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Why You Need a SWOT Analysis for Your Business

A SWOT analysis helps you make smart, informed business decisions.

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Table of Contents

Understanding your company’s position within your market or industry and knowing how and where you can grow is critical for any business owner. The knowledge allows you to develop your company strategically rather than wasting your efforts trying to expand into a market that doesn’t align with your business or being steamrolled by a surprise competitor. This is why it is helpful to perform a strengths, weaknesses, opportunities and threats (SWOT) analysis to assess where you are now and how you can improve. 

What is a SWOT analysis?

A SWOT analysis is a type of analysis that helps you develop your business strategy by comparing internal factors (strengths and weaknesses) against external factors (opportunities and threats). Examples of internal factors include things that you have control over and can change, such as your staff or your intellectual property. External factors are things that you cannot control, such as consumer trends or competitors.

A SWOT analysis has four quadrants:

SWOT quadrants

The analysis provides you with an accurate picture of what your business is currently doing well and how it can improve.

“[A SWOT analysis] gives you a firm grasp of what is affecting your business internally and externally,” said Lynne Pratt, creative content expert. “By carefully evaluating the analysis, a business can find new ways of progressing and achieving growth .”

Why should you do a SWOT analysis?

Every company, no matter its size, should do a SWOT analysis periodically. It is a crucial strategic tool that will reveal problems that need to be fixed, strengths that need to be capitalized on, potential threats that need to be mitigated and opportunities for growth.

Unbiased, big-picture look at the company

Sometimes, it’s hard to see the big picture when you are involved in the day-to-day operations of a company. A SWOT analysis gives you a detailed, unbiased overview of your business as a whole or a specific product or campaign. By involving a variety of stakeholders, you get a perspective that you might not have gotten as an individual or small group of executives. 

Help with overall company direction or project feasibility

It can also help train your brain to consider every factor that could affect your project or business. When you’re facing a tough issue or if you’re just unsure of your current strategy, a SWOT analysis illuminates details so you can formulate actionable plans based on each of the four quadrants.

For example, if you were considering opening a new location for your business, you could run a SWOT analysis to see if you are in a good position to do so. You could also use it to identify outside factors that you will need to plan for.

Preparation for the future

The threats portions, in particular, can help you see and overcome any possible problems, either competitive or market-based, so that you can prepare a proactive initiative. For example, if you find out that a competitor has improved its technology, you can work on similarly upgrading your own. In the early stages of the pandemic, restaurants that did a SWOT analysis could identify the threat of fewer customers opting to dine in and change their strategy to focus on takeout and delivery sooner. 

“A SWOT analysis is useful so that you don’t get caught entirely off-guard,” said David LaVine, founder of RocLogic Marketing. “You [should] do a SWOT analysis for each application area you’re considering operating in.”

“We conduct [analyses] every six months as a rule in our business,” said Alistair Dodds, marketing director and co-founder of Ever Increasing Circles. “They act as a great check on how the competition has evolved in that time period.” [Discover seven effective ways to differentiate your product .] 

Marketing and sales focus

Although many of your company’s strengths should be known, you may discover one you hadn’t considered before or even something that might be new. Perhaps you have reached some threshold in revenue, sales, five-star reviews or customers that you can now use in your sales and marketing efforts. For example, a customer threshold might result in a marketing campaign with a headline of, “1 million customers have trusted Company X. Won’t you?”

Who should conduct a SWOT analysis?

A SWOT analysis should be a collaborative effort between several levels of employment within your company. Founders and leaders should be the most closely involved but, to gain a true picture of your business, gather input from a group of people that can contribute several perspectives.

“It’s vital to go through your analysis with key stakeholders,” said Dodds. “When you identify weaknesses, it’s a great time to get other department heads and staff to suggest solutions — you’ll be amazed at the creativity and problem-solving inherent in your team if they are given the opportunity [for] input.” 

