Any growing business needs a roadmap to help it work its way through the challenges and opportunities it’s likely to face. A SWOT analysis can help you with this, so here’s our handy “how to” guide.
What is a SWOT analysis?
SWOT stands for strengths, weaknesses, opportunities and threats. A SWOT analysis is a framework used to evaluate how closely a business is aligned with its growth trajectories and success benchmarks. It can help a business identify ways to improve as well as assess negative factors that could get in the way of success.
What does each part of a SWOT analysis mean?
Below is a breakdown of what each part of a SWOT analysis means:
- S – strengths. These are all the things your company does well and separates it from the competition. Examples could include a strong balance sheet or brand. It can also include internal resources such as skilled staff or tangible assets such as intellectual property.
- W – weaknesses. These are all the things that stop your business from performing at its best and those that your competitors do better than you. This could be high levels of debt or a weak brand, for instance.
- O – opportunities. This refers to favourable external factors that could give you a competitive advantage, whether that’s better tax rates or the emerging need for your products or services.
- T – threats. This refers to everything that poses a risk to your company or its likelihood of growth. It could include emerging competitors, rising costs for materials, or negative media coverage.
How to carry out a SWOT analysis
You can carry out a SWOT analysis by following the steps outlined below:
- Arrange each section into a table
A table format can be a good way to help you visualise your SWOT analysis. To do this, you need to arrange each of the four parts (strengths, weaknesses, opportunities, and threats) into separate quadrants (see example later on).
- Identify your objective
As your second step, it’s worth thinking about the objective of your analysis. You might be doing it because you’re thinking about launching a new product, for example, and you want a better idea of how it might perform. Having an objective in mind will help your team understand what they hope to achieve at the end of the process.
- Compile your ideas
Get your team together and then start to list ideas within each category. All ideas should be encouraged – there’s no wrong or right answer.
Think about what your business is currently doing well and what it offers that your competitors don’t. Then think about the things that might be holding you back and those that your business is not so good at. What’s blocking you from potentially achieving your goals? What parts of the business are least profitable?
You can then move on to what opportunities there are in the marketplace that could work to your advantage, as well as any threats you could face.
- Refine your ideas
Once you’ve got a list of ideas for each category, you can spend some time going through them and refining them. This will enable you to focus on the best ideas or largest risks to the company.
- Develop a strategy
Finally, it’s time to convert your analysis into a strategic plan. Come up with actions for certain team members and regroup a few months later to assess how things are progressing.
Common SWOT analysis questions
- What is the company doing well?
- What do we do better than competitors in the same industry?
- What is our unique selling proposition?
- What products are performing well?
- What products are underperforming?
- Where are we lacking resources?
- What problems are often mentioned in negative company reviews?
- What are the biggest obstacles in the current sales funnel?
- What resources do our competitors have that we don’t?
- How can we improve our customer support processes?
- What new technology can we use?
- Can we expand our operations?
- Is there any budget we could put to better use?
- What regulations are changing?
- Are any new competitors entering the market?
- How are consumer trends changing?
What are the benefits of SWOT analysis for a small business?
A SWOT analysis can enable you to identify strengths and weaknesses in the business, enabling you to account for them in your roadmap and increase your chances of success. It can also help make complex problems more manageable.
Carrying out a SWOT analysis can also encourage you to consider external factors that are often forgotten about, as well as internal ones. There are many factors outside a company’s control that can influence the outcome of a business decision and a SWOT analysis will help you to keep these in mind.
Example SWOT analysis
Below is an example of a SWOT analysis for a fictional restaurant:
|Not currently able to deliver
|Ability to open more locations
|Menu hasn’t been updated for a long time
|Potential for growth via delivery apps
|Uncertain economic environment
|Years of service
|Poor social media presence
|Expand social media presence
|Rising cost of ingredients
How to interpret and act on your results
Once you’ve carried out your SWOT analysis, your next step is to examine your strengths and see what opportunities are open to you. Using the above analysis as an example, the restaurant is well established and has affordable prices, so you might want to start advertising those facts.
You then need to tackle your weaknesses. So in the above example, you could start to focus on your social media presence by hiring someone to help you. Or you could work with your head chef to come up with a brand new menu – and then advertise it via social media.
Your opportunities segment should also throw up some actions. In this example, we’ve already mentioned expanding the restaurant’s social media presence, but there might also be the possibility of opening a restaurant in another location or using a food delivery app to reach a new customer base. Securing a business loan may give you access the capital you need to make the most of these opportunities.
You’ll also need to make a note of the threats and keep monitoring them so that you can minimise the impact they have on your business. You can’t control these threats, but being aware of them will help you to be more prepared. In some cases you might be able to seize an opportunity and reduce a threat at the same time.