A SWOT analysis is an incredibly simple, yet powerful tool to help you develop your business strategy, whether you’re building a startup or guiding an existing company.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths are internal, positive attributes of your company. These are things that are within your control.
What business processes are successful?
What assets do you have in your team, such as knowledge, education, and reputation?
What physical assets do you have, such as customers, equipment, cash, and patents?
What competitive advantages do you have over your competition?
Weaknesses are negative factors that detract from your strengths. These are things that you might need to improve on to be competitive.
Are there things that your business needs to be competitive?
What business processes need improvement?
Are there tangible assets that your company needs, such as money or equipment?
Are there gaps on your team?
Is your location ideal for your success?
Opportunities are external factors in your business environment that are likely to contribute to your success.
Is your market growing and are there trends that will encourage people to buy more of what you are selling?
Are there upcoming events that your company may be able to take advantage of to grow the business?
Are there upcoming changes to regulations that might impact your company positively?
If your business is up and running, do customers think highly of you?
Threats are external factors that you have no control over. You may want to consider putting in place contingency plans for dealing them if they occur.
Do you have potential competitors who may enter your market?
Will suppliers always be able to supply the raw materials you need at the prices you need?
Could future developments in technology change how you do business?
Is consumer behavior changing in a way that could negatively impact your business?
Are there market trends that could become a threat?
Strengths and weaknesses are internal to your company—things that you have some control over and can change. Examples include who is on your team, your patents and intellectual property, and your location.
Opportunities and threats are external—things that are going on outside your company, in the larger market. You can take advantage of opportunities and protect against threats, but you can’t change them. Examples include competitors, prices of raw materials, and customer shopping trends.
A SWOT analysis organizes your top strengths, weaknesses, opportunities, and threats into an organized list and is usually presented in a simple two-by-two grid. When you take the time to do a SWOT analysis, you’ll be armed with a solid strategy for prioritizing the work that you need to do to grow your business.
You may think that you already know everything that you need to do to succeed, but a SWOT analysis will force you to look at your business in new ways and from new directions. You’ll look at your strengths and weaknesses, and how you can leverage those to take advantage of the opportunities and threats that exist in your market.