A SWOT analysis is an incredibly simple, yet powerful tool to help you develop your business strategy, whether you’re building a startup or guiding an existing company.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses are internal to your company—things that you have some control over and can change. Examples include who is on your team, what do you do well or better than your competition, in what areas are you an expert in the minds of your customer base, where are you short of capacity or talent, are you positioned to be nimble, do you have the cash flow you need, are you lacking technology, or skill that would allow you to excel.
Opportunities and threats are external; things that are going on outside your company, in the larger market. You can take advantage of opportunities and protect against threats, but you can’t change them. Examples include competitors, prices of raw materials, and customer shopping trends.
A SWOT analysis organizes your top strengths, weaknesses, opportunities, and threats into an organized list
When you dedicate the time and effort to do a SWOT analysis, you’ll be more knowledgeable and prepared to develop strategies for prioritizing the work that you need to do to grow your business.
You may think that you already know everything that you need to do to succeed, but a SWOT analysis will force you to look at your business in new ways and from new directions. Seek opinions of anyone that knows your business well for an outside look at your business. Those outside, objective perceptions might not be anything you have identified, but could be very telling for you. Look at your strengths and weaknesses and determine how you can better utilize them to take make or take advantage of opportunities and threats that exist in your business space. Look at your opportunities and threats and analyze how you can capitalize on the opportunities and protect your business from the threats.
Who should do a SWOT analysis?
Certainly, business owners and the company leaders need to be deeply involved. You can get input from employees as to how they see the company, but to be the most effective, the top-level decision makers must be involved.
For best results, you’ll want to gather a group of people who have different perspectives on the company. Select people who can represent different aspects of your company, from sales and customer service to marketing and product development. Everyone should have a seat at the table.
If you’re starting or running a business on your own, you can still do a SWOT analysis. Recruit additional points of view from friends who know a little about your business, your accountant, or even vendors and suppliers. The key is to have different points of view.
Existing businesses can use a SWOT analysis to assess their current situation and determine a strategy to move forward. But, remember that things are constantly changing and you’ll want to reassess your strategy, starting with a new SWOT analysis every six to 12 months.
For startups, a SWOT analysis is part of the business planning process. It’ll help codify a strategy so that you start off on the right foot and know the direction that you plan on going.
This does not have to be a day-long meeting. It can be broken down in chunks of an hour or two once a week until you have really analyzed and documented the four categories. For some companies, a couple of hours is enough.
Gather people from different parts of your company and make sure that you have representatives from every part. You’ll find that different groups within your company will have entirely different perspectives that will be critical to making your SWOT analysis successful.
Spark the analysis with these questions
Make sure everyone involved knows what falls under each category. Give examples of each and ask the team questions to get the process going. These questions can help explain each section and spark creative thinking.
Strengths are internal, positive attributes of your company. These are things that are within your control.
- What business processes are successful?
- What assets do you have in your team, such as knowledge, education, network, skills, and reputation?
- What physical assets do you have, such as customers, equipment, technology, cash, and patents?
- What competitive advantages do you have over your competition?
Weaknesses are negative factors that detract from your strengths. These are things that you might need to improve on to be competitive.
- Are there things that your business needs to be competitive?
- What business processes need improvement?
- Are there tangible assets that your company needs, such as money or equipment?
- Are there gaps on your team?
- Is your location ideal for your success?
Opportunities are external factors in your business environment that are likely to contribute to your success.
- Is your market growing and are there trends that will encourage people to buy more of what you are selling?
- Are there upcoming events that your company may be able to take advantage of to grow the business?
- Are there upcoming changes to regulations that might impact your company positively?
- If your business is up and running, do customers think highly of you?
Threats are external factors that you have no control over. You may want to consider putting in place contingency plans for dealing them if they occur.
- Do you have potential competitors who may enter your market?
- Will suppliers always be able to supply the raw materials you need at the prices you need?
- Could future developments in technology change how you do business?
- Is consumer behavior changing in a way that could negatively impact your business?
- Are there market trends that could become a threat?
Now to the SWOT analysis
Doing a SWOT analysis is similar to brainstorming meetings, and there are right and wrong ways to run them. I suggest giving everyone a pad of sticky-notes and have everyone quietly generate ideas on their own to start things off. This prevents the loud overtaking the quiet and ensures that all voices are heard. Make sure that the space is collaborative, inclusive and non-judgmental. This is not the time to shoot down anyone’s idea or criticize. You never know where an idea might take the group even if the initial idea gets thrown out.
Tackle one aspect at a time, don’t try to think about all four at the same time, things will get messy quickly.
After five to 10 minutes of private brainstorming, put all the sticky-notes up on the wall and group similar ideas together. Allow anyone to add additional notes at this point if someone else’s idea sparks a new thought.
Once all of the ideas are organized, it’s time to rank the ideas. I like using a voting system where everyone gets five or ten “votes” that they can distribute in any way they like. Sticky dots in different colors are useful for this portion of the exercise. If you do not have the numbers for that approach to work, give voting members value points that they can attach to ideas to see which ones rise to the top.
Based on your voting methodology, you should have a prioritized list of ideas. Of course, the list is now up for discussion and debate, and someone in the room should be able to make the final call on the priority. This is usually the business owner, but it could be delegated to someone else in charge of business strategy.
The Next Step
With your SWOT analysis complete, you’re ready to build it into concrete strategy. After all, the exercise is about producing a strategy that you can work on during the next few months.
Look at your strengths and figure out how you can use those strengths to take advantage of your opportunities. You may not have really tapped the potential of your strengths because you never focused or thought about them the way this process has enabled. How can your strengths combat the threats that are in the market. Now that you have identified the threats, you may be able to cut some of them off at the pass. Use this analysis to produce a list of actions that you can take.
What weaknesses were found? What can be done to correct those weaknesses? What investment needs to be made to build up that area of your business? Do you need new/different employees, technology, assets?
Take the list of actions, marry it with your calendar and start placing goals on it. What do you want to accomplish in each of the next months or quarters? Make sure that tasks that will achieve the goal are assigned to the best person and that they know the priority and deadline for each.
You’ll also want to do this by analyzing how external opportunities might help you combat your own, internal weaknesses. Can you also minimize those weaknesses so you can avoid the threats that you identified?
This process will empower you to know how you can change your business, where it needs to be changed, what strengths you should leverage more, what weaknesses you need to correct, what are the opportunities and threats. It can be very powerful and with your goals and actions in hand, you’ll be a long way toward completing a strategic plan for your business.