A SWOT analysis is a powerful tool to help you better understand the state of your business and how to set goals. A quality SWOT analysis provides a snapshot of where you are today and what direction your business should be moving.
In this post, we’ll cover the best ways to conduct a SWOT analysis, as well as how to use the results to strengthen your business.
What does SWOT stand for?
SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is a researched documentation of all of these factors.
The first step in conducting a SWOT analysis is the most fun: identifying your business’s strengths. Strengths might include a great location, a strong online presence, or a healthy cash flow. Weaknesses are areas where your business lags behind the competition, such as a shortage of customer service staff or a weak online presence. Identifying your weaknesses is just as important as identifying your strengths because your business can take action to course correct.
Opportunities are things that could help your business grow. Maybe there’s a new market that you could tap into, or perhaps you have an idea for an additional product or service.
Threats are things that could harm your business. Perhaps a competitor moved into your area, or a downturn in the economy might hurt your sales. Threats should be taken seriously and you should have a plan for how to deal with them if they do happen.
How to identify strengths for a SWOT analysis
Hopefully, there’s a long list of things your business does well. For the purposes of a SWOT analysis, which strengths should you include? Start with the things that set your business apart from other businesses in your industry. Include anything that gives you an advantage over your competitors, especially if it’s measurable.
Some examples of strengths include:
- A unique selling proposition
- A loyal customer base (low churn, high rate of recurring business)
- Strong industry relationships
- Low overhead costs
- Proprietary technology
- Strong team member performance
Another thing to keep in mind is that strengths can be internal or external. Internal strengths are within your control, such as your team’s skills and knowledge. External Strengths are things that are outside of your control, such as your location or the current market trends.
How to identify weaknesses for a SWOT analysis
Weaknesses for your SWOT analysis should include anything holding your business back from being successful. Wherever competitors have an advantage, document it in your weaknesses.
Some examples of weaknesses include:
- Poor digital presence / Lack of brand recognition
- High customer churn rate
- Dependence on one key supplier
- Dependence on a small number of accounts
- Limited financial resources
- Lack of diversification
- High employee turnover
As with strengths, weaknesses can be internal or external. Internal weaknesses are things that are within your control, such as your team’s skills and knowledge. External weaknesses are things that are outside of your control, such as your location or a lack of inventory due to supply chain issues.
How to identify opportunities for a SWOT analysis
Opportunities are the primary areas that can help your business grow and be more successful. Think of opportunities as items that will help you grow your list of strengths.
Some examples of opportunities include:
- A new market trend
- Changes in consumer behavior
- An unserved market niche
- Technology or innovation that your business can adopt
- Relaxed government regulations
Internal opportunities are often weaknesses that you can correct, such as building relationships with new suppliers or bringing your business up to par on technology. The more you can quantify opportunities through data and business impact, the more effective your SWOT analysis will be.
How to identify threats for a SWOT analysis
Threats can hurt your business or cause it to fail. Include anything that may create an advantage for competitors or might damage your brand, customer relationships, or bottom line.
Some examples of threats include:
- A new competitor
- Changes in consumer behavior
- New technology or innovation
- Stringent government regulations
- Key personnel changes
Internal threats are things that are within your control, such as employee morale or performance of your products and/or services. External threats are things that are outside of your control, such as the current market trend or emerging competition. While there are ways to offset external threats, you may not be able to deal with them as directly as internal threats.
How to write a SWOT analysis
There are a few different ways to conduct a SWOT analysis. You can do it yourself, or you can hire someone to do it for you.
If you decide to do a SWOT analysis yourself, you can find all kinds of SWOT templates online, including for Microsoft Word, Excel, and Powerpoint. You’ll need to establish some criteria for which items to include in your analysis.
This is where many people get stuck. How do you know if a strength is worth mentioning? How do you know if a weakness is really holding your business back?
Use data. Do your competitors have larger social media followings, higher Google search results, and more traffic on their website or Facebook page? Then digital marketing is a quantifiable weakness. If close rates and deal sizes are improving with a similar size pipeline, then your sales team’s performance is a quantifiable strength.
If you suspect an emerging technology or startup might threaten your business, include data points. How much funding did the company receive? It might also be anecdotal—what is the potential competitor’s mission statement on their website? If you own a restaurant, how many others have opened or closed within your area of business. The more numbers you use to quantify each item in your SWOT analysis, the more defined action you can take to improve your business.
Take Action: Set goals after your SWOT analysis
Once you have your SWOT analysis, it’s time to take action. Don’t make the mistake of setting goals that are not measurable or achievable. Worse yet, some businesses don’t set any goals after a SWOT analysis.
You’ll likely find relationships between your strengths, weaknesses, opportunities, and threats. For example, let’s say you want to increase sales by 15% in the next year. And let’s say one of your weaknesses is a lack of digital marketing presence. A goal to increase your organic marketing leads by 25% is relevant to both items. By quantifiably improving your digital marketing presence, you’ll have more potential customers to sell to.
Strategic goals like this will give your business action items to improve weaknesses and take advantage of opportunities. One way to set goals from your SWOT analysis is through the S.M.A.R.T. method:
- Specific: Well defined, clear, and unambiguous
- Measurable: With specific criteria that you can use to measure progress and success
- Achievable: Attainable and not impossible to achieve
- Relevant: Worthwhile and meaningful, with a positive impact on your business
- Timely: Measure progress and keep yourself accountable to deadlines
Once you set S.M.A.R.T. goals, you can create an action plan so that every member of your team is working toward key performance indicators for your business.
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