SWOT analysis is a very simple way to take a good look at your business, the marketplace or industry you work in and the external factors that affect your business. SWOT analysis will help you to see how well you are positioned and the changes you might want to consider to prepare for business growth and ultimately success.
So what does SWOT stand for? – Strengths, Weaknesses, Opportunities and Threats.
Typically a SWOT analysis would be done before you even get to your business plan. It will help to identify the areas that you know most and least about in your business, the products and services you provide, your competitors, the market place and your external environment. Once a SWOT exercise has been done you can then spend a bit more time reviewing this information and strengthening your business by preparing a business plan that tightens up on the areas that you know or understand least and most about.
SWOT analysis is something that you can do on your own although a business coach or mentor will help to draw out all the information you need and discuss ways you can achieve positive changes in your business moving forward. Be prepared to make lots of notes and take some time away from your computer and phone in order to do this, working on it section by section starting with.
Strengths – look at the internal factors of your business, tending to look at the present.
What makes your business strong? It could be how long you’ve been in business, your experience, your existing loyal customer database, your products/services, your customer care standards, pricing, profitability, quality, service level agreements, your reputation, your financial security, do you have unique selling points that are immediately identifiable to your target market, are you able to sell to a niche group of people, is demand high for your product/services, do you have outstanding staff, consistent performance or an established infrastructure?
Recognising what makes you strong will also identify your key marketing messages. Why people do and should buy from you over your competitors.
Weaknesses – look at the internal factors of your business, tending to look at the present.
Where are the pain points in your business? Are you restricted on the areas you cover? Is cash flow critical when it comes to agreeing to large contracts and the longer payment terms they wish to pay by? Have you a small team with one or even a few key members of staff? Do you have limited control over product delivery dates? Are you reliant on third parties to deliver a service for you? Could your pricing, product, placement or promotion be weak points in your business?
Recognising what makes your business weaker will identify why people don’t always buy from you and what edge your competitors have over you. How can you turn these weaknesses into strengths? Better contracts with your suppliers maybe? Staff training? Better credit control or more finance options?
Opportunities – look at the external factors of your business, tending to look at the future.
Could you have the chance to build affiliate marketing with another company or organisation where there is a synergy in target markets? Is there an area in business where you could launch a new product/service? Maybe you could negotiate an agency or distributor deal for products that are not on the market.
Companies that are able to adapt and change to the opportunities generated by external factors will find themselves in a current and engaged marketplace e.g. companies without a digital presence will struggle to sell when their current lifecycle is influenced by the younger generation who are now influenced heavily by digital media and tend to buy online.
Threats – look at the external factors to your business, tending to look at the future.
Is new technology a threat to your business? Does the competition have a new product of service that makes yours less current? Is something happening in the economy or legislation that could have a detrimental effect on your business? Is seasonality something that affects your business? Does politics/society/culture/trends have any bearing on your business?
A good example of how trends can affect a business is in the food industry when people are looking for food with less fat/sugar/salt. If your product doesn’t adapt to current trends or requirements you may find that demand dwindles and so does your profit.
Taking time out of your business in order to evaluate your Strengths, Weaknesses, Opportunities and Threats is something businesses rarely do other than when they first start out but businesses change all the time. Often it’s when businesses feel that they’ve lost substantial market share or when a new competitor, who’s done their research, comes along and starts pinching your customers that they feel the need to re-evaluate what they are doing.
Undergoing SWOT analysis can enable you to:
- – foresee the problems a change in the economy can bring to you
- – identify opportunities that may generate money from new income streams
- – strengthen weak areas in staffing or service levels and
- – continue building and promoting your business strengths
All of which will put you in a much healthier place from a business perspective.
Use SWOT analysis on a regular basis for business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports to help you make sound business decisions.