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. What Is a SWOT Analysis? 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: \tS: Strengths \tW: Weaknesses \tO: Opportunities \tT: Threats 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. What Are the Advantages of Performing a SWOT Analysis? 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: \tJumpstart strategic planning for the upcoming year \tUnderstand your competitors and industry \tImprove operations \tDiscover new opportunities for growth in your market \tIdentify and adjust for risks \tReevaluate current strategies that may not be working \tPrepare for expansion or new product rollouts \tBrace for and proactively respond to emerging threats \tDecide where to focus your resources Needless to say, that handy little acronym can reveal a lot about your business. What Are the Steps Involved in a SWOT Analysis? 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: \tInternal factors: Strengths and weaknesses \tExternal factors: Opportunities and threats Make sense? Great. Now, let’s break down each of the 4 pieces of the acronym. Strengths 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 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 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. Threats 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. How to Execute a SWOT Analysis for Your Small Business 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: \tDetermine Your Reasoning: As mentioned previously, a SWOT analysis can be performed yearly, every 6 months, or as needed. It can be used for a specific area of your business, as part of a product rollout or business plan, or to help decision-making. Understand why you want to do one right now, as that’s an important context to keep in mind as you move forward. \tGather Your Team: The more input and perspective you have, the better. Decide who you need to include to help you complete as candid of a SWOT analysis as possible. Typically, SWOT analyses are held as brainstorming sessions with key personnel within your company. They may include project managers, department heads, owners, and other staff. If you run your business alone, ask for input from those close to you or who are somewhat involved in your company, such as friends, family, a mentor, or your accountant. \tCreate Your SWOT Framework: A typical SWOT analysis is displayed as a 2-by-2 grid. Each SWOT element (strengths, weaknesses, opportunities, and threats) is represented in clearly labeled quadrants. You can easily create the grid in Word or PowerPoint, but you can also use SWOT software, free templates, and generator options available online. Ones you may be interested in include Canva, SmartSheet, Creatly, Lucidchart, and SWOT. \tSolicit Honest Feedback: Remember, you don’t have to go it alone. Ask your staff members questions and write down all their responses to get as well-rounded of perspective as possible. \tAnalyze the Results: Your SWOT analysis doesn’t do any good if you don’t take action on what you uncover. It’s up to you to use that information to determine your business strategy moving forward. Create an action plan with deadlines to address issues over the short- and long-term. We’ll talk about this more in the next section. How to Use a SWOT Analysis 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: \tStrengths + Opportunities: Can determine areas where you can use your strengths to seize upon opportunities. \tWeakness + Threats: Can identify the weaknesses you should work on to avoid potential threats. \tWeakness + Opportunities: Can show you where to improve your weakness so you can take advantage of opportunities. \tStrengths + Threats: Can indicate where you can use your strengths to diminish or remove threats. 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. Get Started With Your Own SWOT Analysis 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.