SWOT analysis, an overview
SWOT analysis contributes to building long term business strategies. This tool allows business owners or key decision makers to understand where the business stands. As such, conducting this exercise on a regular basis is highly recommended. It will shed some light on market conditions, business hurdles, customer demand and much more. The valuable information collected will allow the business to avoid some drawbacks that could have a deep impact on its growth or even its survival. But what exactly is a SWOT analysis? Why does it matter even more for small businesses, and what are the key components of it? We answer these questions in the following section.
What is a SWOT analysis?
A SWOT analysis is a strategic planning tool. The letters from SWOT stand for strengths, weaknesses, opportunities and threats. SWOT analyses are frequently used in marketing and strategic planning. Conducting such an analysis allows stakeholders to brainstorm and gain insight into the state of the business or a specific product. The solution covers both internal and external factors that may impact the business in the short and long term.
The importance of SWOT analysis for small businesses
Small businesses need to plan for the future more than others. With a SWOT analysis they can understand internal factors impacting their performance. These internal factors are covered by the strengths and weaknesses sections. Typically, these can be changed or controlled by the business. The SWOT analysis also looks at the outside environment with the analysis of external factors covered in opportunities and threats. These elements are usually influenced by the economic context and the evolution of demand. As such, they are often outside of the business’ control but should be considered in business decisions.
The information collected by small businesses when conducting SWOT analysis is critical for them to plan effectively for the future. An unbiased view of the analysis is key to decision making and to the overall direction of the company.
The four elements of a SWOT analysis
Let’s dive a bit deeper into each element of the SWOT analysis.
‘S’ for Strengths
Strengths are internal factors. They highlight the advantages the business has over its competition. This can be specific to a product or service or cover the overall business.
‘W’ for Weaknesses
Weaknesses are also internal factors. They show what needs to improve and any potential inefficiency holding the business back. Examples of weaknesses can be poor customer service resulting in low retention rates.
‘O’ for Opportunities
Opportunities come from the outside, and as such are external factors. Opportunities should be taken advantage of to ensure that the business runs at its full potential. Capitalising on these opportunities will place the company ahead of the competition.
‘T’ for Threats
Finally, threats represent challenges the business might face due to external factors. These are often unpredictable and can have a significant impact on the organisation’s performance. Examples of threats are fluctuations in costs of materials, changes in regulations or even natural disasters.
How to conduct a SWOT analysis, with examples
Starting a SWOT analysis can be overwhelming. Don’t let it get to you. There are some key steps and questions to be asked that will set you on your way to a successful analysis. Let’s look at those steps below as well as SWOT analysis example questions you should ask.
A step-by-step approach to conducting your SWOT analysis
SWOT analysis can be daunting, and you might not know where to start. This section will guide you through the process with some key questions you should ask yourself when conducting such an analysis.
Before anything, create a quadrant:
- On the top left corner, write the word ‘strength’.
- On the top right corner, write the word ‘weaknesses’.
- On the bottom left corner, write down ‘opportunities’.
- And on the bottom right corner, write ‘threats’.
The following step is to fill in the quadrants one by one. Here are some suggestions on how to do so.
Filling in the ‘strengths’ section
To successfully complete the strength section ask yourself what does the business do well or what is unique about it? Think about what the competition is doing, and ask yourself if there is something that you do better or if you are more profitable. Go deep and brainstorm. Reflecting on your strengths will reinforce them.
Completing the ‘weaknesses’ section of your SWOT analysis
This section, just like the others needs to be thorough. To ensure you cover all the weaknesses ask yourself what is slowing down your business? Are there any skills that are missing or any inefficiencies within your operations? Be honest and realistic.
What you need to ask yourself for the ‘opportunities’ section
When filling in the opportunity section, think about what can be improved and what external factors can help you achieve your goals. For example, there could be a new audience you want to address, or you could make use of new technologies. These should aim at expanding your business or generating profit.
Finally, complete the ‘threats’ section
Threats are not always predictable, which makes this section difficult to complete. However, business can anticipate some threats and external conditions that would hinder their progress. Ask yourself what is going on in your industry. Also look at the economic landscape and try to anticipate anything that could harm your profits. For example, is your target audience reducing, or is the competition innovating faster than you are?
More tips for an unbiased SWOT analysis
A SWOT analysis can be highly effective. Here are some tips to follow to ensure you maximise your efforts.
Work as a team
A SWOT analysis is much more effective if the work is conducted by a team rather than a single individual. This approach ensures that the results are unbiased and thorough. It will lead to brainstorming and challenge the status quo. Make sure the members of the team come from different departments or have different viewpoints.
Keep an open mind
Some results of the SWOT analysis might not be what you want to hear. Nevertheless, if they are accurate, they have their place on the quadrant. Keep an open mind and ensure that all voices are heard.
Share the results
Once everyone has shared their ideas, you can either create the clean SWOT analysis on the spot or you can assign a lead to regroup their meeting minutes and create the final version of the analysis. Whatever you choose to do, make sure you share the final outcome as well as any decision that might be taken as a result of the analysis. This will lead to more engagement and keep your teams motivated.
For more on engagement, check our step-by-step guide to creating an employee engagement survey (with examples).
If you are looking for tips on how to motivate your teams, have a look at our articles with 22 ways to motivate your teams when leading a dispersed workforce or how to develop employee engagement and motivation in the workplace.
Small businesses should not be shy about using SWOT analysis. The results might bring critical insight on the external landscape or on the internal business operations or products and services. The outcome should lead to a business plan with short-to-long-term goals that will consolidate the position of the organisation in the marketplace, maximise use of resources and tweak business’ strategies.
