information in new ways and reveal other findings. Need some inspiration? You can combine elements in the following ways:
Another way to look at your findings is through something called converting. Here you’ll want to analyze the data you’ve collected on your weakness and threats to see if you can convert them into positives.
Once you’ve accumulated all of your information, you can now create an action plan that you can apply to the appropriate level of your business.
Whether you want a once-a-year overhaul on your business plan or need to decide if it’s the right time to expand, a SWOT analysis is where you’ll want to begin.
As an integral part of the decision-making process, this helpful tool can provide you with a comprehensive look at your business and help you determine your next steps. That way, you can make business decisions with more confidence—and less confusion.