How to Do a SWOT Analysis for Your Small Business

If you’ve ever worked in a corporate office environment, you may have come across the term “SWOT analysis.” This has nothing to do with evaluating militarized law enforcement response units, and everything to do with taking a long, hard look at your company.

Conducting a SWOT analysis is a powerful way to evaluate your company or project, whether you’re two people or 500 people. In this article, you’ll learn what a SWOT analysis is, see some examples of SWOT analysis, and learn tips and strategies for conducting a comprehensive SWOT analysis of your own. You’ll also see how you can use the data a SWOT exercise yields to improve your internal processes and workflows.

Before we get to the tips and techniques, let’s start with the basics.

What Is a SWOT Analysis?

A SWOT analysis is an analytical technique used to determine and define several key characteristics: Strengths, Weaknesses, Opportunities, and Threats – SWOT. 

SWOT analyses can be applied to an entire company or organization, or individual projects within a single department. Most commonly, SWOT analyses are used at the organizational level to determine how closely a business is aligned with its growth trajectories and success benchmarks, but they can also be used to ascertain how well a particular project – such as an online advertising campaign – is performing according to initial projections.

Breaking Down the SWOT Analysis Process

We know that SWOT stands for Strengths, Weaknesses, Opportunities, and Threats – but what does each of these elements mean? Let’s take a look at each element individually.

Strengths

The first element of a SWOT analysis is Strengths.

As you’ve probably guessed, this element addresses things that your company or project does especially well. This could be something intangible, such as your company’s brand attributes, or something more easily defined such as the unique selling proposition of a particular product line. It could also be your people, your literal human resources: strong leadership, or a great engineering team.

Weaknesses

Once you’ve figured out your strengths, it’s time to turn that critical self-awareness on your weaknesses. What’s holding your business or project back? This element can include organizational challenges like a shortage of skilled people and financial or budgetary limitations.

This element of a SWOT analysis may also include weaknesses in relation to other companies in your industry, such as the lack of a clearly defined USP in a crowded market.

Opportunities

Next up is Opportunities. Can’t keep up with the volume of leads being generated by your marketing team? That’s an opportunity. Is your company developing an innovative new idea that will open up new markets or demographics? That’s another opportunity.

In short, this element of a SWOT analysis covers everything you could do to improve sales, grow as a company, or advance your organization’s mission.

Threats

The final element of a SWOT analysis is Threats – everything that poses a risk to either your company itself or its likelihood of success or growth.

This could include things like emerging competitors, changes in regulatory law, financial risks, and virtually everything else that could potentially jeopardize the future of your company or project.

Internal and External Factors

The four elements above are common to all SWOT analyses. However, many companies further compartmentalize these elements into two distinct subgroups: Internal and External.

Typically, Strengths and Weaknesses are considered internal factors, in that they are the result of organizational decisions under the control of your company or team. A high churn rate, for example, would be categorized as a weakness, but improving a high churn rate is still within your control, making it an internal factor. Similarly, emerging competitors would be categorized as a threat in a SWOT analysis, but since there’s very little you can do about this, this makes it an external factor. This is why you may have seen SWOT analyses referred to as Internal-External Analyses or IE matrices.

Image via Bplans

Subcategorizing your four primary elements into Internal and External factors isn’t necessarily critical to the success of your SWOT analysis, but it can be helpful in determining your next move or evaluating the degree of control you have over a given problem or opportunity.

Now that we know what each of the elements of a SWOT analysis means, let’s take a look at how to go about creating and conducting a SWOT analysis.

How to Conduct a SWOT Analysis

Like feature-benefit matrices, there are several ways to conduct a SWOT analysis. However, regardless of how you choose to structure your analysis, we need to start by asking a series of questions.

Let’s take our first element, Strengths, for example. To determine what your strengths are as an organization, you could begin by asking some of the following questions:

• What do your customers love about your company or product(s)?
• What does your company do better than other companies in your industry?
• What are your most positive brand attributes?
• What’s your unique selling proposition?
• What resources do you have at your disposal that your competitors do not?

By answering these questions, you’ll be in great shape to start identifying and listing your organization’s strengths.

Positive brand attributes associated with WordStream, as
identified by our customers

We can use the same principle to determine your company’s weaknesses:

• What do your customers dislike about your company or product(s)?
• What problems or complaints are often mentioned in your negative reviews?
• Why do your customers cancel or churn?
• What could your company do better?
• What are your most negative brand attributes?
• What are the biggest obstacles/challenges in your current sales funnel?
• What resources do your competitors have that you do not?

You may find that determining the strengths and weaknesses of your organization or project is considerably easier or takes less time than figuring out the opportunities and threats facing your company. This is because, as we said earlier, these are internal factors. External factors, on the other hand, may require more effort and rely upon more data, as these are often beyond your immediate sphere of influence.

