You may have a great idea for a business, but how will you know whether it will be successful?
Having a thorough understanding of your company within your market, industry or geography and how you can grow it profitably is important for any business owner. Not just for large companies, businesses of all sizes can benefit from engaging in an exercise that thoroughly evaluates all the positives and negatives, so that you can get better at the things you’re good at — and make plans to improve the things you’re not — while also looking towards the future.
What Is a SWOT Analysis?
A SWOT analysis is an exercise that helps you better understand your business by evaluating internal factors (Strengths and Weaknesses) against external factors (Opportunities and Threats).
Internal factors generally include the things that perhaps made you create the business in the first place, such as your own skill set or access to particular products and services to sell. These are generally internal, while external factors include the overall market, consumer preferences, and competitors. A traditional SWOT analysis takes your strengths, weaknesses, opportunities, and threats and organizes them into a list or a 2×2 table:
Why Should You Conduct a SWOT Analysis?
A SWOT analysis represents a simple, graphical view of your business. You can perform it for the business as a whole, or you can conduct individual SWOT analyses for your different product groups, service lines, or locations.
When you’re brainstorming new ideas or struggling to understand why certain approaches did not work, you can always refer to the SWOT analysis for guidance. For example, if you are considering presenting your product to a new customer group, you can run a new SWOT analysis, or look to an older one to see whether you are in a good position to do so. You could also use it to identify outside factors that you will need to plan for.
Who Should Conduct a SWOT Analysis?
For smaller companies, a SWOT analysis is generally performed by the business owner alone. However, outside input from lawyers, accountants and other professionals could also be helpful. Many businesses prefer to keep SWOT analyses more private, as sharing fundamental strategy or core insights with employees could lead to risk. However, for more thorough insights into your business, input from a diverse group of people can contribute perspectives you may not have considered in the past.
How Do You Do a SWOT Analysis?
Create your grid (or list), then start with Strengths. These should generally be easier — strengths are why you went into business in the first place. rThen poceed to each section. Answering questions could be helpful to get the ideas rolling. Here are some suggestions.
- What are you really good at?
- What does your company do really well?
- Is there something unique about your products and services that no other company has or does?
- What are your most profitable products or services?
- What are some current challenges to your company’s products or services?
- What skill sets, people, assets or resources do you lack?
- What are your biggest costs or liabilities?
- In what areas can you improve?
- Are you currently working on something that will roll out to customers and be potentially profitable?
- What external conditions exist that can serve as an opportunity for your business?
- Are there new audiences or markets you could sell to?
- Is there new technology or processes you could use to streamline your business?
- Is it possible to upsell or cross-sell to your existing customers?
- What external conditions could damage your company’s success?
- Do you know who your competitors are and what they excel at?
- Are there changes happening in your industry or even the economy as a whole that could challenge your success?
- Is your target market shrinking? Are they still willing to pay for your products and services at the price point you are currently offering?
The answers to these questions, of course, do not need to be perfect. You can start this process one day, and pick it up the next. Sometimes walking away and re-visiting the SWOT analysis with a fresh perspective can expand your thinking and provide further context.
A SWOT analysis is not just an exercise for large companies. Companies of all sizes can certainly benefit, and the document can be updated on a rolling basis as business conditions and the company’s people and products change.
Jake Wengroff writes about technology and financial services. A former technology reporter for CBS Radio, Jake covers such topics as security, mobility, e-commerce, and IoT.
Business.com – Why You Need a SWOT Analysis for Your Business