If you’re a solo operation, ask close friends or related professionals, such as your accountant, lawyer or advisor, for input. Having plenty of outside perspectives helps make your analysis as well-rounded and objective as possible. 

How to do a SWOT analysis

The first step of a SWOT analysis is to create your grid. Start with strengths in the upper left corner, then weaknesses in the upper right corner, opportunities in the bottom left and threats at the bottom right of the grid.

Next, fill in each quadrant. An easy way to do this is to ask yourself questions that apply to each box. Here are some suggestions.

  • What do you do well?
  • What unique skills or services do you have?
  • What experiences do you have that can help you achieve your goal?
  • What expertise, knowledge or other intellectual property do you have?
  • What do you do better than your competitors?
  • Where are you most profitable? Why?
  • What aspects of your business could hinder your progress?
  • What skills or resources are you lacking?
  • What is costing you money?
  • Is there anything you feel like you’re failing at?

Opportunities

  • What can you improve?
  • What external conditions can help you achieve your business goals? [Related article: Tips for Setting Better Business Goals ]
  • Are there new audiences you could potentially reach?
  • Is there technology you could use to enhance your business?
  • Can you do more for your existing customers?
  • Where or how could you expand your business?
  • What external conditions could damage your progress or performance?
  • What do your competitors do well?
  • What are your competitors doing that you are not?
  • What is going on in your industry?
  • What is happening (or could happen) in the economy that could harm your business?
  • Are there new competitors in your market?
  • Is your target audience shrinking?

Here are some additional points to consider as you fill in your quadrants:

swot analysis in conjunction with the business plan

Your quadrants do not have to be perfect — you can always create multiple drafts of your analysis, editing what you have filled in as you go. Host a brainstorming meeting to complete your first draft.

After you have filled in the quadrants, review each quadrant and evaluate your results.

In preparation for these conversations, review some of the most important terms for business owners to enhance your ability to assess each area of the SWOT analysis and brainstorm solutions.

How to evaluate your results

Once you complete your SWOT grid, you need to analyze the information you’ve collected. Here are a few things to consider.

Capitalize on your strengths

To evaluate your SWOT analysis effectively, start with your strengths and don’t brush them off, said Pratt. “You might feel that because you’ve got these nailed down that you don’t need to do anything with them, but this is wrong,” she said. “There is always room for improvement and working on your strengths, as well as [with] the [other quadrants], will help them remain your strengths”:

  • Rank your strengths from strongest to weakest.
  • Focus on using your strongest points to drive marketing and sales.
  • Bolster your weaker strengths by implementing improvements.

Address your weaknesses

Next, look at your weaknesses and identify which aspects of your business each weakness is related to. For example, do you need to boost customer retention by better training your staff? Or is location and/or competition the problem? “Identify where the problem is coming from so you can begin to plan to address it,” said Pratt.

  • Identify the sources of each weakness.
  • Change of policy
  • Improve company culture and leadership
  • Increase investment
  • Hire/fire employees
  • Improve marketing or sales messages
  • Secure business capital from investment or lender
  • Change your suppliers or renegotiate terms with them

Pivot to defeat threats

You can also see which of your threats are related to your weaknesses and if any of them are caused by something you can change. Try to connect your strengths to ways you can combat threats:

  • Competitors are gaining market share : Determine why this is happening. Do they have a more compelling message, a lower price or better product? Then, take steps to combat whatever issue is occurring. [Related article: Ahead of the Pack: 8 Ways to Keep Your Business Competitive ]
  • Competitors are bigger or have more money : Look to find additional funding to grow your company or position your small business as a place that provides better quality or customer service. You can also invest in clever guerilla marketing to attract attention.
  • Economy is getting worse : Find ways to lower your prices, introduce a lower-priced version of your current product or shift marketing to higher-income customers.
  • Product is becoming obsolete : Improve or change your product to fulfill customers’ changing needs.
  • Material cost is increasing : Look for new suppliers or new materials and raise prices if necessary.
  • New government regulations : Assess any additional costs and possibly raise prices, change processes or pressure suppliers to comply.

