How to do a SWOT analysis for your business plan
People are often intimidated by the idea of doing a SWOT analysis, not knowing that it could be both an enjoyable and extremely productive exercise. The process is almost always fairly quick and can give you a fresh perspective on the original vision for the business.
SWOT analysis defined
A SWOT analysis is a high-level strategic planning model that helps a business maximize its use of available resources to achieve its goals. Acronym, the term stands for Strengths, Weaknesses, Opportunities and Threats. In a nutshell, a SWOT analysis examines the stable and vulnerable areas of a business, as well as the options and risks that mark its path to success, and ultimately becomes the basis for developing its core strategy.
How to do a SWOT analysis
The first thing to remember when performing a SWOT analysis is to include people with different perspectives and issues in your business. You want to give everyone – from senior executives to sales reps and human resources managers – a voice. This way you will produce a well balanced strategy.
The analysis is usually performed on a model with four squares, but it can also be presented as a list with four categories. At the end of the day, it’s the content that matters.
Either way, this is where brainstorming can make a big difference. There is no need to develop at the start. In fact, it’s good to start with bullet points that represent the gist of each idea raised in the four quadrants. After brainstorming, you can sort all your ideas and prioritize them under the following headings:
This is where all of the positive attributes of the business go, both tangible and intangible. Examples of tangible assets include capital, existing customers, and technology. Intangible assets can include reputation, skills, and education. In short, this part is dedicated to the strengths and potential of the company compared to its competitors.
Obviously the opposite of strengths, this part is dedicated to areas of the business that need work. For example, lack of expertise or technology, bad location, inefficient processes, etc. The idea is to write down the areas that are pulling the business down, so that appropriate corrective action can be taken and the business can become more competitive.
Opportunities are conditions and resources that help a business thrive, such as cheap labor and recent market growth. It is also important to determine if these opportunities already exist or if you will need to actively seek them out. If so, timing is crucial.
Threats can be anything that compromises the business strategy or itself. Some examples would be negative market growth or new technology that makes the company’s existing equipment obsolete. Threats should be described and brought to the attention of decision makers for containment. Although beyond the control of the business, established contingency plans help the business survive when they arise.
SWOT analysis example
Understanding the SWOT analysis and how it works is easier with a real sample. Take Thei’s Pasta, a gourmet pasta maker and cafe in downtown Seattle. They make fresh and authentic pasta in several varieties, such as vegan, keto, and zero sugar. They are considering opening their second branch downtown. Here’s an example of what their SWOT analysis would look like:
- Experienced chef
- High traffic location
- Proven marketing strategies
- Known for innovation
- Lack of staff
- Rent increase
- Cash flow issues
- Ineffective record keeping
- Reputation of being the best pasta in the field of the first branch
- Passionate customers
- Strong market growth
- One direct competitor in the location of the second branch
- Competitor serves faster because he uses packaged pasta
- New pasta café opening soon
What happens after
A SWOT analysis is useful, but not an end in itself. You will turn it into a dynamic strategy as you glean information about the contrast between strength and weakness, and opportunity and risk. Ultimately, you need to create an actual list of milestones and goals based on their level of importance to ensure that you are maximizing resources in the most critical areas.
When assigning priority levels, every item on the list should be looked at in great detail. And you should use concrete, verifiable statements instead of vague, unquantifiable concepts. For example, “Savings of $ 15 per kilogram” is more actionable than “Higher ROI”.
All corrective actions should be applied at the level where they are specifically needed. For example, if a product is underperforming, these actions should be taken at the product level rather than being thrown aimlessly at the business in general.
Before taking any measurements, it is important to walk through the cross connections between the four quadrants of the SWOT matrix. It can mean building on existing strengths or solving current weaknesses to uncover new opportunities. While a SWOT analysis is vital for creating a business strategy, it is best used in conjunction with other tools such as USP analysis and basic skills analysis.
When to perform a SWOT analysis
A business (or sometimes an individual) will usually perform a SWOT analysis before making any major decisions such as adding a new location or opening the business to franchise. After the first round, you will test your resulting strategy and then review it alongside the SWOT analysis. The frequency of this activity will depend on the industry and the changes it undergoes.
Take the tech industry for example. Evolving faster than the steel industry, it will require a more frequent SWOT review. As the analysis relies heavily on environmental data, companies can conduct a review at any time, especially in response to key political or economic movements that could impact their organizations.
Face the facts
A SWOT analysis is not complicated, but it can be overwhelming for executives who are forced to look at the real state of their business – vulnerabilities included. But that’s no reason to look away. It could even be seen as an opportunity to improve the business. When you know what you’ve accomplished so far, you can continue to build and grow.