Identifying opportunities and threats may require you to conduct in-depth competitive intelligence research about what your competitors are up to, or the examination of wider economic or business trends that could have an impact on your company. That’s not to say that opportunities and threats cannot be internal, however; you may discover opportunities and threats based solely on the strengths and weaknesses of your company. Some possible questions you could ask to identify potential opportunities might include:

• How can we improve our sales/customer onboarding/customer support processes?
• What kind of messaging resonates with our customers?
• How can we further engage our most vocal brand advocates?
• Are we allocating departmental resources effectively?
• Is there budget, tools, or other resources that we’re not leveraging to full capacity?
• Which advertising channels exceeded our expectations – and why?

When it comes to threats, you could certainly begin by asking a series of questions like those above. However, it’s often quite easy to come up with a list of potential threats facing your business or project without posing questions beforehand. This could include “branded” threats such as emerging or established competitors, broader threats such as changing regulatory environments and market volatility, or even internal threats such as high staff turnover that could threaten or derail current growth.

A Note on PEST Analysis

While we’re on the topic of internal versus external factors, I wanted to mention a tangential but entirely separate type of analysis closely relevant to SWOT analyses, known as a PEST analysis.

Earlier, I mentioned that external factors such as changing regulatory policies and market volatility could be considered threats in a standard SWOT analysis. However, despite their importance, challenges like this are often highly nuanced and driven by dozens or hundreds of individual factors. This can place them beyond the scope or intent of a typical SWOT analysis. This is why many companies also conduct PEST analyses.

This type of analysis is not what an exterminator does upon arriving at a roach-infested tenement. Rather, a PEST analysis functions very similarly to a SWOT analysis, only they’re concerned with four external factors: Political, Economic, Sociocultural, and Technological factors, to be precise.

One of the main reasons it’s worth looking at PEST analyses is because many of the factors that could end up in a PEST matrix could also be relevant to the Opportunities and Threats in our SWOT analysis. The kind of political and economic turmoil we’ve seen in the United States during the past year, for example, could very well pose legitimate and serious threats to many businesses (as well as some opportunities), but these kinds of obstacles tend to be much more complicated than the opportunities and threats you’d see in most SWOT analyses, given their broader scale and often-complex underlying factors.

Image via Dr. Jean-Paul Rodrigue/Hofstra University

Obstacles identified in a typical PEST analysis also tend to be on much longer timeframes – it’s a lot easier and quicker to try and overcome internal challenges like high staff turnover than it is to wait and see if the economy picks up (or if the bubble will burst again). That’s why many larger companies conduct both SWOT and PEST analyses simultaneously – the SWOT analysis provides them with more immediate, potentially actionable roadmaps, whereas PEST analyses can be highly valuable when it comes to formulating longer-term plans and business strategies.

Why Your Small Business Should Conduct a SWOT Analysis

If you’re a marketer or small-business owner, you might be wondering if SWOT analyses are practical or even feasible for smaller companies and organizations. Although there is definitely a resource overhead involved in the creation of a SWOT analysis, there are many benefits in doing so, even for the smallest of companies.

Image via Fundera

For one, conducting a comprehensive SWOT analysis provides a unique opportunity to gain greater insight into how your business operates. It’s all too easy to get lost in the weeds of the day-to-day workings of your company, and conducting a SWOT analysis allows you to take a broader, bird’s eye view of your business and the position it occupies in your industry.

Another benefit of SWOT analyses is that this technique can be applied to a wide range of scenarios, not just as an overview of your business. You could use SWOT analyses to evaluate the potential strengths and weaknesses of a forthcoming advertising campaign, a planned content project, or even whether your company should be represented at a trade show or industry event.

Obviously, it almost goes without saying that conducting a SWOT analysis allows you to identify what your company does well, where it could improve, and the opportunities and threats facing your business. However, conducting a SWOT analysis provides you with the opportunity to not only identify these factors, but also develop and implement tangible roadmaps and timelines for potential solutions. This can be beneficial in the creation of budgetary plans, identifying hiring needs (p.s. – WordStream is always on the lookout for great people!), and other mid- to long-term strategic planning.

How to Do Your Own SWOT Analysis

So, now we know what each element of a SWOT analysis is concerned with and the kinds of exploratory questions we can ask to get the ball rolling, it’s time to actually get to work and create your SWOT analysis.

To illustrate how it works, we’ll do a hypothetical SWOT analysis using an example of a family-owned restaurant, with a single location, operating in an urban area.

