A SWOT analysis is an incredibly powerful tool in developing an effective business strategy. It is useful for all types of business, and there is no time or quantity limit on how often or when you can perform one, which makes it invaluable in analyzing and reanalyzing your strengths and potential shortcomings.
What is a SWOT Analysis?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses are both internal company factors that represent if your organization is doing well and where it could use some improvement. Generally, these are things that are able to be changed either in the short or long term.
Opportunities and threats, on the other hand, are external factors that affect your business’s success. These are things that go on within your market. You can seize opportunities and protect against threats, but ultimately you have little control over them. These are things like your competitors, supply and demand, and raw material pricing and availability.
Your analysis will organize these things into an easy-to-read list that allows you to incorporate strategic planning in determining your company’s next course of action.
In order for a SWOT analysis to be effective, however, the company’s leaders must help perform it. They should be accompanied by a group of managers from different departments in order to ensure the analysis is as complete and thorough as possible.
Many of the most successful companies also involve their customers in this process through the use of surveys and questionnaires.
What is a SWOT Analysis Important?
There are several reasons why you should perform a SWOT analysis on your business, but these are some of the top ones:
Economic principles are founded on the idea of scarcity. As such, every market— and by default, every company— has a finite supply of resources and labor they can use. Ensuring you are familiar with your company’s strengths and resources helps you to better understand how to allocate those resources in an efficient manner.
In examining your business’s weaknesses and potential downfalls, you gain the ability to identify which areas need the most help and guidance. This aspect of the analysis is critical if you want to stand a chance against your competition, especially if you are in a highly saturated market.
Making these improvements can also help you preserve valuable time and capital you may otherwise have lost in putting emphasis on the wrong departments. It can also help you turn your weaknesses into strengths.
This is perhaps the most important part of the SWOT analysis, and here’s why:
In running a business, it is always necessary to be a few steps ahead of your opponents, and your SWOT analysis can help you do that.
Threats within your market have the potential to severely impact your operations, and you can’t change that. However, you can mitigate the effect those threats may have on you by preparing for them ahead of time.
There are many more reasons why a SWOT analysis is beneficial to your company, but these are the ones that have the most impact on your daily operations.
How to Perform a SWOT Analysis
As stated, you’ll need multiple people to perform a SWOT analysis. Before you begin, you’ll want to ensure you have your organization’s leaders and at least one representative from every department within your company involved. Ensure they have at least a few hours of availability. Then, begin your SWOT.
Step 1: Brainstorm
The beginning of a SWOT analysis is a lot like a large brainstorming session. During this stage, you’ll essentially be collecting ideas from the various department representatives to get an idea of where you are as far as strengths and weaknesses.
It’s beneficial to give each person a pad of paper so they can write their ideas down as they come and won’t have to interrupt to have their voices heard before the idea is forgotten.
Step 2: Rank
Once you have all of your staffs’ ideas out there, you’re going to post them to a large board or wall. This will allow your staff to vote on the ideas as they see fit.
This can be done in a number of ways.
One way is to give each person an appropriate number of votes they can distribute in the manner they see fit. Another would be to use a Reddit-like system of upvotes and downvotes. Once all the votes are cast, arrange the ideas onto a single sheet of paper in the order from most votes to least votes and move to the next step.
Step 3: Repeat
You are going to repeat the second step for each of the four quadrants of the SWOT analysis: strengths, weaknesses, opportunities, and threats. You can give each quadrant its own sheet of paper or simply arrange them into boxes on a single piece of paper. Alternatively, you can type them into a word document.
If you’re having trouble coming up with opportunities within your market, you can overcome this by reading about potential sources of income in your industry.
Use this process of a SWOT analysis as often as is appropriate or whenever the market or internal factors change.
A SWOT analysis is an invaluable tool for businesses – both old and new. It can help you effectively allocate resources, improve operational processes, and, best of all, save you money.
If you are performing a SWOT analysis for your business, I recommend hiring a tax consultant for the Strengths and Weaknesses sections. A tax professional can help you determine if you qualify for any additional deductions when you file and can assist you in ensuring that incorrect tax filings don’t present you with any risk.
At Borshoff Consulting, we are qualified to assist you in these areas to ensure your SWOT analysis is as thorough as possible. If you need CFO assistance or business consulting, we are more than happy to help! Just reach out today for a free consultation!!