Have you ever completed a SWOT analysis on your business, but didn’t really get much value out of it? You are not alone – perhaps you have been doing it wrongly. Getting the most out of a SWOT analysis is where many businesses get stuck. Identifying the internal strengths and weaknesses of your business, along with external opportunities and threats through SWOT analysis is a widely used planning tool. But ultimately, its true value lies in what you do with it.
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. It is an effective method to maximize opportunities while minimizing negative factors associated with a given project or objective. Plus, it lets you unbiasedly evaluate your business’s strengths and weaknesses, which is key to avoiding unnecessary errors from lack of insight down the road. A SWOT analysis arranges your top strengths, weaknesses, opportunities, and threats into an organized list and is usually presented in a simple two-by-two grid.
Who should do a SWOT analysis?
For a SWOT analysis to be effective, company founders and leaders need to be deeply involved. This is not a task that can be delegated to others. But company leadership should not do the work on their own, either. For best results, you will 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, operations, etc. Everyone should have a seat at the table.
Innovative companies even look outside their own internal ranks when they perform SWOT analyses and get input from customer surveys to add their unique voices to the mix. For startups, a SWOT analysis is part of the business planning process. It will help codify a strategy so that you start off on the right foot and know the direction that you plan ongoing.
Questions that can help inspire your analysis
Here are a few questions that you can ask your team and customers when you are building your SWOT analysis. These questions can help explain each section and spark creative thinking. There are certainly other questions you could ask; these are just meant to get you started and show you the direction to take.
[READ MORE: Steps to developing a growth plan for your business]
Strengths describe the positive attributes, tangible and intangible, inherent in your organization. These are things that are within your control and you can change. You will want to ask yourself the following questions concerning your strengths:
- What do you do really well? 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 and remain in the battle for the purple cow. You may want to ask the following questions as regards your weaknesses:
- What factors that are within your control detract from your ability to obtain or maintain a competitive edge?
- What areas need improvement to accomplish your objectives or compete with your strongest competitor?
- What does your business lack (for example, expertise or access to skills or technology)?
- Does your business have limited resources?
- Is your business in a poor location?
Opportunities are external factors in your business environment that are likely to contribute to your success. The following questions are key to knowing opportunities that exist in your sector:
- 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 (external, negative factors)
Threats include external factors beyond your control that could place your strategy, or the business itself, at risk. You have no control over these, but you may benefit by having contingency plans to address them if they should occur. You should be asking the following questions:
- Who are your existing or potential competitors?
- What factors beyond your control could place your business at risk?
- Are there challenges created by an unfavourable trend or development that may lead to deteriorating revenues or profits?
- What situations might threaten your marketing efforts?
- Has there been a significant change in supplier prices or the availability of raw materials?
- What about shifts in consumer behaviour, the economy, or government regulations that could reduce your sales?
- Has a new product or technology been introduced that makes your products, equipment, or services obsolete?
What to do next
With your SWOT analysis complete, you’re ready to convert it into real strategy. After all, the exercise is about producing a strategy that you can work on during the next few months. The first step is to look at your strengths and figure out how you can use those strengths to take advantage of your opportunities. Then, look at how your strengths can combat the threats that are in the market. Use this analysis to produce a list of actions that you can take and assign a timeline and responsibility matrix to them.
Once you understand how to compile your SWOT data and find ways to use it strategically, the SWOT analysis will be a tool that you can use over and over in your business to explore new opportunities and improve your decision-making process.