If you’re a business owner vying to get your business up and off the ground, conducting a SWOT analysis is a fundamental starting point to ensure long-term success.
A rudimentary process in the corporate world, this analysis is a vital resource for assessing the internal and external factors facilitating or hindering your business’s potential for growth and profit.
Conducting a SWOT analysis is a practical yet incredibly effective tool for evaluating your company, regardless of whether you’re just starting or have climbed to the likes of a multi-million dollar enterprise.
What is SWOT Analysis?
As we briefly touched on above, the ‘SWOT’ in SWOT analysis stands for strengths, weaknesses, opportunities and threats.
These evaluations have both broad and narrow scopes in the sense that they can be applied to an entire company or organization or an individual project within a single department.
SWOT analyses are most commonly used at the more general organizational level to establish what is and isn’t working within a business and how well a company aligns with its growth trajectories or predetermined success milestones.
You can use a SWOT analysis to help highlight your company’s strengths concerning competitive and inherent advantages.
You can also use the findings to discover and reduce any internal or external risks for failure by gaining insight into what needs improvement and adjusting to compensate or supplement what you lack.
Essentially, a SWOT analysis allows you to construct comprehensive, well-positioned strategic planning objectives to set your business apart from competitors and establish a unique place in the market.
Breaking Down SWOT in Detail
Now that we have a basic understanding of a SWOT analysis, let’s delve into each specific component’s details.
The concepts themselves are relatively straightforward. However, we will explore them in greater detail below.
The ‘S’ in SWOT stands for strengths, which encompasses the approaches, practices and qualities that your organization performs particularly well or in a manner that breaks you away from the pack and sets you apart from competitors.
Your organization’s strengths can comprise many things, including specific company attributes, a unique selling proposition or a particular product or service line that is especially desirable or popular.
That said, it could also be the particular people within your company, in other words, literally your human resources, that set you apart through their expertise, prowess and superior abilities.
As the beloved 1980’s sitcom The Facts of Life taught us, “You take the good, you take the bad. You take them both, and there you have. The facts of life.” Except, in the context of discussing SWOT analysis, the good is your strengths, and the bad, unsurprisingly, are your weaknesses, or the ‘W’ in SWOT.
It’s crucial to be honest! Only then will the SWOT analysis be the most valuable. Like strengths, weaknesses are inherent features of your business.
Uncovering your weaknesses is a healthy exercise in the activity of self-awareness.
It’s the process of holding a figurative magnifying glass up to your business and asking, what is holding this company back? What are areas that need improvement, and what factors are hindering our journey to success?
Examples of weaknesses may include internal factors, such as budgetary or financial limitations, a shortage of skilled workers, or a lack of advantageous resources or technology.
This element can also apply to understanding your competitors’ weaknesses to see what they may fall short on and adjust your strategy accordingly to meet these particular needs.
We have now reached the ‘O’ of SWOT, which stands for opportunities! These signify positive trends that can present new possibilities for your business.
They typically arise as external opportunities in the form of industry changes, progressions on the competitive landscape, or potentially legal changes within your specific industry that work to your benefit.
Opportunities are external factors in your business environment that are likely to contribute to or facilitate your company’s success.
For example, external opportunity factors can include overall market growth or trends arising that encourage customers to buy more of what you’re selling.
Finally, we’ve reached the ‘T’! Threats are factors out of your control existing in the external environment.
These encompass all elements that may pose a potential risk to either the organization itself or the potential for its success or growth.
Examples of threats could include new, emerging competitors, alterations of regulatory laws, financial risks, changes in consumer attitudes towards your business, negative media or press coverage, and anything else that could jeopardize the future of your business or a project’s success.
It is crucial to gather as much information as possible regarding threats to prepare your business to confront or combat any challenges that may arise.
This data could serve as a crucial element in decision-making and various risk assessments that drive your overall business strategy.
How to Conduct a SWOT Analysis
There are several ways to conduct a SWOT analysis effectively.
Most commonly, SWOT analysis is performed using a grid-like matrix comprising of four quadrants, one to represent each element.
This structure provides a straightforward visual that highlights which elements are internal and external factors. It also displays a comprehensive collection of data in a form that is easy to read and communicate.
Whichever format you choose, each specific element will enlist a specific set of inquiries to address.
Below, we will highlight examples of such questions.
- What qualities make your business or product superior to other competitors in your industry?
- What are your most positive brand attributes?
- What do customers love about your company or product/service?
- What is your unique selling proposition?
- What resources do you have that your competitors don’t?
- What could your business do better?
- What are your most negative brand attributes?
- What are the biggest obstacles/challenges in your current sales funnel?
- What resources do your competitors have that you don’t?
- What issues or complaints are most often mentioned in negative reviews?
- What improvements can be made to your company’s customer support, onboarding and sales processes?
- What key messaging best resonates with your target audience?
- Which advertising and marketing channels, be it print, digital marketing, or social media campaigns, exceeded your expectations? Why was it so effective?
- How can you further engage your most vocal brand advocates?
- Are you utilizing departmental resources as effectively as you could be?
- Are there potential competitors that could enter your market?
- Could future technological advancements alter how you conduct your business?
- Is consumer behaviour changing in a way that could negatively affect your business?
- Will suppliers consistently be able to supply the materials or resources you need at the price point you need?
- Are there emerging market trends that could become a threat to your business’s operations and success?
How to Use Your SWOT Data
Once you have completed all four components of your SWOT analysis, you’ll likely be face to face with a laundry list of actionable measures.
These ventures will lay the groundwork for accomplishing various objectives, including supplementing your strengths, addressing your weaknesses, utilizing all available opportunities and mitigating any potential external threats.
That said, it’s best not to get ahead of yourself and leap into action too quickly.
Instead, the best approach is to perform strategic planning to establish connections between the various elements. If you opted to use the matrix model, this is the perfect opportunity to illustrate any associations between the quadrants visually.
For instance, could you utilize some of your pre-existing strengths to open up or foster opportunities? Alternatively, would combatting and eliminating some of your weaknesses open the door to even more new opportunities?
From there, you’ll need to cut down and prioritize your various ideas to be able to dedicate the necessary time and money to address those considered to be most relevant and significant.
Arguably, mitigating threats will be the most challenging. Since most threats are external, there is only so much you can do to minimize potentially harmful factors that are out of your direct control.
In this sense, every threat will be different. That said, using the data compiled from your SWOT analysis will provide you with insights into the specific threats facing your business.
Monitoring these threats should be among your top priorities regardless of how little control you have over them.
Performing a SWOT analysis is one of the simplest yet most effective tools to establish a productive perspective of where a company is and where it could potentially go.
While it may seem basic, identifying your strengths, weaknesses, opportunities, and threats is an action repeatedly performed by both first-time business owners and monopolies alike.
This critical information allows you to build on what your business does well, address what it’s lacking, identify and minimize potential threats and take the most significant advantage of every opportunity and chance for growth and profit.
Not only are they beneficial from an organizational development standpoint, but these key indicators can also supply a greater understanding of your competitors and broader market share, providing valuable insights into how best to position your business advantageously.
Ultimately, for a SWOT analysis to be effective, you need to be brutally honest, set realistic expectations and get ready to put in the hard work. As long as you follow those primary principles, you’re on your way to success!