SMH. There are too many initials out there for you busy entrepreneurs to remember! As if you don’t already wear enough hats as you try to grow your business. Now you’re supposed to be an enigmatologist as well? The Wheelhouse Factory team won’t stand for these unrealistic expectations! That’s why we are going to cut through the nonsense and take our own advice to be useful. In this article, we will focus on just one set of initials as we build a SWOT analysis for your small business.
What is a SWOT analysis?
A SWOT analysis is an exercise that can be performed by anyone with a bit of guidance. In business, SWOT stands for strengths, weaknesses, opportunities and threats. The analysis takes into consideration both internal and external factors. The strengths and weaknesses should be specific to your internal team, product or business. The opportunities and threats, on the other hand, are more externally driven. These should focus on elements such as market conditions, economic trends and the competitor landscape.
Entrepreneurs can analyze each of the SWOT components to better understand their competitive advantage. Let’s take a high-level look at each component to anchor ourselves in the terms. Then, we will go through a step-by-step guide to performing the SWOT analysis for your small business. One quick note before going any further – the instructions below are written as though you are performing the SWOT analysis on your own. That is definitely not a requirement! In fact, having a group perform the analysis is a great way to gain a wider array of insights and perspectives.
What does SWOT actually mean?
This term can take on a few meanings within the context of a SWOT analysis. Core values, culture, differentiators and special sauce are a few of the many ways to reflect on the strengths of your business. These are the qualities, characteristics or offerings of your business that give you a competitive advantage.
You can look at weaknesses as the inverse of your strengths. These are the characteristics of your business that may be a disadvantage. One way to think about this category is in terms of a hypothetical question. For example, what are the reasons customers would choose a competitor over my business?
This is where awareness and experience of the conditions within a marketplace become important. You can think of this category as defining the current gaps within the market landscape. For example, maybe customers are underserved thanks to a small number of competitors. Or it could be the case that you uncover data pointing toward aggressive market growth in the future.
Identifying threats can be done by examining the holistic market you’re a part of or planning to enter. These are elements of the environment that could jeopardize the growth and profitability of your business.
Step-by-step guide to a SWOT analysis.
Step 1. Set aside some time to focus. To build a SWOT analysis for your small business you will need to be honest and thoughtful. A SWOT analysis will be more illuminating and insightful with more transparency. This is especially true for the internally focused components of strengths and weaknesses. Our recommendation is to carve out at least 30 minutes but there are no hard and fast rules. You can dedicate as much time and detail to the analysis as needed. Right size the approach for your business purpose.
Step 2. Decide on where your SWOT analysis will be captured. There’s truly no right answer. It could be a sheet of paper, a OneNote page, a whiteboard or whatever vehicle works best for you.
Step 3. Set up a chart with four quadrants and label each one with a component of SWOT. We’ve included an example for you to reference below.
Step 4. Spend time brainstorming each component individually. Document your findings as they come. At this phase, go for quantity. Write or type down everything that comes to mind for each category. Now, depending on the magnitude of your analysis, the time required is likely to vary. We recommend spending a minimum of 5-10 minutes in each area.
Step 5. Step away. Once you’ve made an initial pass through each area it’s important to give yourself a breather.
Step 6. Revisit each of the components a second time with a fresh pair of eyes. Capture any new thoughts that may have been missed on your initial pass.
Step 7. Make the most out of your findings. Break down the components individually and build a strategy for each one. There are a variety of ways you can leverage the SWOT analysis.
Below are ideas on how to leverage findings.
Narrow your list of strengths to the top three you have documented. You can think of these as the top tier of your strengths. Place them in order so that #1 is your top strength and the last one is your bottom strength in the top tier. Next, ask yourself the following question: how can I highlight these top strengths for my customers?
From there, develop a high-level action plan. You will need to right-size the plan for your project. Perhaps it’s one minor change every week or a significant change once per quarter. One important qualifier though is that you should not jeopardize your other strengths as a result of this action plan.
Similar to the strengths, list out your top three weaknesses. Put your top weakness as number one and focus on this question: how can I minimize my top weakness (or possibly turn this weakness into a strength)? Time to build another action plan. You will want to walk away with a specific set of next steps. If you’re not sure where to start with building a timeline, you can check out this article to help you brainstorm.
List out your opportunities and assign a rating to each one. Base your rating on the following question. On a scale from 1-10 (low to high), how am I maximizing this opportunity? For the opportunities that are rated low, say five or below, there is a follow-up question for you to reflect on. What is the risk of not maximizing this opportunity? If the risk is significant, document a few goals that will help you move closer to making this opportunity a competitive advantage.
Threat mitigation is all about planning ahead. You may need to make some assumptions about what the future holds. While you may not be able to control all the external threats to your business, you need to understand the potential impact. Once you know the potential impact, you can put your focus on the high threats and develop backup plans if those threats become a reality.
For this area it can be helpful to develop a simple matrix similar to the one captured below.
|Threat Description||Threat 1||Threat 2||Threat 3|
|Negative impact to customers||High||Medium||Low|
|Negative impact to employees||Low||High||High|
|Negative impact to vendors/partners||Medium||Low||Low|
|Negative impact to business operations||Low||Low||Low|
|Negative impact to financial growth||Low||High||High|
A few final thoughts.
We truly hope that you feel confident and ready to build a SWOT analysis for your small business. The SWOT analysis is just one of many exercises you can leverage to build your business. The Build Workbook in the Wheelhouse Factory store includes tons of great ideas, tips and exercises! Topics such as how to build a launch roadmap and performing an industry analysis are just a couple of examples. We hope you enjoyed this article and always love to hear from readers. Please send your questions, comments and feedback to email@example.com.