SWOT analysis: 4 easy steps to start a business plan
SWOT analysis is a strategic planning tool for identifying and understanding the strengths, weaknesses, opportunities, and threats affecting your business. If you are starting up in business for the first time SWOT is a great way to start getting your mind around some of the most important things to cover in your business plan
SWOT analysis isn’t just for strategic planning. Once you understand how to use the tool you can apply it to decision-making in all sorts of circumstances.
What is SWOT analysis?
SWOT analysis takes its name from the first letters of the four aspects of your business that it analyses:
- Strengths the business possesses
- Weaknesses that might prevent the business from achieving success
- Opportunities that the business might take advantage of
- Threats that might impact on the business
The SWOT analysis is quite straightforward, it involves capturing the Strengths, Weaknesses, Opportunities and Threats that are relevant to your current business situation and evaluating these to develop plans to address them. This article takes you through the key steps in developing a SWOT analysis
We discussed SWOT analysis in episode 34 of The Next 100 Days Podcast. You can listen in here.
Why are you doing a SWOT analysis?
Your business plan will need to articulate the things that will make your business a success, and it needs to demonstrate clearly:
- How you use your strengths to take advantage of opportunities.
- How you overcome weaknesses preventing you from taking advantage of opportunities.
- How your strengths cut the likelihood of threats.
- What you will do about your weaknesses to make the threats less likely.
How do you build a SWOT analysis?
1) Ensure you have a view of where you want to be as a business
You will need a view of what you want to achieve from your business, not just in the short term but in the next 3 to 5 years. You probably have this already, but if not its worth spending some time to think about this before you start the SWOT. You will have lots of Strengths, Weaknesses, Opportunities and Threats, but its only the ones that have an impact on your business vision that are important.
If you are working with a business partner or a senior business team. having a shared vision is very important. Before you can set specific business goals and objectives and pull together the plans that will get you there you need some idea of the end point you are aiming for. Ask each of the senior team to write their own vision of what the business will be like in 5 years time and then share these among the team, discuss any differences in viewpoint and come to a shared view.
2) Complete a SWOT matrix
You can complete a SWOT analysis by yourself, but if you are part of a business team then the first step of the SWOT analysis lends itself to a workshop. The senior people within the business use their collective knowledge to brainstorm each group in turn and capture the strengths, weaknesses, opportunities, and threats pertinent to the business in a matrix. Its important to understand the definition of the four boxes before you start:
- Strengths and weaknesses are internal to the business and generally are in your control.
- Opportunities and threats are external forces that act upon the situation and are generally uncontrollable.
Getting this wrong can make the later stages of the analysis more difficult, so to be absolutely clear:
- Strengths – are positive attributes internal to the business that are within your control.
- Weaknesses – are also internal factors within your control that may impede your ability to meet your goals.
- Opportunities – are external factors that the business could develop.
- Threats – are external factors beyond your control that might place the business at risk.
- Identify each strength, weakness, opportunity or threat within the context of your shared vision for the business.
- be realistic about your strengths and weaknesses, it’s very easy to overemphasize your strengths and underplay your weaknesses.
- be specific ― only include key points and issues, back these up with evidence, not here-say.
- spend too much time capturing this information and don’t over analyse. Aim to only include key points. All we are doing at this stage is capturing ideas that will allow us to kick-start the analysis process.
You can do parts of the analysis using more in-depth tools. The SWOT analysis is a useful way of drawing together the various analyses that you might undertake. I’d usually recommend using a PEST or PESTLE analysis to scan the horizon for the changes that might be coming along in the future, look at the opportunities and threats that arise from these and feed them into the SWOT. There are other more advanced tools, but there are lots of merits in keeping things simple and sticking to just SWOT and perhaps PESTLE especially if you are a new business. Porter’s Five Forces also provides a good tool for scanning the external environment, likewise Porter’s Value Chain can help with the internal environment and inform your assessment of strengths and weaknesses in the business. It’s important to be thorough with this first brainstorm and consider all the factors that are relevant to your business situation. To help we’ve developed a checklist. Complete the form at the end of the article and we will send you a copy.
3) Rank in order of importance
The brain storm will have unearthed a whole range of factors, some will be more important than others. We need to find the ones that we will focus on. Rather than trying to decide an exact order, score each factor with a High, Medium or Low level of importance. This wont be an exact science but will help us in the next exercise.
4)Use the SWOT analysis to start developing a Strategic Plan
The next stage of the analysis is to take the highest ranking strengths,weaknesses, opportunities and threats and answer the following questions:
- How do you use your strengths to take advantage of opportunities?
- How do you overcome weaknesses preventing you from taking advantage of opportunities?
- How can your strengths cut the likelihood of threats?
- What can you do about your weaknesses to make the threats less likely?
The answers to each of these questions will begin to shape the action plan that will move the business forward. We will cover the development of the plan in a future article. In the meantime complete the form below and I’ll send you my checklist for preparing a SWOT analysis and some templates to help you do both SWOT and PESTLE analysis.
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