What is a SWOT Analysis?
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is a technique businesses use to identify internal and external factors – both positive and negative – that impact the company. Strengths and weaknesses are internal factors, while opportunities and threats are external factors.
The Four Elements of Every SWOT Analysis
When you conduct a SWOT analysis, these are the four categories you’ll review:
- Strengths (internal, positive) – The strengths of a business reflect what it’s doing well and the main competitive advantages it holds. Strengths could include a high-quality product, exceptional customer service, high employee and buyer retention, etc.
- Weaknesses (internal, negative) – A business’ weaknesses are internal areas that aren’t operating as effectively or efficiently as they could (or keep the business from competing more efficiently). Examples include a poor customer journey, outdated systems, ineffective marketing, or a high churn rate.
- Opportunities (external, positive) – Opportunities are the external areas that a business can utilize to reach its goals. For example, there may be a new service line that you could start offering, a local company you could partner with, or a new technology you could use to sell your products online.
- Threats (external, negative) – The threats to your business are external factors that could negatively impact your company’s success. Since threats are external, they are factors that you don’t control. Identifying these threats can help you prepare to handle them. Examples of threats include inflation and rising cost of materials, changing regulations, shifts in customer priorities, and a rush of new competitors in the market.
Why do Businesses Perform a SWOT Analysis?
A SWOT analysis is one of the easiest ways to perform an internal and external self-evaluation of your business. The process helps owners slow down, ask key questions, think critically, and uncover important information about the business and its goals for the future. It can also help businesses reveal blind spots and that you or your employees might not notice in your day-to-day work.
The strengths and weaknesses sections will help clarify 1) what the business is doing well and should continue, and 2) what is not going well and needs to be improved.
The opportunities and threats sections are more important than ever in today’s market, with quick company evolution and an uncertain economy. A SWOT analysis can help you keep pace with your competitors and plan ahead, rather than being surprised by challenges as they arise.
How to Conduct a SWOT Analysis for 2023 Planning
Whether your business has been operating for two years or twenty years, you may have an annual planning process in place that works for your specific needs. If you aren’t planning annually, a SWOT analysis can be a helpful, flexible tool to begin looking forward strategically.
Here are some tips to conduct the most effective SWOT analysis possible:
- Gather a broad team – To organize the best SWOT analysis, gather a range of stakeholders from across the business. Different viewpoints are key. If you only talk to one team, it will be hard to paint a comprehensive picture of your business. Be sure there are representatives from each major department, from those operating the day to day to those planning strategy for the future.
- Ideate and listen – The people you gather for the analysis will have unique skills, perspectives, and ideas. Encourage everyone to share all of these in an open and judgment-free setting, whether in person, online, as a group, or through anonymous online tools.
- Plan ahead – Those who are leading the SWOT analysis will need to make decisions based on the team’s ideas. Think about what the main areas to focus on should be, which methods should be used, and when the analysis should be completed by.
- Share your findings – A simple matrix (like the one above) with one quadrant for each category is an easy way to visually showcase the findings of your SWOT analysis.
- Use the analysis to develop goals for the next year – All the insight you gain from the SWOT analysis can be used to build your plans for 2023 and beyond.
Building your 2023 Business Plan with Cultivate Advisors
Developing a plan for 2023 can make it easier to break your goals up into smaller, achievable actions – and a SWOT analysis can be a great first step to building that plan.
Not sure where to start? You don’t have to do it alone. NEWITY is partnered with Cultivate Advisors, an advisory firm built specifically for small businesses. Cultivate’s expert advisors are former and active business owners that provide monthly one-on-one guidance to help you maximize your business’ opportunities.
NEWITY members can schedule a free two-hour session with Cultivate with no obligation.