As a small business owner, you make tens (maybe even hundreds) of decisions every day—how to handle a specific customer service problem, where to store excess inventory, how to reroute a shipment gone wrong, etc. Most of these, you probably make from years of experience and gut instinct. But what about when it comes to the big decisions—especially when they may mean venturing into an uncertain future?
With well-worn strategic planning that takes into account internal and external factors, SWOT analyses can help you make the right call when it comes to big business decisions and optimizing strategic management.
Read on for a breakdown of how to conduct a SWOT analysis, a template your business can use, and an example to help you get started.
Unlock Your Business’s Potential with a SWOT Analysis
A good SWOT analysis covers your business’s strengths, weaknesses, opportunities, and threats honestly. Its primary goal is to help your business be fully aware of all the variables involved in making important business decisions.
While the reasons for running a SWOT analysis vary, there are a few times when you definitely should perform one. For example, you should always perform a SWOT analysis before committing to any big changes to your processes or business as a whole—things like internal restructuring, policy changes, examining new initiatives, and changing course once a plan is already underway.
Why SWOT: Understanding the Benefits
Regularly evaluating your processes through SWOT analyses ensures that you are operating at optimal efficiency and charting the right course. At ground level, this takes the form of overall improved decision-making, a better understanding of your market, and increased chances for success—not to mention raising your bottom line.
Improved Decision-Making
Unfortunately, not every decision can come down to a science, carefully calculated using primary variables to piece together the most likely desired outcome and how to get there. However, conducting a SWOT analysis gets you as close as possible. You’ll follow a step-by-step procedure based on logic, reasoning, and research instead of just relying on gut or guessing. This allows you to uncover the strengths you should play to, opportunities to take advantage of, and factors that threaten you.
You’re essentially giving yourself the gift of the big picture before you dive in and start making massive changes. This allows you and your team to make well-informed decisions that will play out in your favor.
Better Understanding of Your Market
One of the major benefits of a SWOT analysis is that it helps you better understand your market. Evaluating your business from every angle, including external resources, allows you to more accurately grasp your place in your market—who you’re catering to, who your competitors are, etc. Clearly understanding your external environment should be one of your main SWOT analysis focuses.
Increased Chances for Success
Most importantly, SWOT analyses increase your chances for success by helping you to better understand your business and the competitive advantages you possess. Learning your strengths helps you capitalize on them and use them to confront opportunities and threats. Understanding your weaknesses tells you exactly what’s holding your business back, which allows you to better allocate resources.
A Closer Look: The Four Components of a SWOT Analysis
When conducting a SWOT analysis, there are four main components:
- Strengths
- Weaknesses
- Opportunities
- Threats
It’s important to note that threats and opportunities often refer to external sources while weaknesses and strengths typically cover internal ones.
Strengths
Your company’s strengths are advantages that are unique to you. Is your legal team trained in multiple types of litigation? Is your dental staff bilingual? Are you bigger or smaller than other competitors? Are you able to pivot or adapt quickly as a result of being smaller, or able to take on larger (or multiple) projects because you are bigger? Think critically about unique advantages that make your business successful and why.
Weaknesses
When it comes to internal weaknesses, be fair but honest. Maybe your staff is well-equipped, but are they relatively limited in experience? Is there a target demographic you’re not able to reach because of your messaging? Do you have recurring issues with quality control? Other weaknesses could be more general—too much demand, high overhead, poor bookkeeping, or problems with your cash flow. When evaluating this section, keep in mind standard practice, relativity to competitors, and industry performance.
Opportunities
Your opportunities will often tie into your strengths. For example, perhaps out of the twenty dental practices in your area, yours is the only one that can provide bilingual service— consequently, you have the unique opportunity to serve a key demographic that other practices can’t serve the same way. Maybe because your team is smaller than others in the area, you are able to give clients a more personalized experience. Perhaps your product is already cheaper than others on the market, you have particularly loyal customers, or have seen a rise in customer demand for a specific product.
Threats
Finally, you need to assess potential threats. Are your strengths easy for other companies to exploit or develop? For example, if one of your strengths is that your staff is bilingual, consider the possibility that other businesses can help their staff gain a language skill or hire multiple language speakers. Perhaps your competitor has a product that is similar to yours, plans to open a location close to you, or has just launched a new (successful) marketing campaign.
