What is SWOT analysis?
To stand the test of time, businesses owe it to themselves to constantly analyze their positioning in the market. A SWOT analysis is also called a competitive analysis and it is one of the most comprehensive techniques that businesses use to do this.
SWOT stands for — Strength, Weakness, Opportunity, and Threat. SWOT analysis is the framework that helps to determine factual, objective, and realistic data about the external and internal factors surrounding a business. It’s essential for businesses that want to grow, stand out, and continue to attract good business.
A SWOT analysis is a great way for business owners to discard some preconceived ideas about their business, and to find loopholes or vague areas, thereby allowing them to form a solid strategy that will help them move their business to the next level.
This analysis is important for all businesses, regardless of their size. Therefore, as an entrepreneur looking for ways to scale or just establish a workable strategy, this post will address all the concerns you may have.
The importance of SWOT analysis in a business
You may assume that you have all the information about your business, therefore, you have no need for a SWOT analysis, but, there are key details that may not be obvious to you.
- A SWOT analysis would definitely help you identify gray areas and give you insights into all factors (external and internal) to help you solidify your position in your market/industry.
- SWOT allows you to keep records of your business. By performing a comprehensive SWOT analysis, you will have documented important aspects of your business that you can always refer back to and track your progress as well.
- A SWOT analysis can also help you make projections and set financial goals for your business. With a SWOT analysis, you would easily identify revenue-generating opportunities.
- SWOT helps you plan mitigation measures ahead of time. With a comprehensive SWOT analysis, you’d be able to recognize potential challenges and work towards averting them.
How to conduct an effective SWOT analysis
1. Divide a table into a quadrant or download free templates online.
You can create a table and divide it into four places, label each quadrant; Strength, Weakness, Opportunity, and Weakness. Alternatively, you can download templates to get started.
2. Identify your objectives
You need to begin your analysis by having a clear goal in mind, an open-ended approach would take the analysis far broader than it needs to. Your objectives would streamline your SWOT analysis to the important aspects.
So, if for instance, you want to carry out an analysis of your social media presence, it would be more effective than carrying out an overall analysis of your business. Your analysis will give you actionable insights to create a well-rounded strategy.
3. What are your strengths?
You’ve now begun your SWOT analysis, starting with S which means strength. Your strengths are the positive and internal aspects of your business. They’re not external, therefore, these aspects are fully within your control. This is the point where you highlight all the right things, and if you have an edge above your competitors, even better. Now’s the best time to list them.
Some questions that you can answer to help you are:
- What are the things that work well?
- What are the assets and resources (human and resources) that you have? (e.g. workforce, connections, skills, etc)
- What is your Unique Selling Point (USP)? How are you better than your competitors?
4. What are your weaknesses?
Your weaknesses take away from you. These are the barriers that keep you from reaching your goals. The point of carrying out an analysis of your weakness is not to focus on it, but rather, to help you identify weak areas that you can work on.
Here are some questions to help you figure out your business weaknesses:
- What areas could you strengthen to gain a competitive edge?
- What are the business operations that are not as smooth?
- What assets/resources is your business in need of?
- Is your business location ideal?
5. What are the opportunities?
To identify them, ask yourself these:
These are external factors that can impact your business positively. These are the possible achievements for your business and they’re the openings that could increase your success as a business.
- What are the trends that could make more people patronize you?
- What new demographics could you break into?
- What events or activities could you use to your advantage?
- What are the common customer complaints/objections that you could solve to convert more customers?
6. What are the threats?
These are external factors that are obstacles to the success of your business/objective. You may not be able to control them, however, you could put mitigation measures in place to help deal with them when they arise.
To help you discern what they are, ask yourself the following:
- Who are our competitors that could reduce our chances of success?
- Could technology advancements affect your business?
- Are customer needs changing? If yes, in what ways?
- Would market trends affect the way you do business?
SWOT analysis could just be the definitive measure to identify your strongholds, gray areas, and improvement areas. With a SWOT analysis, you could come up with implementation strategies to move your business to the next level.