One of the planning tools I use for my business is the SWOT analysis. It’s a great tool to be familiar with, and it has many applications. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. Here are some tips on how you might use it for your small business.
The SWOT analysis is a tool for auditing your business and its environment – both internal and external. It forms an important part of your strategic planning process. This analysis that takes into account not only your own business, but also your competitor's activities and current industry and marketplace trends. You can use this analysis as a very effective ways to identify different internal and external factors that will affect your business.
Carrying out an analysis using the SWOT framework helps you focus on your strengths, minimize weaknesses, take the greatest possible advantage of opportunities available, and anticipate any threats to your business.
How to create your SWOT analysis
To begin the analysis, create a four-cell grid or four lists, one for each component:
Strengths | Weaknesses | Opportunities | Threats. Then, begin filling in the lists.
1. Internal Analysis: Examine the capabilities of your business by analyzing your company and services strengths and weaknesses.
2. External Analysis: Do an *environmental analysis*. Identify opportunities for your business, and any threats or obstacles to performance.
You can use this information to help you develop a strategy that uses the strengths and opportunities, reduces the weaknesses and threats, and achieves the long term objectives of your business.
Strengths and weaknesses are internal factors. For example:
A strength could be:
• your specialist expertise
• a new, innovative product or service
• the location of your business
• top quality products, processes, and procedures
A weakness could be:
• lack of marketing expertise
• undifferentiated products and service (i.e. in relation to your competitors)
• location of your business
• damaged reputation
Opportunities and threats are external factors. For example:
An opportunity could be:
• a new developing or international market
• a market vacated by an ineffective competitor
• new market segments that offer improved profits
• mergers, joint ventures, or strategic alliances
A threat could be:
• a new competitor in your market
• price wars with competitors
• a competitor with a new, innovative product or service
• competitors with superior access to channels of distribution
Guidelines for successful SWOT analysis
A word of caution, SWOT analysis can be very subjective. Do not rely on it too much. Two people rarely come-up with the same final version of SWOT.
• be realistic about the strengths and weaknesses of your business
• be specific; avoid grey areas
• always analyze in context to your competition i.e. better than or worse than your competition
• keep your SWOT short and simple; avoid complexity and over analysis
• analysis should distinguish between where your business is today and where it actually could be in the future based on your current situation
Completing a SWOT analysis helps you identify ways to maximize the strengths in your business while minimizing the effect of the weaknesses. Ideally, you will match your strengths against market opportunities that result from voids in your competitors' products and services.
You can also learn more about your own as well as competitor’s businesses and expand the reach of your SWOT analysis through the use of surveys.
With a thorough SWOT analysis, you are sure to come away with newfound insights. Use these insights to increase your company's effectiveness and as input to your strategic business and marketing plans.
Take Action: Identify Your SWOT
Start by listing all your company’s strengths and weaknesses – the internal analysis. Focus on the strengths that can be leveraged in your marketplace to gain a competitive advantage.
Identify the weaknesses of your company and services that you can manage or overcome.
The external analysis begins with a list of opportunities and threats – sometimes called issues. Identify key opportunities that you can capitalize on in your marketplace. Then, list the external threats or issues that could significantly impact your company or service.
Here are some questions you can answer to determine your SWOT:
• What advantages do you have over other businesses?
• What do you do well that your competition can’t?
• What makes you stand out from your competitors?
• What do other people see as your strengths?
Consider this from both your point of view and that of your clients. Don't be modest. Be realistic. If you are having any difficulty with this, try writing down a list of your characteristics. Some of these will hopefully be strengths!
• What do you do badly?
• What do your customers complain about?
• What could you improve?
• Are your reputation and market presence as strong as they could be?
• What are the areas of struggle for your company?
• Do you have the staff and technology to provide top notch customer service?
Do other people perceive weaknesses that you do not see? Are your competitors doing better than you? It is best to be realistic now, and face any unpleasant truths as soon as possible.
• Where are the opportunities for your business or services?
• What are the trends in your area of specialty?
• Will changes in demographics, social patterns, or lifestyle changes affect your business?
• Is your business sector expanding?
Are there emerging trends that fit with your company's strengths? Is there a product/service area that others have not yet covered?
A useful approach to looking at opportunities is to look at your strengths and ask yourself whether these open up any opportunities. Try to uncover areas where your strengths are not being fully utilized. Also, look at your weaknesses and ask yourself whether you could open up opportunities by eliminating them.
• What obstacles do you face?
• What is your competition doing?
• Are your competitors becoming stronger?
• Are the required specifications for your products or services changing?
• Do you see other external threats to your company's success?
Examine your weaknesses and ask yourself whether any of them could seriously threaten your business. Are there emerging trends that amplify one of your weaknesses? Internally, do you have financial, development, or other problems? Look both inside and outside of your company for things that could damage your business to see the big picture.
Carrying out this analysis will often be illuminating - both in terms of pointing out what needs to be done, and in putting problems into perspective.
Jan Marie Dore is the founder of Femalepreneurs.com a coaching and training company dedicated to teaching women how to consistently attract more clients, make more money, and have more freedom in their business. For marketing and sales strategies to turn your expertise into profitable new income streams and build a solo business with a global reach, visit http://www.femalepreneurs.com