How to create a SWOT analysis is one of the first things you learn in business school, and for good reason. Creating a well-thought-out SWOT analysis is important to run a successful and innovative business. Unfortunately, many entrepreneurs are guilty of creating a SWOT analysis to appease a professor, mentor or lender/financer, and then shoving it into a file, never to see the light of day again once it has served its initial purpose.
Much like a mission statement, a SWOT analysis should be considered a useful tool throughout the lifespan of your business. It is something that should be reviewed and modified both routinely and whenever there’s a significant change in your business or industry. Doing so will bring clarity and perspective to your unique challenges and opportunities. BUT before you can review, you must first create. If you have not yet done a SWOT, here is some information to get you started.
SWOT – Strengths, Weaknesses, Opportunities, Threats
When thinking about your SWOT, it’s important to remember that Strengths and Weaknesses are usually factors that are internal to your organization. Opportunities and Threats are external forces that can affect your organization. Here are examples of all four categories:
Strengths – Organizational and competitive advantages
- Low barrier for entry
- Low overhead – inventory on demand products
- High level of repeat clientele already established
- New software contains sophisticated algorithms to provide more targeted up-sells at checkout
- Awesome Yelp reviews
Weaknesses – Organizational and competitive disadvantages
- Low marketing budget
- Difficulty obtaining necessary paperwork to export outside of Canada
- Lack of process for managing and measuring performance of off-site sales force
- Staff keeps eating the product under guise of “taste testing”
Opportunities – External/environmental factors that you can take advantage of
- Broaden customer base and brand awareness with social media sharing incentives (discounts, contests)
- Create and offer add-ons and complementary products for best-selling products
- Design limited edition products for holiday season
- Jump on the Star Wars bandwagon
Threats – External/environmental factors that may prove detrimental to your organizational goals and success
- Our best-selling item is reliant on a single supplier. Can they meet demand in the coming year?
- Canadian dollar is rapidly declining. How will this affect profit margins and growth opportunities? Will customers turn to American competitors?
- My mom wants to move her car back into the garage this winter. May have to move head office.
For the purposes of simplification, I intentionally did not give examples in any one category that tied into another category. Many people consider Strengths and Opportunities to be paired together and Weaknesses and Threats to be paired together. For example:
Strength – Fully revamped website, which is more technologically advanced, features enhanced security measures and is rated as more navigable than the websites of our competitors. Opportunity – Train additional staff on new website CMS platform and online customer service/resolution dispute procedures to provide round-the-clock service.
This type of thinking is logical. You’ve identified your strength and the opportunities that derive from your strength. While this is smart, I also like to put a particular emphasis on matching Strengths to Threats and Weaknesses to Opportunities. Using the above example, here would be a Threat to consider:
Threat – Sales heavily reliant on technology/website. Additional funds should be set aside for upgrades within the next five years.
As another example, we have low barrier for entry listed under the Strengths category in the SWOT description above. A threat to be considered in this case would obviously be new competitors entering the market quickly and without warning. We also have Low marketing budget listed under Weaknesses. This weakness may lead to opportunities to experiment with low-cost social media campaigns.
Now that I’ve offered some tips and info to get you started on your SWOT analysis, it’s time to get brainstorming. Put down your latte and open up a new document or draw a grid with four quadrants on a napkin. Draw an S, W, O and then T, one in each quadrant, and start your list. Then re-visit the list on a monthly or quarterly basis, or as needed. Have fun!