How to perform a SWOT analysis - Definition and explanation
Many businesses will miss doing a SWOT analysis. This key step in your business plan and analysis will help give you a strong foundation of your business’s strengths and weaknesses!
Some business owners don’t know what a SWOT analysis is, or how to properly perform one!
First, we’ll explain what a SWOT analysis is, then the steps you need to take to properly perform each step
What is a SWOT analysis?
In simple terms, a SWOT analysis is a table you use to help organize your strengths, weaknesses, opportunities and threats for your organization and business projects!
Strengths and weaknesses are internal factors (within the business) that will affect the success of your business success
Opportunities and threats are external factors (outside of the business) that will affect your business success
Now we’ll explain what factors too for each category
How do you perform a SWOT analysis?
There are some SWOT templates available that you can use to help you organize your thoughts and factors!
But a simple pen and paper will do the trick (or a document will work as well)
First, be sure to write the following headings with space to write/ type below them
- Strengths (internal)
- Weaknesses (internal)
- Opportunities (External)
- Threats (external)
Now go through each heading and note down your factors for each category.
Strengths (internal factors)
In this category, name internal factors that will make your organization or business project successful. These are factors that you can control or have an influence on.
When filling out your strengths ask these questions:
- What do you do really well?
- What resources/ assets do you have that will help you succeed?
- What do customers love about your brand/ organization?
Examples of strengths could be:
- Customer service
- Strong brand
- Unique technology/ product
- Competitive advantages
Weakness (internal factors)
You want to list down internal factors that may cause your business to fail. You want to list these out as it will help you give factors that you can try and minimize to maximize your chances of success!
Examples of weaknesses could be:
- Not enough capital
- Lack of experience
- Bad location
- Resources
Be sure to answer the following questions when figuring out your weaknesses:
- What areas of your business operations need to be improved?
- Do you have all of the resources and assets?
- Is there something your business doesn’t have?
- What do your customers think of your business?
Opportunities (external factors)
Opportunities and threats are external factors for your business. This includes environments, trends, substitutes, market opportunities etc.
Opportunities are factors that will help your business grow! For example, say your a real estate agent, how is the economy doing? Are people able to afford houses? If the economy is going well and more people can afford houses, this is an opportunity.
Other examples of opportunities are:
- Rules and regulations
- Economy
- Upcoming technology/ products
- Suppliers
Questions to answer when figuring out your opportunities:
- Are there any rules or regulations that will benefit my company?
- Any upcoming events you can use to help you?
- Does your product or service benefit from the current economy?
- Did any competitors go out of business?
Threats (external factors)
The opposite of opportunities, threats are external factors that will restrict your business’s success. For example, the government implements a new rule that directly impacts your product or service. Since this will have a negative impact on your business, this is a threat.
Examples of threats are:
- New government rules and regulations
- New competitors to the market
- New substitute products
- Poor economy
Answer the following questions:
- Are there any new competitors coming to the market?
- Will the current economy affect the sales of your business?
- Are there new products that will replace yours (substitutes)?
- Have there been any new rules or regulations that have a direct impact on your business?
Why a SWOT analysis is important?
Once you’ve completed your SWOT analysis, you can see what exactly you can enhance and what areas you need to improve. You want to maximize your strengths and opportunities, and minimize weaknesses and threats.
Since you know what exactly has an influence on your business, you can plan more effectively.
Closing thoughts
A SWOT analysis should never be skipped! You should perform a SWOT analysis every so often to see if anything has changed (especially for threats and opportunities).
What wasn’t a threat before, could be a threat in several months. Same with opportunities, what was an opportunity before could become a threat later on.
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