Small business owners tend to view their businesses tactically and rarely have the time to take an objective view of their business from both internal and external perspective. A SWOT analysis can help you understand the characteristics of your company and the environment around it that can affect its overall success. If you have not done a SWOT analysis for your business lately, it may be a good time to go through this exercise to determine if your marketing plan needs adjustments to accommodate new strengths, minimize a weakness, or protect you from potential threats.

What is a SWOT Analysis?

SWOT analysis is a tool for assessing your business and its environment that helps you focus on key issues. It can help you focus limited resources and capabilities to the competitive environment. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The point of the SWOT analysis is to ensure you have a marketing plan that is consistent with the resources and capabilities of your company.

Strengths

Strengths are the positive, internal characteristics of your business with respect to your competition. What is it about your business that sets you apart? What advantages do you have over your competition? Don’t underestimate any quality when determining your strengths because what may seem insignificant to you just may be one of your more interesting qualities that will attract new clients. Think about your expertise, your people’s strengths, your contacts, your products and services, the location of your business, any processes that are unique, customer base, credit history, or any other aspect of your business that adds value to what you offer your clients.

Weaknesses

Weaknesses are factors internal to your business that detract from your ability to maintain a competitive advantage. Although it is good to be brutally honest, it is not necessary to attack the business. However, understanding your weaknesses can help you correct them or market around them. By identifying your weaknesses, you have the potential of converting them into strengths. Think about areas that need improvement, such as a lack of experience in certain markets, limited resources and capital, poor location for your business, dependency on one person for the success of the business, and other factors that are under your control, but for some variety of reasons, are difficult to improve in the short term.

Opportunities

Opportunities are external factors that are attractive to the business and represent areas of potential growth. What factors exist in the environment or market that if approached properly can increase sales, market share, or net profit? These areas are key to your marketing activities because investing a little bit of effort into these areas can result in sizable areas of growth. For example, are there potential partnerships that can open new markets for your company? With an adjustment to your product or service, is there an untapped market waiting to be served? By focusing a bit more on one particular aspect of your business, are you able to reach more market share? By adjusting how you sell your product or service such as utilizing eCommerce, can you reduce expenses?

Threats

Threats are external factors beyond your control that could place your marketing strategy, or the business itself, at risk. Identifying threats allows you to take actions to have contingency plans in place to address these factors if they should occur, before they can affect your business negatively. These challenges are unfavorable economic trends that could lead to reduced revenues or profits. Competition, whether existing or potential, is always a threat. Your existing competitors can make moves that can undermine your business. New competition can arise from a market shift or a new way of providing the same product to the end customer (think On Demand from Comcast vs. Blockbuster Movie Rentals). Other threats could be government regulations, corporate leaks, changes in customer behavior that reduces sales, or new technology that reduces the demand for your current products or services. Make sure you address your worst fears during this part of the exercise. Better to be prepared than being blindsided later.

Action

Once you have your SWOT analysis information, you can then use this information to form a strategy to exploit the opportunities and deal with the threats. The strategy should align with your business’s objectives and goals, but you may want to determine if you need to shift the business to accommodate new, more profitable market opportunities or avoid a disastrous threat.

Look for ways to capitalize on your opportunities that play to your business’s strengths and pursue a strategy that will get you into that space, especially if it enables you can leave one which threatens to hurt your business in the long term. In addition, assess your weaknesses and determine which ones you can address now and which will take time to correct.

Summary

A SWOT analysis is a useful activity to undertake periodically to ensure you are always aware of the environment around you in order to have a better, more focused marketing plan. Your SWOT analysis for your business should:

• Be short and simple and avoid complexity and over analysis.
• Be realistic about the strengths and weaknesses of your organization in relation to your competition.
• Distinguish between where your business is today, and where it could be in the future.

Regardless of your business, a SWOT analysis can provide you with new insights about your business that will help you guide your company into new, profitable markets or avoid high risk situations.