What is a SWOT analysis and how can a small business use it?
How can a SWOT analysis be used in a small business?
Every business has an array of strengths at your fingertips; this could be the physical products or services you provide, your staff or your innovative approaches. However, on the flip side, you will always have some weak points and elements that might put you at a disadvantage to your competitors.
For a small business owner, it is essential to be aware of what makes your business stand out from the crowd, as well as the internal or external risks that might affect you. One technique a small business can adopt to identify what could potentially impact the success of your business is a SWOT analysis. Failure to consider critical strengths, weaknesses, opportunities or threats of a small business could lead to poor decisions and struggles that could be avoided.
A SWOT analysis is a meaningful way to measure both the internal and external factors that affect your business.
Without having an accurate overview of your business, it will always present a challenge. It will be difficult to recognise potential improvements you can apply to remain relevant to your customers, as well as potentially missing opportunities to stay ahead of your competitors. A SWOT analysis is commonly used in strategic planning, where it can help businesses identify their niche in a market.
One thing I always tell any business undertaking a SWOT is that the term analysis is a bit misleading. Once you have identified the four areas of a SWOT framework, it is the interpretation of the facts and results that will create the real value. By assessing and reviewing your current business activities and operations, you can identify actions, approaches and strategies for now and the future.
Why is a SWOT analysis necessary for a small business?
A SWOT analysis is a handy analytical tool for any business, but certainly for a small business owner. It provides a simple and straightforward framework, that you to apply to your planning and decision making. It is easy to interrupt and practical in its application.
However, you need to take the time to understand what the unique features of your business are, what differentiates you in the market, and in turn, what are the internal and external factors that could be a threat to your business growth and success.
The application of a SWOT analysis provides you with the opportunity to identify where you can leverage the internal businesses skills, expertise and knowledge, which should then used to recognise new opportunities, markets, and customers alongside increasing your awareness of any business weaknesses to help avoid poor business decisions. With this increased awareness of where your business could be exposed, offers you the insight to put in place control mechanisms to minimise their effects.
Importantly a SWOT analysis challenges a small business to look beyond the companies current target market and customer base and discover new opportunities.
When should you use a SWOT analysis?
It is often encouraged for a business owner to undertaken a SWOT analysis both at the beginning of a new business venture and at regular intervals. It is critical to remain aware of how your business is performing against your competitors and other social or economic changes.
Doing a SWOT analysis can be very helpful when considering diversification into a new customer market or geographical trading area.
In simple terms, a small business can do a SWOT analysis at any time in the life of your business. It is a tool that provides you with a clear and visual representation of the internal and external factors that affect your business. Whether positive or negative, they all contribute to better business decisions, planning and strategies.
By implementing a SWOT framework, you can start to build a strategy that helps you distinguish yourself from your competitors.
This simple grid framework, allows a small business to capture what you are doing now, what you could be doing, what your competitors are doing and what you need to do better, both with an internal and external viewpoint.
By identifying these threats allows you to make strategic decisions, so you are not left behind. You can ensure you are doing things efficiently, that are cost-effective and maximising available systems and technology.
By undertaking a SWOT analysis, it will provide you with valuable information regarding what the threats to your business are, such as changing customer choices, new ways of purchasing among many others.
Why is a SWOT analysis important for small businesses?
A SWOT analysis is a handy tool for a small business. It is straightforward to apply and interpret, which often makes it a realistic analytical approach to embark on, especially if you are trying to balance the demands of running your own business.
A SWOT analysis states the unique features of your business, what your business can offer compared to your competitors, and where you need to consider threats and possible limitations to your business.
Using this form of analysis encourages small businesses to look internally and externally to help identify ways to leverage business skills, experience, knowledge and systems to support ongoing success and growth.
A SWOT challenges a small business to look beyond your current target market and customer base and identify what opportunities are open or possible through undertaking a simple form of analysis to see how your business can capitalise on its strengths.
How to evaluate SWOT results?
What steps should a business take to act on the SWOT results, and how should you determine those steps?
The first thing I always tell any business undertaking a SWOT is that the term analysis is a bit misleading, as it is not an analysis that you make of the SWOT results, but an interpretation of facts discovered through assessing and reviewing your current business activities and operations. A SWOT enables a business to plan future activities and strategies.
A SWOT presents a high-level overview of what a business perceives as its main issues.