Take advantage of opportunities

Finally, consider whether there are time constraints that could impact your opportunities. Are any of them short-term or seasonal? If so, make it a priority to hit those opportunities first and create an action plan for taking advantage of them.

Nathan Thompson, e-commerce and growth lead at The Others Beauty Co., said his company splits their business opportunities into short-, mid- and long-term goals. They set deadlines for each goal to ensure it gets done. “SWOT results should be analyzed and evaluated in order of actionability,” he said. “Having deadlines set for each milestone ensures accountability for all parties.”

  • Organize opportunities by timeliness and budget.
  • Identify the opportunities that will have the biggest positive impact on the company.
  • Use this criterion to decide where to focus your resources first.

A sample of SWOT in action

To see how SWOT analysis works, consider this example:

Soft-Touch makes pads that attach by Velcro to the plastic face mask worn by sleep apnea sufferers to help them breathe while they sleep. The company founder herself has sleep apnea and she developed the product to increase the comfort of wearing the mask and to eliminate the marks it left on her face the following morning.

The company has largely grown its sales through word-of-mouth. A major sleep apnea equipment maker wants Soft-Touch to supply the pads for all of its masks. To satisfy the increased demand, Soft-Touch would have to outsource its manufacturing.

Here is a sample SWOT analysis for Soft-Touch as they consider this opportunity: 

Notice that the SWOT analysis doesn’t provide an answer. Instead, it provides a framework to help formulate an answer and allows you to see exactly what the opportunities are (an expanded market share and increased revenue), what weaknesses currently limit the company (lack of funding and marketing expertise, limited manufacturing capacity), its current strengths (unique proposition and trusted brand) and the threats it could face if it takes the opportunity (less control and need for financing).

“Taking time to think strategically will lead to ways you can streamline to get more done as well as take your business into new directions that can benefit (or even save) the company,” said Joshua Ladick, president and founder of GSA Focus.

Remember that your SWOT analysis is only a starting point, not an actionable plan. “Don’t confuse SWOT for strategy,” said Greg Githens, executive and leadership coach at Catalyst & Cadre. You are still responsible for developing a strategy that will take you from where you are to where you want to be, and SWOT provides a roadmap for that strategy.

​​Jennifer Dublino and Sean Peek contributed to this article. Source interviews were conducted for a previous version of this article.

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What is a SWOT Analysis? (And When To Use It)

Use a SWOT (strengths, weaknesses, opportunities, threats) analysis to grow your business.

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Table of Contents

A SWOT analysis is a planning process that helps your company overcome challenges and determine which new leads to pursue. “SWOT” stands for strengths, weaknesses, opportunities and threats. You should perform a SWOT analysis before you commit to any sort of company action, whether you are exploring new initiatives, revamping internal policies, considering opportunities to pivot or altering a plan midway through its execution.

While there are numerous ways to assess your company, one of the most effective is to conduct a SWOT analysis. Learn all about this approach below.

What is the objective of a SWOT analysis?

The primary objective of a SWOT analysis is to help organizations develop a full awareness of all the factors involved in making a business decision . Albert Humphrey of the Stanford Research Institute created this method in the 1960s during a study conducted to identify why corporate planning consistently failed. Since its creation, the SWOT analysis has become one of the most useful tools for business owners to start and grow their companies.

“It is impossible to accurately map out a small business’s future without first evaluating it from all angles, which includes an exhaustive look at all internal and external resources and threats,” Bonnie Taylor, chief marketing officer at CCS Innovations, told Business News Daily. “A SWOT accomplishes this in four straightforward steps that even rookie business owners can understand and embrace.”

When to perform a SWOT analysis

Employ a SWOT analysis before you commit to any company action, whether that’s exploring new initiatives, revamping internal policies, considering opportunities to pivot or altering a plan midway through its execution. Sometimes it’s wise to perform a general SWOT analysis to check on the current landscape of your business and improve operations as needed. The analysis can show you key areas where your organization is performing optimally and areas where operations need adjustment.

