How to Do SWOT Analysis for Your Business
What is SWOT Analysis?
SWOT analysis is a simple planning tool that compares Strengths and Weaknesses with Opportunities and Threats to create an action plan. Strengths and weaknesses are internal to the business or individual being analyzed, while opportunities and threats are external factors.
While SWOT analysis can be used for personal development, it's most commonly used as a business planning tool.
SWOT analysis is the Swiss army knife of business planning tools because it can be used for so many different planning purposes. For small businesses, for instance, SWOT analysis can be used for:
- A nice quick way to examine a small business idea
- As a springboard for annual business planning
- As the basis of a marketing action plan
- As a starting point for business contingency planning
- As a tool for involving staff/employees in business planning – e.g. solving particular problems or achieving particular business goals
- As a self-evaluation tool for how you're doing managing staff or running your business
How to Do a SWOT Analysis
A SWOT analysis is organized in a matrix/table form with two rows and two columns as follows:
Row 1: Internal Factors
The first row represents factors internal to your organization for which you have some degree of control. These may be listed in column one or two depending on whether they are positive (strengths) or negative (weaknesses).
- Your financial situation (income, cash flow, debt, investments, etc.)
- Your market share
- The relative skills of your employees and/or contractors
- Your physical premises, location, equipment, etc.
- Assets such as patents or copyrights
Row 2: External Factors
The second row represents factors external to your organization for which you typically do not control.
Again, these may be listed in column one or two depending on whether they are positive (opportunities) or negative (threats). For example:
- The state of the economy and of your particular industry
- Your market share and the possibility of increasing (or decreasing) competition for your products/services
- Workforce stability – can you retain or hire employees or contractors as needed?
- Regulatory changes that may affect your business
- The ability to obtain financing (changing interest rates, increased loan requirements, etc.)
Fill in the boxes, according to the specific purpose of your SWOT analysis. Once you have the table complete, use it to create a strategy or strategies that will make your business more competitive.
You can use these questions as a thinking/discussion guide:
- Do strengths open any opportunities?
- How can we convert weaknesses to strengths?
- What do we have to do to use opportunities?
- How do we best neutralize threats?
Don't forget to write the answers to these questions down!
As you'll see in the SWOT Example, Writing down the purpose of the SWOT analysis can help you stay focused.
Adding a short results section at the end tells you what the next step or steps are.
Other SWOT Examples
These SWOT analyses are overviews of these particular companies, not SWOT analyses that focus on a particular aspect of a business’s operations.
SWOT Analysis Tips
Always choose a specific purpose for your SWOT analysis. Otherwise, you'll just end up with a bunch of generalizations that won’t provide any direction for an action plan.
Realize that SWOT analysis is a subjective process; different groups of people may come up with different SWOT analyses for the same stated purpose or a single person may come up with different SWOT analyses for the same stated topic at a different time.
For this reason, SWOT analysis is not the be-all and end-all of business planning; it's best as a planning starting point for small businesses and/or used in conjunction with other business planning tools, such as PEST analysis which can help to ensure that you don't overlook external factors, such as new government regulations, or technological changes in your industry when looking at opportunities and threats.
- Quick-Start Business Planning for Small Businesses
- Business Contingency Planning Guide
- Harness the Power of an Advisory Board
- Create a Business Action Plan for Success
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- How to Write a Mission Statement