The SWOT provides a one time overview which focuses attention on those areas thought to be urgent whether a positive or negative matter. In regards to understanding why or where to begin with interpreting the results, you may want to apply an approach such as identifying the risks of not doing something and the risks of doing it. You should always establish a prioritisation list. Threats should be high on the list, and opportunities should be next. It is not always that straight forward, but this is an excellent approach to apply to help you develop your understanding of where you will benefit from undertaking an action from your SWOT.
Here are some questions you can use to help get going with your SWOT framework:
What advantages does your organisation have?
What do you do better than your competitors?
What unique or lowest-cost resources can you draw upon that others can’t or haven’t?
What do people in your market see as your strengths?
What do your customers say you do well?
What factors mean that you “get the sale”?
What is your organisation’s Unique Selling Proposition (USP)?
What attracts customers to your business?
What could you improve?
What do you see as holding you back?
What do you think you could stop doing?
Are you doing anything that is wasting time or money?
What are others in your market likely to see as weaknesses?
What factors lose you sales – customer service, no online payments etc?
Are there good opportunities you are aware of within your business, customer or market?
What interesting trends are you aware of?
Are there changes in technology that you could use?
Are there any changes within your market that you could respond to?
Changes in government or economic matters.
Changes in social patterns, population profiles, lifestyle changes, purchasing patterns.
Are there any local events and marketing opportunities you could use?
A useful TIP when starting to assess the opportunities for a business is to look at the strengths you have identified and ask yourself whether these provide any opportunities. Alternatively, look at your weaknesses and ask yourself whether you could identify opportunities for the business by eliminating them, such as no longer doing something manually or stopping doing something that isn’t what your customers want.
What obstacles do you face?
What are your competitors doing?
Are quality standards or specifications for your job, products or services changing?
Are you reliant on any one person or supplier to deliver your products or services?
Is changing technology threatening your position?
Do you have debt or cash-flow problems?
Could any of your weaknesses seriously threaten your business?
What are the benefits of a SWOT analysis?
A SWOT provides the opportunity for:
- Improved focus – Undertaking a SWOT ensures the business decision-makers are on the same page. It identifies what you should be working towards now and in the future.
- Strategic alignment – With everyone working towards the same goals, managers and employees can build better strategies and core business activities together.
- Identify unknown aspects – You’ll likely discover aspects of your business that you didn’t know about. From unknown strengths to hidden threats, uncovering this information will help you move forward.
What should businesses expect a SWOT analysis to do for them?
A SWOT analysis is only as good as the number of actions you take from it.
A business owner should review the data, ideas and information in your framework and use them to create actionable strategies to guide your business.
Here are some ways you can use the information from your SWOT analysis.
- Identify business strategies and goals.
- Create a business and marketing plans.
- Identify key customer groups, new markets and new customers.
- Find ways your business can diminish weaknesses, to build more resilience.
- Set SMART goals for each of the opportunities you identified, so you have a clear plan to achieve them.
- Explore how you can combine your strengths and opportunities to develop new products, services, customers or markets.
- Identify ways you can minimise the effect of your business threats.
- Identify what your internal and external strengths and weaknesses are so you can proactively react to any changes in your business, customers or markets.
- Look at your weaknesses and opportunities to create a list of areas ready for improvement.
- Make a list of activities to avoid that fall under weaknesses and threats.
Once you understand how to conduct a SWOT analysis, it can become a tool that you use over and over again in your business to explore new opportunities and improve your decision-making process, devise a plan to use your strengths to decrease the threats.
It is always advisable to undertake a SWOT analysis with more than one person, the more input, the better the results. If you are the sole business decision-maker, you want to ensure you employ objectivity, critical thinking and challenge your thinking to provide an unbiased view.
As a business owner, it is very easy to think you have a very clear understanding of your business, the market and competitors, but you will be surprised how much value you will get by asking others to provide an objective view.
If you are running a business on your own, or you do not feel you have an appropriate member within the business to work with you on your SWOT, there are always other people and services out there to call upon.
You could ask someone within your business network, or use a business support manager or business consultant. There are many options available to you to help you achieve the best SWOT analysis for your business, with real and tangible results.
The more you put into your SWOT, the higher the value, and real rewards you can achieve — all with the end goal of developing a more prosperous and resilient business.