10. Mar 2020 |
How to Perform a SWOT Analysis for Your Small Business
Anyone planning to sail across the ocean would take a close look at both their ship and the weather forecast. When you’re planning a big business move, it’s important to take a look at both the structure of your business and the larger market you’re in—enter the SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and it’s a way of summarizing your biggest internal and external risks and advantages all on one page. If you have a big decision to make in business and are feeling stuck, read on for more about this versatile analysis tool.
What is a SWOT Analysis?
With a SWOT analysis, you can see at a glance what your company’s strengths and weaknesses are, as well as the opportunities and threats the market presents. An additional TOWS analysis matrix can help you see clearly how they interact with each other, giving you choices about how to proceed. While you can do one on your own, it’s a good idea to consult with team members or outside advisors as you’re doing the analysis.
Why is Important to Conduct a Business SWOT Analysis?
Often this analysis is performed to test the feasibility of a big decision, but it can also be a business analysis tool to help you find ways to expand. It’s a way to strategize; instead of focusing only on your business model or only on the market, it will help you keep both in mind. Done properly, a SWOT analysis can help you to come up with creative strategies that you might not otherwise have thought of. It can also point you back to the drawing board if there’s no logical way forward, based on the realities of your business.
What Does it Include?
A SWOT analysis is usually presented in a 2×2 grid, sometimes known as the SWOT analysis matrix. In it, strengths, weaknesses, opportunities, and threats are listed in each quadrant.
Example for a SWOT analysis:
Strengths • Strength #1 • Strength #2 • Strength #3 | Weaknesses • Weakness #1 • Weakness #2 • Weakness #3 |
Opportunities • Opportunity #1 • Opportunity #2 • Opportunity #3 | Threats • Threat #1 • Threat #2 • Threat #3 |
It’s sometimes accompanied by a TOWS matrix, which helps assess the interactions between the four quadrants, resulting in four separate strategies.
Example for a TOWS analysis:
Opportunities • Opportunity #1 • Opportunity #2 • Opportunity #3 | Threats • Threat #1 • Threat #2 • Threat #3 | |
Strengths • Strength #1 • Strength #2 • Strength #3 | Strengths-Opportunities Strategy: use strengths to seize opportunities | Strengths-Threats Strategy: use strengths to combat threats |
Weaknesses • Weakness #1 • Weakness #2 • Weakness #3 | Weaknesses-Opportunities Strategy: take opportunities to mitigate weaknesses | Weaknesses-Threats Strategy: defend against weaknesses and threats |
How Do You Write a SWOT Analysis for a Business?
- Define your objective:
It doesn’t have to be final, but it will determine the direction of your analysis. Make sure your objective is specific enough that certain parts of your business and market stand out as key players.
- Determine your internal strengths and weaknesses:
It’s often wise to consult with management employees on this one if you have them. If you don’t, take a look at your financial statements and analyse your business model to identify individual components that are working well and not working well:
- Strengths: Think about what your company does well internally that could help you obtain your goal. Do you have a quality product? A highly skilled sales team?
- Weaknesses: What weaknesses might hold you back? Do you have a lot of liabilities, or cash flow issues? Are you in a difficult to reach location?
- Determine the opportunities and threats in the market
This step might take a little longer, as it often requires market research. Looking at the market as it currently stands, try to identify what external opportunities might help you achieve your goal, and what threats might hinder it:
- Opportunities: what are the opportunities available to you in the larger market? For example, maybe you see an opportunity to target a market niche that no one in your area has captured, or maybe you’ve developed a proprietary feature on one of your products that you can license to other companies.
- Threats: what are the threats in the market? Are online businesses capturing an increasingly large chunk of your target market? Has a new technology been invented that might make your platform obsolete?
- Input your results into a SWOT matrix:
The SWOT matrix will give you a snapshot of where your business stands within the larger market. Although it won’t generate strategies directly, you may find that seeing the information side-by-side already helps you assess the risks and rewards associated with your objective. - Create a TOWS matrix:
A TOWS matrix will give you four strategies, based on how your lists in the four quadrants of the SWOT matrix interact with each other. You may come up with several different strategies for each quadrant, or you may find that one quadrant presents a more obvious and compelling strategy than the others. For example, maybe one of your strengths is that your business has strong profits, but a threat is that a new online competitor is targeting the same customers that buy from your bricks-and-mortar store. The combination of these two elements might spark a Strengths-Threats strategy of investing profits back into your business to grow your online presence.
While the SWOT and TOWS analysis models are a great way to strategize, you may find that you still don’t have the clarity you’re looking for. If your goal is complex, this might be the first step of a more in-depth business analysis. However, one of the greatest features of this style of analysis is that it can be as simple or as complex as you decide to make it. When you’re navigating a tough business decision, a SWOT analysis can be the compass you need to help steer you in the right direction.