The Four Quadrants of SWOT Analyses

Whatever you choose to call them, SWOT analyses are often presented as a grid-like matrix with four distinct quadrants – one representing each individual element. This presentation offers several benefits, such as identifying which elements are internal versus external, and displaying a wide range of data in an easy-to-read, predominantly visual format.

Here’s the SWOT analysis based on our fictional restaurant:

As you can see, this matrix format allows you to quickly and easily identify the various elements you’ve included in your analysis.

For example, we can see that a great location, strong reputation, and seasonal menu are strengths in this particular analysis. Conversely, we can see that heightened competition from chain restaurants and the rising costs of ingredients are two of the four weaknesses identified by our fictional restaurant business.

How to Act Upon Your SWOT Analysis

So, you’ve finally got your hands on a completed SWOT matrix. You’ve identified internal strengths and weaknesses, as well as external opportunities and threats. You’ve begun to see your company in a whole new light.

Now what?

Ideally, there are two stages of action you should take upon completing a SWOT analysis. First, you should attempt to match your strengths with your opportunities. Next, you should try to convert weaknesses into strengths. Let’s take a look how this works.

Acting On Your Strengths

One of the best things about the strengths you identified in your SWOT analysis is that you’re already doing them.

In our example above, the restaurant’s location, reputation, and seasonal menu are all strengths. This tells the fictitious company that it should continue to experiment with its popular seasonal menu. It also tells the company it should continue to develop and nurture the strong relationships with its regular customers that have strengthened the restaurant’s reputation in the community.

Essentially, acting upon your business’ strengths consists of “do more of what you’re already good at.”

Shoring Up Your Weaknesses

Acting on the weaknesses you identified in your SWOT analysis is a little trickier, not least because you have to be honest enough with yourself about your weaknesses in the first place.

Going back to our example, some of these weaknesses are very challenging to act upon. Going up against the considerable purchasing power of rival chain restaurants can be very difficult for smaller, family owned businesses. The restaurant is also struggling with its limited reach, the restrictions of a modest advertising budget, and is also failing to leverage the potential to increase sales by allowing customers to order food online through delivery apps like Foodler or GrubHub.

However, that’s not to say all hope is lost. It might be harder for our example business to compete with a chain, but there are plenty of other ways small companies can be more competitive – such as by developing strong, meaningful relationships with customers, which was not only one of the company’s strengths, but also something chain restaurants simply cannot offer.

Seizing Opportunities

The Opportunities section of your SWOT analysis is by far the most actionable, and that’s by design. By identifying opportunities by evaluating your organization’s strengths, you should have a ready-made list of targets to aim for.

In the example SWOT analysis above, increasing consumer appetites for ethically produced, locally grown ingredients is a major opportunity. However, our restaurateurs cannot rest on their laurels – there’s still work to be done. In this example, this may involve investing in technical expertise to take advantage of the opportunities presented by food delivery apps, or sourcing locally grown produce more aggressively in an attempt to reduce costs.

It’s also important to avoid hubris or complacency in your opportunities. Even if you have an iron-clad advantage over every other business in your industry, failing to devote sufficient time, money, or personnel resources in maintaining that advantage may result in you missing out on these opportunities over time.

Every business’ opportunities will differ, but it’s vital that you create a clearly defined roadmap for capitalizing upon the opportunities you’ve identified, whether they be internal or external.

Mitigating Threats

Anticipating and mitigating the threats identified in your SWOT analysis may be the most difficult challenge you’ll face in this scenario, primarily because threats are typically external factors; there’s only so much you can do to mitigate the potential damage of factors beyond your control.

Every threat, and the appropriate reaction to that threat, is different. Regardless of the specific threats you’ve identified in your SWOT analysis, responding to and monitoring those threats should be among your very top priorities, irrespective of the degree of control you have over those threats.

In the example SWOT analysis above, all three threats are particularly challenging. To compete with the prices of its chain competitors, our restaurateurs may be forced to either compromise on their values to secure cheaper ingredients, or willingly cut into their profit margins to remain competitive. Similarly, economic uncertainty is virtually impossible to fully mitigate, making it a persistent threat to the stability of our example restaurant business.

In some SWOT analyses, there may be some overlap between your opportunities and threats. For example, in the analysis above, the popularity of locally sourced ingredients was identified as an opportunity, and heightened competition was identified as a threat. In this example, highlighting the restaurant’s relationships with local farmers – further reinforcing the restaurant’s commitment to the local community and regional economy – may be an effective way for our restaurateurs to overcome the threat posed by the increasingly desperate chain restaurants vying for their customers.

When compiling the results of your SWOT analysis, be sure to look for areas of crossover like this and see if it’s possible to seize an opportunity and reduce a threat at the same time.

from Internet Marketing Blog by WordStream http://ift.tt/2kOCyGz

from WordPress http://ift.tt/2ktVxXv