When is the last time you performed a SWOT analysis on your business? There are other ways you can use SWOT to take a look at specific departments and processes in your business as well. We are talking through what a SWOT analysis is, why it’s important and giving you some examples to get you going in this episode of The Cultivating Business Growth Podcast.
What we cover in this episode:
- 2:11 – What is SWOT and why is it important?
- 4:20 – What are the differences between each of the SWOT items?
- 5:30 – How do you complete a SWOT analysis?
- 5:54 – Strengths
- 7:31 – Weaknesses
- 9:00 – Opportunities
- 10:25 – Threats
- 12:40 – Why is it important to separate internal vs. external factors
- 14:01 – What do you do with your SWOT analysis?
What is SWOT and why is it important?
SWOT is an acronym for strengths, weaknesses, opportunities, and threats. It’s a methodology for analyzing what’s going on from your company’s internal and external positions. This type of analysis can be done for the entire company or on a microlevel for a department or situation.
A SWOT analysis can give you that opportunity to analyze not only the internal factors of your business, but external factors that you probably don’t consider on a regular basis.
Normally, we like to do the SWOT analysis with the management team because the brainstorm ability gives perspectives from different levels. Giving the necessary time to this exercise provides awareness necessary to see upcoming challenges and potential opportunities as well.
What are the differences between each of the SWOT items?
Strengths and opportunities sound similar, as do weaknesses and threats, so it’s worth making the distinction between each of these. The difference is an internal view vs. external. Strengths and weaknesses are focused internally. These are generally the aspects of your business that you can control.
When looking at opportunities and threats, these apply to the external factors that may affect the business. Things like the economy, government regulation, market conditions, etc. can all influence your business, but are not necessarily on your radar at all times.
How do you complete a SWOT analysis?
This can be done in different ways and does not have to be difficult. You can create a matrix, a chart on the wall, table, spreadsheet or even write it down on paper. It depends on how you run your business and the collaborative environment in which you are working.
To reiterate, strengths focus on the internal strengths of your business. Some of the ideas we have seen in the past include:
- Good personalities
- Good teamwork
- Long-term view
- Organizational structure
You can keep going on and on as long as you’d like to brainstorm when it comes to each of these components of the SWOT analysis. This is very unique to what you are evaluating and becomes an opportunity to discuss the things you are doing well.
Weaknesses are those that are internal in your business. You can control most of these internal factors and some examples could include:
- Confusion about assignment of responsibilities
- Unclear procedures
- Poor communication
- Poor cash flow
- Unutilized software
Now we take our analysis to the external factors. A few examples that we discuss include:
- Introduction of a new service
- Market trends
One opportunity that could arise as a result of external forces would be a new law that’s coming out that people may need help writing that into contract. If you own a law firm, that could potentially be a new service that you could offer.
Typically, competition is top of mind when it comes to threats, but there are other considerations.
- Market in geographic area is tightening
- Supply chain problems
- Natural disasters.
When it comes to these external threats, many times these are things that are out of our control. We know that the potential is there for a hurricane, so having a backup plan in place is important but we can’t plan the timing or full extent of the scenario.
When it comes to supply chain problems, unforeseen circumstances can cause issues too. Katina worked in the past with a logging company who got logs from Canada. Large wild fires destroyed wood where they normally sourced their product, which affected their supply and price points. They had to make sure they remained competitive to keep customers, while also covering their costs.
These possibilities are important to consider as you plan ahead for your business.
Why is it important to separate internal vs. external factors?
Separating SWOT items by internal versus external makes it easier to think of these in two separate categories. You are able to brainstorm more easily thinking in these terms.
Additionally, you want to think of the things that are in your control as well as those that are out of your control. You can then look at the matrix and see if there are any things that you can control that could mitigate the impact of something like an external threat.
What do you do with a SWOT analysis?
This is a great tool to utilize during your strategic planning session. For example, this analysis can be implemented by taking a look at your weaknesses and potentially setting goals to improve those with KPIs to track your success. As with any of these strategies, you want to choose those that will be the most impactful. During your SWOT analysis brainstorm session, you’ll come up with a long list of items under each category. Bringing that tool with you to your strategic planning meeting will allow you and your team to select the most impactful items to incorporate into your annual goals.
Additionally, you can play with the SWOT matrix to pair strengths and opportunities. Very good tool to use for your strategic plan.
Lastly, you can plan ahead and put a plan in place and establish reserves to handle those situations that may be unexpected. A SWOT analysis is a focused opportunity to look at external factors like the market and economy alongside what’s currently operating in your business, get employee feedback and see what may be coming down the road. It’s a good reminder to avoid keeping your head in the sand because something could surprise you much more easily if you’re just powering through, head down without taking some time to step back and analyze.
SWOT is an acronym for strengths, weaknesses, opportunities and threats. It is a methodology to analyze a company, department or decision and allows you to take a look at the internal and external factors affecting your business now and into the foreseeable future.
Essentially, you can break these factors into two categories – internal and external. Your strengths and weaknesses are focused on those factors internally that you can control. Your opportunities and threats are those external factors that are beyond your control like the economy or natural disasters.
We run through examples of each component of the SWOT analysis and wrap up by looking how to use your analysis in your strategic planning. It is a great tool to help plan for your year and set goals for improvement. The opportunity to match up items between your strengths and opportunities to reinforce those is a great advantage to have as well. This analysis is helpful to see potential threats before they become immediate issues and get feedback from management on your team to help move your business forward.