SWOT analysis part one: How can you identify your strengths and weaknesses?
Conduct an objective internal analysis of your business to discover what you do best and where you can improve.
A SWOT analysis is a crucial part of your business plan.
It considers four main areas that may either positively or negatively impact your business's future performance and success:
Conducting a SWOT analysis can help you use resources efficiently, improve operations, uncover opportunities, mitigate risk, and become more competitive. You're probably most in tune with your internal operations, so begin by evaluating the internal factors specific to your business: your strengths and weaknesses.
Play to your business's strengths
This is your chance to brag. What do you bring to the market that helps you stand out from your competition? In what ways does your business excel?1 Consider these tips when identifying your business's strengths:
Back up your assumptions. You probably have a good idea of your strengths, but even educated assumptions aren't enough. Back up your ideas with solid data. "One of the mistakes that I see a lot of organizations making is they'll create a SWOT analysis based on assumptions. The danger is that your strategies will be based on shaky ground," says Linda Pophal, owner of marketing communication consultancy firm Strategic Communications and author of The Complete Idiot's Guide to Strategic Planning.
Gather measurable data. Collect quantifiable data about your sales trends, customer base, and employee retention to help identify your strengths.2 You might discover an above-average customer satisfaction rate, comparatively low employee turnover, loyal customer base, or particularly profitable product.
Look at subjective strengths. In addition to measurable data, consider more qualitative strengths, such as a highly trained staff or strong leadership team.3
Overcome your business's weaknesses
Identifying weaknesses can be scary. After all, isn't your goal to present your business in the best light? But your ability to identify weaknesses and leverage your strengths to overcome them can be a powerful tool. Plus, an inability to identify weaknesses that are obvious to potential investors and lenders could jeopardize their perception of your business, Pophal says.
Common weaknesses include an isolated business location with limited foot traffic, high employee turnover, or low profit margins on key products or services. Consider these tips when identifying your business's weaknesses:
Compare yourself with competitors. Take an objective look at your products, vendors, customer base, employees, internal processes, and location, and compare these factors with your competitors'.2 In which areas could your business improve? Focus on what differentiates you instead of the strengths you share with competitors.
Seek an objective opinion. Be honest about assessing your business's weaknesses, and consider enlisting outsiders to help you think objectively about how you can improve. Trusted business colleagues, employees, and customers can all provide valuable insights you might otherwise overlook.
Create a plan to overcome weaknesses. Most importantly, determine how to minimize or overcome weaknesses. Implement your plan, and then track data to monitor your improvements.
"When you get to the point where you're actively seeking investors or lenders, you can show that you know what those weaknesses are, you are actively addressing those weaknesses, and you can share the progress you’ve made," Pophal says.
Learn more about the eight keys to conducting a competitive business analysis.
1 "Do You Know Your SWOT?" Inc. (2012) http://www.inc.com/eron-zehavi/swot-can-teach-you-about-leadership.html
2 "Analyzing Your Business’s Strengths, Weaknesses, Opportunities, and Threats." CBS News. (2007) http://www.cbsnews.com/news/analyzing-your-businesss-strengths-weaknesses-opportunities-and-threats/
3 "The Right Way to Do a SWOT Analysis." Inc. (2015) http://www.inc.com/paul-schoemaker/12-tips-swot-analysis.html