Every day, thousands of people start their business journey while many others shut their doors. It takes more than just business acumen and a solid initial investment for an organization to succeed. Indeed, a great product or service is no longer enough to thrive in today’s competitive market. Apart from luck, strategy, and excellent marketing, a successful business also involves careful planning, dedication, and research. While a solid business plan is the bedrock of any successful small business, utilizing an array of business tools to solidify your standing against the winds of time is quintessential. One such tool is the SWOT analysis, a simple yet comprehensive solution to establishing a business strategy and the way forward. A robust SWOT analysis helps identify scenarios that can positively or negatively affect your business while guiding your strategic decision-making process.
What Does SWOT Stand For?
SWOT is an acronym for
- Strengths,
- Weaknesses,
- Opportunities, and
- Threats.
Identifying each of these factors as effectively as possible will play a major role in your business strategy. Here, the internal factors that your business can manage are Strengths and Weaknesses. Opportunities and Threats, on the other hand, are external factors over which your small business has little to no control. Performing a SWOT analysis can also help you handle frequently-occurring work obstacles and more large-scale, unpreventable situations like recessions or natural disasters.
In this article, we discuss why, when, and how to perform a SWOT analysis for your small business.
Why Should You Perform a SWOT Analysis for Your Small Business?
Conducting a SWOT analysis will help you:
- To achieve your goals,
- To enhance your products and services,
- To improve company operations and performance,
- To explore growth prospects, and
- To create a contingency plan in case of an emergency.
Performing a SWOT analysis has several benefits, such as:
- Strengthening brand reputation,
- Attracting and retaining customers,
- Increasing revenue,
- Securing funding,
- Investing in the right technology,
- Creating a positive work environment, and
- Managing threats.
When Should You Conduct a SWOT Analysis?
Your company goals and aspirations can change as you grow. We recommend you perform a SWOT analysis at least once a year, if not every six months, to prepare yourself for anything that the future holds, and to circumvent disaster in the face of emergencies.
6 Steps to Perform a SWOT Analysis for Your Small Business
A SWOT analysis is a systematic approach to analyzing your business’s current and future state. While analyzing strengths and weaknesses, dive into your human resources, product and service quality, company documentation, financial statements, customer feedback, marketing and sales, and organizational structure.
Applying the PESTEL analysis is a fantastic way to comprehend opportunities and threats. PESTEL is short for political, economic, societal, technological, environmental, and legal. These are external factors beyond your control. PESTEL, when combined with a SWOT analysis, can give you a clear picture of how external and societal factors can impact your organization.
Follow the six steps outlined below to perform a SWOT analysis:
Conduct Deep-dive Market Research on Your Industry and Its Major Competitors
Make sure to use all the resources available to you to understand your industry, its available technologies and services, and the status quo of relevant competitors in the same domain. This includes understanding their day-to-day operations and what makes them succeed in the face of competition similar to yours. This can help you establish a comprehensive business strategy that factors in several variables that impact your success or failure.
Identify Your Strengths
The factors that differentiate your company from others are its strengths. Consider asking the following questions:
- What sets you apart from your competitors?
- Why did your clients pick you over your competitor’s products or services?
- How skilled are your employees?
- What are your accomplishments?
- Is your company located in a prominent location?
Asking these questions can help reverse-engineer your way to a map of what might help your company succeed, today and in the future. As a result, your business’ strengths can also comprise your fallback strategy in the face of calamity.
Identify Your Weaknesses
Your company’s weaknesses are the elements that restrict its productivity and growth. We mentioned above that you should conduct a SWOT analysis once every few months. Charting its weaknesses can help you evaluate how far your company has progressed since the last benchmark.
Consider asking questions like:
- What difficulties has your small business recently faced?
- Can you hire skilled employees?
- Can you invest in new technology to make work easier?
- What are the advantages your competitors have that you don’t?
- Why are a few customers, if any, dissatisfied with your company?
Ensure that you are transparent and elaborate when detailing your weaknesses, as mitigating these variables is as valuable as bolstering company strengths.
Identify Your Opportunities
Opportunities allow you to capitalize and benefit from a third-party entity, current market trends, or competitors shutting down.
In this section, make sure to ask questions like:
- Is one of your products or services popular at the moment now?
- Are you the only service provider in your region?
- Has your industry seen an increase in investment?
- Can you grow your brand by investing in new technology?
- Are your social media posts going viral?
Identifying opportunities and capitalizing on them can either broaden or establish avenues that further your strengths, and in turn, pave the way for success.
Identify Your Threats
Threats can hinder the expansion of your company. These are factors your company has no control over. If not managed, they can result in events like employee layoffs, drastic revenue decline, or even the company’s closure.
In this section, ask questions like:
- Has your government raised taxes?
- Do your vendors owe you money?
- Are you experiencing a recession?
- Has the price of raw materials risen?
- Have you experienced a backlash after a social media post or an advertisement?
- Do you have competitors who offer more reasonable prices?
While some threats may be impossible to predict or list here, make sure to do your necessary due diligence and research these areas thoroughly. In more cases than not, understanding the extent of the threats your company faces may very well be the first step in overcoming them in the future.
Create a Strategy To Resolve the Issues
Rank the problems based on the results of your SWOT analysis. Create a plan of action for each concern by brainstorming with your peers and fixing them immediately or strategizing to minimize their effects in the future.
Your company will succeed if you make sure to factor external and internal factors into your small business strategy and pay attention to your customers and employees. It is beneficial to gain a fresh view of your business operations to ensure that you run an efficient business. A SWOT analysis will help you identify a broad range of negative and positive aspects that impact your organization, which can improve your small business operations and ultimately boost revenue.
