SWOT is the acronym of Strengths, Weaknesses, Opportunities
and Threats. This Analysis is a simple tool for identifying the areas of your business that will be
the priority for your efforts and actions.
The review of Strengths and Weaknesses focuses on the internal operations of the business. The analysis of the Opportunities and Threats looks at the external
market and outside factors that impact on your business.
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We complete the SWOT Analysis prior to reviewing each of the ten FORMIDABLE steps to compare the status of your business as it is today against the initial set of business outcomes you established.
When conducting the Analysis your ultimate objective is to;
- Capitalise on your strengths,
- Overcome and minimise your weaknesses,
- Grasp opportunities and,
- Minimise or eliminate threats.
It will take approximately 75 minutes to complete. You need to involve other people who can provide feedback on the four criteria for your business. The
participants can be employees, suppliers, appropriate clients (always err on the side of caution), your accountant and others with knowledge of your business.
The SWOT Analysis requires you to conduct a brainstorming session on each of the four topics and how it applies to your business. Essentially you are answering
the following four questions;
- ‘The strengths of my business are…’
- ‘The weaknesses of my business are…’
- ‘The opportunities for my business are…’
- ‘The threats to my business are…’
This is a very straightforward process, but it produces powerful results, particularly if you involve other parties in the brainstorming session.
Don’t do it once!
You need to have an ongoing strategy for ensuring your business is reviewed on the key four criteria. I recommend to my clients that they have at least one formal
review per year and include a SWOT Analysis. The ideal time is just prior to the beginning of the new financial year. At the same time ensure you have an ongoing process for capturing this
information, for example, if you have sales representatives make reporting on the Opportunities and Threats part of their weekly reporting.
The SWOT Analysis can also be used on specific operations of your business.
The Strengths of a business are the assets and resources that provide it with a competitive advantage or benefit. The traits of a business strength
- It is ranked in the top quartile for the industry
- Provides a distinct competitive advantage
- Is a reason why customers choose to use the business or its product/ services
- Generates a positive income stream and/or adds real value to clients
Examples of Strengths are:
- Profitable client relationships
- Accurate client information and databases that are up-to-date and ‘marketing friendly’
- Profitable cash flow
- Infrastructure and facilities
- High performing employees
- Excellent business reputation and strong branding
- Product/ service knowledge and technology
- Favourable access to distribution channels
The Weaknesses of a business are the deficiencies that compromise its ability to achieve its goals. To be a weakness the deficiency must:
- Be ranked in the bottom three quartiles for the industry
- Not provide the business with a competitive advantage
- Be sought by your ideal clients but you are not able to deliver
- Is used by competitors as a point of differentiation against your business
- Be a reason why customers do not do business with you
- Generates a non acceptable rate of return or a potential loss
Examples of Weaknesses are:
- Product/ service limitations
- Volume restrictions and relatively high costs of production
- Poor brand name/ recognition
- Limited financial resources/ cash flow
- Over dependence on key employees (if they leave the business it loses vital knowledge or relationship contacts)
- Inconsistent delivery of services or poor quality control
- Lack of documented systems or processes
Opportunities for the business are those favourable outcomes that currently are not being developed or taken advantage of. The traits of an opportunity
- Provides scope to build the sales/profits/income of the business
- Provides access to new clients or to develop existing clients further
- Is a technological breakthrough
- Enables you to distribute products/services more efficiently to markets
Examples of Opportunities are:
- New clients
- New geographic markets
- New technologies
- New methods of distribution and Internet sales
- Acquisition of competitors
- Additional referral sources
The Threats to the business are those events or outcomes that threaten the existence of the business or may reduce its income or the value of its assets. The
traits of a threat are:
- A danger to the existence of the business
- Is a risk to the profitability/ income of the business
- Is a risk to the viability of a product, service or operation
- Could reduce the capital/sales value of the business
Examples of Threats are:
- Competitor activity – discount pricing/ new product releases/ cheaper imports
- Economic downturn/ interest rate rise
- Problem with supplier deliveries
- Non-renewal of a franchise agreement or loss of the distribution rights for a key product
Conducting a SWOT Analysis is a straight forward task. It requires no specialist skills – just a commitment to following the brainstorming guidelines detailed in
the small business guide on this topic.