Per tradition, we like to kick off a new period with a SWOT analysis as we consider our goals and look for new opportunities where we can expand our reach. While some may find this task tedious or feel they don’t have time for it, we always try to emphasize to our clients and fellow small and self-employed business owners the importance of making time for their own SWOT analysis.
SWOT analysis is actually a rather simple task. It consists of measuring the four major factors that impact a business – Strengths, Weaknesses, Opportunities, and Threats – broken up into two groups – Internal and External factors:
- Strengths are internal factors that make your business unique, competitive, and create some type of value. They may include special skills, proprietary technology, or even a great location.
- Weaknesses are internal factors which put you at a disadvantage and could be improved upon in some way, such as obsolete equipment, heavy debt, or lack of a clear strategy.
- Opportunities are external market factors which may allow your business to grow, gain more customers, or impact you in another positive way. Examples may include a sudden shift in market preferences or lower interest rates.
- Threats are external market factors that may create obstacles or limit your ability to succeed. Included might be population shifts, economic downturns, or an increase in competition.
Outlining these factors in your business strategy has a number of advantages. First, by writing down each of these issues you are forced to consider why and how each strength, weakness, opportunity, and threat actually matters to your business. Second, it serves as a visual representation of your business’s current position and situation. This can allow you to more clearly draw parallels across the four main factors. For example, you may not have realized that your business possesses an ideal strength for acting on a particular opportunity or that some of your weaknesses put you at increased risk for external threats. It also helps prevent you from focusing too much on one factor. It’s not uncommon for business owners to ignore external factors and only focus on their internal operations until it’s too late.
Ultimately, a SWOT analysis will help you refine your business’s strategy, work more efficiently, discover new opportunities, better manage risk, and remain competitive for years to come. As you plan out new goals or work towards existing ones, use this simple framework to help you get there.