What is SWOT Analysis and what it can do for your small business?
Running a business means keeping up its efficiency, scale, and evolve. But sometimes it’s hard to choose the right vector of movement. And here where SWOT analysis can help you out. A SWOT (strengths, weaknesses, opportunities, and threats) analysis is a planning process that helps to analyze all factors (internal and external) and build a strategy around them, overcome challenges, make the right business decision.
Little deeper in its history, this method was created by Albert Humphrey in the 1960s for a study conducted to identify why corporate planning consistently failed. Since its creation, SWOT has become one of the most useful tools for business owners to start and grow their companies.
When should you perform a SWOT analysis?
Any time would be good for the SWOT analysis to track the company’s progress but especially efficient it will be before you commit to any sort of company action, if you exploring new initiatives, rethinking inner processes, considering opportunities to scale, etc.
It’s also wise to perform a general SWOT analysis regularly to see the changes, did the company used its chance to work on some weaknesses. The analysis can show you the key areas where your organization is performing optimally, as well as which operations need adjustment.
While the business owner should definitely be involved in working on SWOT analysis, it is often helpful to include other team members too for the all angles review. Ask for input from a variety of team members and openly discuss any ideas and thoughts.
The main definitions to discuss for the SWOT Analysis are:
S – Strengths
W – Weaknesses
O – Opportunities
T – Threats
But we will discuss them in detail further in the step-by-step guide so let’s stop on the other important ones.
Factors that are essential to analyze for SWOT can be divided into 2 groups:
Strengths and weaknesses refer to them, simply put it’s – resources and experience readily available to you.
These are some commonly considered internal factors:
— Financial resources (income, funding, investments)
— Physical and Human resources (location, equipment, employees)
— Current processes (software solutions, usual workflow)
External factors are typically things you or your company can’t control, but at the same time, they can influence business dramatically. They can be connected to the opportunity or threat, but either way, it’s important to predict them to prepare the strategy or simply use them as a benefit.
Usually, they are:
— Relationships with suppliers and partners
— Market trends (new products, technology advancements)
— Economic trends (local, national and international financial trends)
— Funding (donations)
Now that we have a vision on the factors that will be used for analysis it would be right to proceed with a Step-By-Step guide on how to conduct your own SWOT analysis.
Step 1: Strengths
After forming the team which will be working on the analysis. Start by asking simple questions, “What are we good/best at?”This is a broad question, but in the beginning stages of your discussion, you should accept all answers.
Divide them on – Financial, Customer, Internal and other you can think of so it would be easier for the team to form them.
Financial Strengths: What is your most stable source of income? Maybe some service stands out from others? A particular product?
Customer Strengths: Where is your customer traffic coming from? How do the clients find you? Why are your customers choosing you over your competitors?
Internal Strengths: What do you do very well as an organization? Are you the ones pushing your industry forward? Do you have strong customer relationships or partnerships?
Step 2: Weaknesses
Next, you should ask yourself, “What are we not that good at?” or “Where do we have opportunities to improve?”
Financial Weaknesses: What is your biggest financial weakness? Maybe clients canceling the subscriptions after the trial ends. Or maybe your most used product has the lowest profit margins.
Customer Weaknesses: What are the things that your clients do not like about your service? This could be your investment products, locations, loan origination, or competitive prices for interest rates.
Internal Weaknesses: What processes are not efficient? Do you have opportunities to improve project management for opening new branches? What are your biggest challenges with employees?
Step 3: Opportunities
Look forward to the future for your company – Where are the biggest possibilities for your organization?
Financial Opportunities: What is your biggest opportunity to improve, scale the sources of the income? Like, starting a new product line, going after a new geographical market, etc.
Customer Opportunities: What could you improve for your customers? Could you improve your UI?
Internal Opportunities: What are the new initiatives that can boost up the team efficiency? Maybe new software, digital solutions?
Learning & Growth Opportunities: What opportunities do you have to leverage staff? For example, do you have cross-training opportunities?
Step 4: Threats
After identifying opportunities, it’s time to sort out the potential threats.
Financial Threats: What threats could seriously impact your financial situation? (low-cost competitors)
Customer Threats: What is your biggest concern about your customers? How easy the competitors can steal your audience?
Internal Threats: What current areas of your business might harm you later? Do you have a new product rollout soon that could potentially fail?
From each step in sort of matrix like this to make it more visual:
How to act upon your SWOT analysis?
So, you’ve finally got your hands on a completed SWOT matrix. You’ve identified internal strengths and weaknesses, as well as external opportunities and threats. You’ve begun to see your company in a whole new light.
The next step ideally would be to match your strengths with your opportunities. Next, you should try to convert weaknesses into strengths. Let’s take a look through in more detail.
Acting On Your Strengths
One of the best things about the strengths you identified in your SWOT analysis is that you’re already doing them. Simply put – acting upon your business’ strengths consists of ‘do more of what you’re already good at.
By identifying opportunities by evaluating your organization’s strengths, you should have a ready-made list of targets to aim for.
Mitigating Threats and Sorting out the Weaknesses
Anticipating and mitigating the threats identified in your SWOT analysis may be the most difficult challenge you’ll face in this scenario, primarily because threats are typically external factors; there’s only so much you can do to mitigate the potential damage of factors beyond your control.
The SWOT analysis is a simple but strong tool for building the strategy, identifying not only the weaknesses and threats but also the strengths and opportunities to focus on. It will help to make the right business decisions and defined the best options to grow.