Performing a SWOT analysis is a critical component of any business, whether you’re just getting off the ground, preparing to launch a new product or service, or simply want to improve your overall performance and maximize efficiency.
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats. Identifying these aspects of your business and the surrounding marketplace will give you a clear idea of how to create a strategic and actionable performance improvement plan for your company. Business consultants and coaches often speak of a SWOT matrix or grid like the one below. As you can see, Strengths and Weaknesses represent internal factors that affect your business, i.e. things that you have control over and can change. Opportunities and Threats represent external factors, i.e. things you do not have control over but nevertheless must respond to.
This SWOT template is also useful for understanding how the internal and external factors of the analysis relate to each other. Strengths and Opportunities represent things that have the potential to be helpful or beneficial to your business, while Weaknesses and Threats represent things that could harm your business.
It’s easy to spend time focusing on the positive aspects of your business and the marketplace (i.e. the left column of the SWOT matrix), and many business owners have a tendency to put a great deal of their energy toward improving their strengths and capitalizing on opportunities. Performing a SWOT analysis, however, forces you to confront the negative factors that may be at play, allowing you to better prepare for unexpected challenges. This is what makes it such an essential tool not just for profit-based companies and corporations, but also for non-profit organizations, government and community groups, and even individuals.
Before You Begin
SWOT analysis consists of making a thorough list of all your strengths, weaknesses, opportunities, and threats. Because these factors undoubtedly exist across multiple areas of your business, it’s vital that you assemble a team of collaborators who together can cover all the arenas of your business.
For example, the marketing and sales teams will likely be able to address the strengths of your product or services, while media buyers may have insight into the overall market landscape. The accounting team can speak to your strengths and weaknesses with regard to resources and investments, while the supply chain team can provide information on availability and pricing of raw materials. For this reason, it’s crucial to solicit input from a breadth of managers, employees, and even customers.
Some companies may prefer to get together in one room for a few hours to brainstorm ideas. Others may want to have each team or division fill out separate SWOT analysis templates, which can then be compiled together to form an aggregate matrix. Small companies or individuals may should be especially careful about maintaining as objective a view as possible, even though it may not be possible to get a wide range of people’s inputs. Small companies in particular can benefit from consulting with a business coach to act as a neutral third party and help ensure an honest appraisal.
No matter how you choose to compile your SWOTs, it’s important that everyone involved be prepared to devote significant time and effort to the process. After all, the future of your business is at stake. This isn’t something you should rush through at 4:40 on a Friday afternoon.
These are the internal factors that give your business an advantage. Strengths can be anything from your products and services, to the unique skills of your team, to your physical location. To ensure you cover all your bases, ask yourself a number of questions:
- What are the best features of your product or service?
- What do your customers get from you and only you?
- Who are your superstar team members? What sets them apart? Knowledge, credentials, experience, education, skills – or a combination of all of the above?
- What assets – both tangible and intangible – give you an advantage? These can include capital, credit, customer base, or intellectual property.
These are the internal factors that potentially put you at a disadvantage. Some of these may be easy to change, while others will take more work to shift.
- What aspects of your business limit your competitive edge?
- Where does your product or service fall short compared to your competitors?
- What resources – both human and capital – are you missing in order to operate at full capacity?
- Is your location less than ideal?
Unlike strengths and weaknesses, opportunities represent external, positive factors. These are things that you don’t have control over, but nevertheless can benefit your business.
- What gaps exist in the marketplace that you could potentially fill?
- Have there been recent industry-wide innovations or growth opportunities?
- Have there been local or state legislative changes that benefit your company, such as tax breaks or other incentives?
Because they represent external factors that you have no control over, making a list of threats can feel daunting and overwhelming. However, it’s important to understand how these can affect your business so that you can prepare for every contingency.
- Who are your primary competitors? Have they taken any actions lately that could cut into your business?
- Have there been any legislative changes that could restrict your business activity?
- Has there been unfavorable press coverage about your industry or related market trends?
- Have shifts in consumer behavior or attitudes had an effect on your business or industry?
- Are there potential limitations on raw materials or supplies that could affect your productivity?
Putting It Together
Once your team has finished listing all your strengths, weaknesses, opportunities, and threats, it’s important to organize the items in each group according to priority or severity. Ranking the individual items on each list in order of importance helps ensure that you can appropriately compare the groups. For example, you may find that you identified half as many weaknesses as strengths. But if one of those weaknesses is that your business is almost completely broke, that should outweigh most of your strengths.
Performing a SWOT analysis should represent the first step in a long-term, strategic plan for your business. Depending on your needs, this could take the form of an aggressive performance improvement plan or a new operating strategy to help prepare for various contingencies down the road.
A great way to start developing an actionable strategy from SWOT is to compare your strengths and weaknesses with your opportunities and your threats. How can you apply your internal strengths to capitalize on external opportunities or guard against threats? How can you minimize your weaknesses by taking advantage of opportunities? How do your strengths protect you against threats?
You may also want to spend time working on improving your internal factors (i.e. strengths and weaknesses). How can you do what you’re doing well even better? What are some short-term solutions to minimize your weaknesses? What should you focus on in the long run? Hiring new talent? Investing in your current employees? Adding new features to keep up with the competition?
SWOT is an essential tool for any business because it forces you to be honest about the internal and external factors impacting your operations. This honest appraisal will help you develop the most effective strategies to grow your business, continue to innovate, and provide a valuable experience for your customers. If you’re looking for other ways to enhance your productivity, check out Ace-up’s team of business coaches, who can help take your SWOT analysis from theoretical exercise to real, actionable business strategies.