What are your business’s strengths and weaknesses? What about your opportunities and threats? If you aren’t able to effectively answer these questions, you need to conduct a SWOT analysis.
A SWOT analysis can help you evaluate your business, institute appropriate changes, and improve operations. Learn what a SWOT analysis is, find out how to conduct one, and see an example below.
What is SWOT analysis?
A SWOT analysis helps you determine your business’s strengths, weaknesses, opportunities, and threats. SWOT analyses identify internal and external factors that influence your business’s successes and shortcomings. Use a SWOT analysis to establish goals and a small business growth strategy you and your employees can follow.
You should create a SWOT analysis when starting your business. And, you should update your SWOT annually.
Most of the time, you will create a SWOT to analyze overall business operations. But, you can also create a specific SWOT analysis to identify positives and negatives associated with a particular product.
Here is the SWOT meaning:
Strengths and weaknesses both deal with the internal workings of your business while opportunities and threats are external. Take a closer look at each attribute of the SWOT analysis of a business.
The strengths portion of SWOT planning looks at things your business is doing well. Your business’s strengths put you ahead of your competition, giving you the upper hand when attracting consumers.
Strengths also include valuable employees who work for your business. A skillful, kind, and knowledgeable staff differentiates successful and unsuccessful businesses.
Here are some examples of business strengths:
- Loyal customers
- Hardworking employees
- Unique brand
- Original products
- Low prices
Once you identify your business’s strengths, cater to them. See how you can highlight your strengths when marketing or developing new offerings.
Your business’s weaknesses are the areas where your business falls short of success. These are aspects of your business that prevent it from surpassing competitors.
Weaknesses include things your company lacks and limitations you face when operating. Your competitors do a better job in these areas than you do.
Your business might be weak in some areas by having too broad a vision, mission, or brand. If your business is all over the place, you won’t be able to resonate with your audience.
Here are some examples of business weaknesses:
- Low profits
- Ineffective systems
- High turnover rates
- Costly processes
- Lack of ingenuity
When you determine your business’s weaknesses, you and your employees should come up with methods to improve them.
Aside from internal things your business is doing right and wrong, you will also have external opportunities to give your company a boost. Opportunities are industry- or market-related factors that give your business an advantage over your competition.
Your business will face opportunities that depend on what’s happening outside of your business. Some opportunities might be temporary while others are permanent.
Opportunities might make it possible to sell more products or services. Or, they can improve your chances of attracting new customers.
Here are some examples of opportunities:
- Lack of competition
- Demand for your offerings
- Market growth
- Online presence or coverage
- Sales tax holiday
Make sure to take advantage of opportunities. If opportunities are only temporary, come up with ways to cope after the opportunity passes.
Just like opportunities are often out of your control, threats are too. Threats are external factors that can harm your business.
Threats might come from new or improved competitors. Or, they can stem from weaknesses. For example, you might receive negative reviews as a result of a disengaged employee.
You might also see changes in the market that result in a lack of demand. A recession might lead to a lack of consumer spending.
Threats might also be due to the environment, like droughts, hurricanes, or severe blizzards. Like opportunities, threats can be temporary or permanent.
Here are a few examples of business threats:
- Drought that destroys your crops
- New competitor with lower prices
- Market decline
- High unemployment rates
- Negative press
Although you can’t control threats, you can choose how you react to them. Brainstorm ways to adapt your business when facing threats.
3 Tips for conducting a SWOT analysis
You need to create an effective SWOT analysis. After all, you want to use your SWOT analysis to make positive changes in your business. Use the following tips to help.
1. Create a SWOT analysis template
Before you begin your SWOT analysis, you need to be prepared. Create a SWOT analysis template to prevent disorganized information. Organizing your information can also help you to compare current and past SWOT analyses.
Generally, a SWOT analysis is set up as a square divided into four parts. Label the quadrants “Strengths,” “Weaknesses,” “Opportunities,” and “Threats.” After creating your template, list elements of your business under the corresponding category.
Here is a SWOT analysis template:
2. Involve your employees
Have SWOT planning meetings where employees can contribute. This way, you will get more ideas flowing. You can’t possibly know everything that’s going on with your business. Your employees have the scoop on your company’s day-to-day triumphs and struggles. They can reveal strengths, weaknesses, opportunities, and threats you didn’t know or forgot existed.
Involving employees will also make it easier to implement changes. When employees know what’s going on, they can take the appropriate actions. And, employees may be more willing to improve on something if they were part of the decision making.
Consider hosting regular meetings to create a SWOT analysis with all your employees. Or, you might have SWOT meetings with departments, like the marketing department.
Make sure you keep the conversation going after meetings. Send out quick emails or host additional meetings so employees are involved in strategizing.
3. Use the results of your SWOT analysis
Creating a SWOT analysis isn’t going to do much if you don’t do anything with the results. Use your SWOT analysis to set goals and objectives.
Create strategies for addressing weaknesses and threats. And, uncover ways to highlight your business’s strengths and make sure you are taking advantage of opportunities.
Compare the results of your SWOT analysis to your business’s mission statement, vision statement, and business plan. If your business’s strengths don’t match your statements or plans, make changes.
You can also use your SWOT analysis to make changes to your business brand. If your strengths aren’t being displayed in your brand, include them. If one of your weaknesses is that you don’t have a clear, cohesive brand, improve it.
SWOT analysis example
Let’s say you own a homemade bakery. You want to conduct a SWOT analysis for your overall business.
Using information from your business, your SWOT analysis might look like this: