September 23, 2014
Maybe, you've heard of a SWOT analysis and, maybe, you haven't, if not, now's the time to learn and take a stab at preparing one. It's a great management tool and when completed correctly, a strategic plan emerges!
SWOT stands for: strengths, weaknesses, opportunities, and threats. A SWOT analysis is a critical self-analysis of a business. It highlights factors that a company should consider when planning for the future and allows an owner to understand the competitive landscape.
The following is a brief explanation of each category:
These are internal resources, processes, products, or procedures that a company does well. The accumulated strengths enhance a company's competitiveness in the marketplace.
Weaknesses, of course, are the opposite of strengths. Weaknesses contribute to competitive deficiencies or competitive disadvantages that a company has in the marketplace. These are factors where the company is weak or something that a company might completely lack.
These are, also, called market opportunities. If a company has the ability to capitalize on new opportunities, these can produce added growth and profit for a business.
External threats will always exist for any business and can hinder a company's profit and competitive edge. While external threats can never be completely eliminated, understanding the threats and knowing in advance what to do to if the threats do materialize will minimize the negative effect they can have on a business. Examples of external threats might be new competition, natural disasters, the economy, or new laws and regulations.
The Actual Analysis
A SWOT analysis can be prepared with the assistance of a small business consultant, completed by an owner, or even involving employees. For a SWOT analysis to be beneficial, the preparers must be honest in describing what goes into each category. It's great to be a company cheerleader, but this is not the time!
Size Doesn't Matter
All businesses regardless of size have some factors that fall into each of the four categories; therefore, all businesses can benefit from performing a SWOT analysis. The goal of this exercise is to gain a competitive advantage, solidify a stronghold in the marketplace, and improve long-term profits.
It's simple to start a SWOT analysis. All it takes is a clean sheet of paper or a whiteboard divided into four sections, and you're off and running. Put a few thoughts down daily...this is a great work in progress. Factors will come and go, but after a thorough analysis, you've prepared a strategic plan for the future...without even realizing what you were doing!
Association of Accredited Small Business Consultants