SWOT analysis part two: What are your business’s opportunities and threats?
Determine the best chances for your business to grow, and identify what may hold you back.
The next step in your SWOT analysis (strengths, weaknesses, opportunities, and threats) is looking at the external factors that influence your success and potential for growth. As you conduct a SWOT analysis, identify your business's opportunities and threats and plan how you can pursue them or minimize them.
When considering external factors, cast a wide net, says Linda Pophal, owner of marketing communication consultancy firm Strategic Communications and author of The Complete Idiot's Guide to Strategic Planning.
Look at opportunities and threats from within your industry and local community, as well as larger-scale influences like the economy, national and global market trends, emerging legislation, competitive forces, technological advances, and environmental elements.1
Maximize opportunities in business
Opportunities might include new technology to streamline your operations, recruitment of new talent, or collaboration with outside organizations to expand your product lines, services, or customer base.
When searching for opportunities like these, avoid the temptation to narrow your focus too much early on, which can limit your potential for growth. Pophal recommends beginning the brainstorming process with a "no-idea-is-off-limits" approach.
"People tend to hold back on opportunities because they think, 'We can't do that,'" Pophal says. "Don't edit yourself. If you can do whatever you want to do or take advantage of anything, what would it be?"
Once you've considered the possibilities:
Focus on the most realistic opportunities. Determine which ones you can realistically pursue, and create a path for taking advantage of them.
Reflect on your business's challenges. Your strategies for overcoming them might be reframed as opportunities.2 For example, if one of your key suppliers raises prices, you might find a new supplier that not only offers lower pricing, but is more innovative and provides superior customer service.
Consider how opportunities will contribute to success. Completing a SWOT analysis is all about gaining practical insight, so don't stop at identifying your opportunities. Go a step further and explain how they will benefit your business.
Minimize threats in business
As the final step of your SWOT analysis, understand what's threatening your business's potential to succeed so you can proactively address potential risks. Investors will also want to see that you've considered how to address risks.
Common threats might include emerging competition, a shifting economic climate, or fluctuating customer needs. To determine what threatens your business:
Study your competitors' strengths.3 Your competitors' successes can harm your market position. Be aware of their performance so you can anticipate threats.
Consider the "big picture." Monitor larger trends in the economy, government regulations, and changing demographics. "Big picture" factors, such as a recession or a new prohibitive law, can also threaten your operations.
Then, create a plan to counteract potential threats.4 Consider what you can do to minimize or remove risks, and detail the steps you'll take in your business plan. Identifying threats sometimes requires speculation, but it's important to show you have a plan to combat existing threats and overcome potential obstacles before they arise. "If you can't identify a threat that's obvious to your investors, that could negatively impact your ability to acquire financing," Pophal says.
As you finish your SWOT analysis, remember that your business's strengths, weaknesses, opportunities, and threats may change. Update your strategy as these internal and external factors evolve so you can stay on top of obstacles and seize chances that can lead to success.
Learn more about the eight keys to conducting a competitive business analysis.
1 "The Right Way to Do a SWOT Analysis." Inc. (2015) http://www.inc.com/paul-schoemaker/12-tips-SWOT-analysis.html
2 "Analyzing Your Business’s Strengths, Weaknesses, Opportunities, and Threats." CBS. (2007) http://www.cbsnews.com/news/analyzing-your-businesss-strengths-weaknesses-opportunities-and-threats/
3 "What is a SWOT Analysis?" Entrepreneur. (2003) http://www.entrepreneur.com/article/61206
4 "Do You Know Your SWOT?" Inc. (2012) http://www.inc.com/eron-zehavi/swot-can-teach-you-about-leadership.html