A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis can help you with your business planning. It is a simple tool and is easy to do. Taking the time to analyze these components can give you insights you might normally miss. Once you have determined your business goals or objectives, a SWOT analysis can help you determine the likelihood of meeting those goals and point out obstacles you need to consider. Sometimes, a SWOT analysis will even lead you to modify your goals.
SWOT analysis basically looks at internal and external factors that will help or hinder reaching your objectives.
Strengths are internal assets that will help you reach your goals. Your skills and experience, your cash flow, your market position, your product attributes, your pricing structure and so on could be listed as strengths. It is important to objectively clarify your strengths so that you can use them to your benefit. You need to know not just what you are bringing to the table, but what your competitors are doing, too. Strengths are areas where you feel you can do better than the competition and that matter to the customer.
Weaknesses are internal factors that could inhibit your progress. These are areas you need to work on or overcome. It’s often hard to consider weaknesses, but knowing and acknowledging them can help you make better decisions.
It can be very helpful to ask your customers, employees, stakeholders and advisors for help in considering your strengths and weaknesses. It also helps to keep an open mind and a thick skin and give careful consideration to the feedback you receive, especially the feedback that makes you cringe.
Opportunities are external factors that could play a part in helping you achieve your goal. Perhaps your product or service is “hot” right now. That’s an opportunity. If a competitor is going out of business, that’s an opportunity to capture more of the market share. Analyzing opportunities means looking outside your business for conditions that could help you meet your objectives. Things to consider: economic conditions, area or market growth, trends, competitors.
Threats are external factors that could impede your progress. An increase in prices for raw materials you use to make your products is a threat. New competition is a threat. Stronger competition is a threat. When trying to identify threats, ask yourself what could happen outside your company that would derail your plans.
To clarify opportunities and threats you need to have a good understanding of overall social and economic trends, your industry, your marketplace and your competition. It may mean doing some research to find out what is happening now or what is predicted to happen.
Once you have identified your SWOTs, it can be helpful to put them into a “matrix” or grid, like this:
SWOT analyses should be done regularly for your overall business objectives, and it is a good idea to do one for each specific new project or venture you plan. You can also use SWOT analyses for other purpose such as choosing vendors, deciding which associations to join or which markets to pursue.
Once you have the results of your SWOT analysis, take another look at your goals to see if they still make sense. Then, get to work on using the information to improve your processes, work on areas that need improvement and target your marketing, sales and promotion efforts.