⌚ 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.
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.
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:
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?