New Book: Roadmap For Starting a Business

The Simple Analysis Tool Your Business Needs

4 min read

At any given point in time, a business owner faces a multitude of critical decisions. New opportunities arise, each carrying their own potential for success or failure. Likewise there is never a lack of challenges popping up, each requiring a solution and roadmap for how to tackle them. 

The one constant, no matter what industry or business type we’re looking at, is how difficult it is to be unbiased. Our gut will always pull in one direction, whether it’s because of familiarity, routine pattern, or intuition, but there are critical aspects we cannot afford to overlook when making consequential decisions. 

While a little intuition and “this feels right” can be a push in the right direction, we must first figure out what directions are available to us and all the good and bad each of them encompasses. 

That means we have to put on our objective thinking caps and map out each option, opportunity, solution, etc. in front of us. 


The Fix: SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. This technique helps a business identify areas where they can improve and seize opportunities while determining any negative aspects that may hinder success.

A SWOT analysis can be used to evaluate new projects, objectives a business is deciding on, or even the entire business as a whole. It is also a useful comparison tool when assessing multiple paths your business can take. By laying out the strengths and weaknesses and unbiasedly making a decision, you will avoid unnecessary errors that are often the result of idealizing one option over another.

Strengths and weaknesses are internal factors affecting a business in the present; while threats and opportunities are external factors that may affect the future. By building on strengths, a business can prepare to seize the opportunities before them and by subduing weaknesses it can make itself less susceptible to threats. 

 

Case Study

Liz runs a popular local boutique located in an area with a sizable population of college students and young professionals. Her boutique is a favorite among her target audience, but she has plans to expand and start an ecommerce store as well.

Knowing that this will be a completely different playing field, Liz decides to conduct a SWOT analysis to see what opportunities she needs to seize and what precautions she must take to avoid possibly costly decisions. 

 

Liz’s SWOT analysis:

Strengths: 

  • Affordability
  • Loyal local customers
  • Little competition in the area

Weaknesses:

  • Minimal presence on social media
  • No website or online ordering
  • Small inventory on-hand

Opportunities:

  • Building up social media
  • Bringing in new in-store customers because of online marketing
  • Significantly increasing sales through online store

Threats:

  • Online competitors
  • Trouble with online customer service leading to bad reviews
  • Not enough employees to keep up with both retail channels

 

How to Create a SWOT Analysis

Keep in mind that the types of questions you ask and considerations you make at each step depend on what situation you are analyzing.

Identify strengths - A good initial question to ask is what makes my business different and special when compared to competitors? What is it that your business does better than others?

Pinpoint weaknesses - Not fun, but necessary. Look at areas of your business that are the least profitable, where you lack resources, what is costing the most time and money, and what things customers (or even you!) regularly complain about. 

Determine opportunities - The main question to ask here is what is happening in my business and surrounding market that would allow me to grow sales and expand my customer base. A good technique is to connect your opportunities with your weaknesses by thinking about what opportunities could possibly arise if you were to eliminate weaknesses.

Recognize threats - Think about: what obstacles may keep you from reaching your objectives? What developments are occurring within the industry and among competitors that could set you back?

Important Considerations:

  • Try to be as subjective as possible. At the end of the day a SWOT analysis is your view of a situation at a specific moment in time. If you can, bring in others to help you with the analysis to create a more holistic and realistic view. 
  • Depending on the lifespan of your SWOT’s objective, redo it every so often to accomodate for internal and external changes.
  • Be honest and realistic. Use data and forecasts where you can to determine opportunities and threats.

 

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