Don’t make the mistake of thinking about your business operations informally, in hopes that they will all come together on their own. If you take the time to put together a formal SWOT analysis, you’ll be able to see the whole picture of your business. From there, you can discover ways to improve or eliminate your company’s weaknesses and capitalize on its strengths.

While the business owner should certainly be involved in creating a SWOT analysis, it is often helpful to include other team members in the process. Ask for input from a variety of team members and openly discuss any contributions made. The collective knowledge of the team will allow you to adequately analyze your business from all sides. 

You can also conduct a personal SWOT analysis in your own life, whether for professional or other purposes. 

What does a SWOT analysis include?

A SWOT analysis focuses on the four elements of the acronym, allowing companies to identify the forces influencing a strategy, action or initiative. Knowing these positive and negative elements can help companies more effectively communicate what parts of a plan need to be recognized.

When drafting a SWOT analysis, individuals typically create a table split into four columns to list each impacting element side by side for comparison. Strengths and weaknesses won’t typically match listed opportunities and threats verbatim, although they should correlate, since they are tied together.

Billy Bauer, owner of ROYCE New York, noted that pairing external threats with internal weaknesses can highlight the most serious issues a company faces.

“Once you’ve identified your risks, you can then decide whether it is most appropriate to eliminate the internal weakness by assigning company resources to fix the problems, or to reduce the external threat by abandoning the threatened area of business and meeting it after strengthening your business,” said Bauer.

Internal factors

Strengths (S) and weaknesses (W) refer to internal factors, which are the resources and experience readily available to you.

These are some common internal factors:

  • Financial resources (funding, sources of income and investment opportunities)
  • Physical resources (location, facilities and equipment)
  • Human resources (employees, volunteers and target audiences)
  • Access to natural resources, trademarks , patents and copyrights
  • Current processes (employee programs, department hierarchies and software systems) [See related articles: Best CRM software of 2024 and The Best Business Accounting Software Services of 2024 ]

External factors

External forces influence and affect every company, organization and individual. Whether these factors are connected directly or indirectly to opportunities (O) or threats (T), it is important to note and document each one.

External factors are typically things you or your company do not control, such as the following:

  • Market trends (new products, technology advancements and shifts in audience needs)
  • Economic trends (local, national and international financial trends)
  • Funding (donations, legislature and other sources)
  • Demographics
  • Relationships with suppliers and partners
  • Political, environmental and economic regulations

After you create your SWOT framework and fill out your SWOT analysis, you will need to come up with some recommendations and strategies based on the results. Linda Pophal, strategic marketing communication consultant and content marketer at Strategic Communications, said these strategies should focus on leveraging strengths and opportunities to overcome weaknesses and threats.

“This is actually the area of strategy development where organizations have an opportunity to be most creative and where innovative ideas can emerge, but only if the analysis has been appropriately prepared in the first place,” said Pophal.

SWOT examples

SWOT analysis table

Bryan Weaver, an in-house advisor to Scholefield Construction Attorneys, was heavily involved in creating a SWOT analysis for his firm. He provided Business News Daily with a sample SWOT analysis template and example that was used in the firm’s decision to expand its practice to include dispute mediation services. His SWOT matrix included the following:

Resulting strategy: Take mediation courses to eliminate weaknesses and launch Scholefield Mediation, which uses name recognition with the law firm, and highlights that the firm’s construction and construction law experience makes it different.

“Our SWOT analysis forced us to methodically and objectively look at what we had to work with and what the marketplace was offering,” Weaver said. “We then crafted our business plan to emphasize the advantages of our strongest features while exploiting opportunities based on marketplace weaknesses.”

Blank SWOT analysis table

Additional business analysis strategies

The SWOT analysis is a simple but comprehensive strategy for identifying not only the weaknesses and threats of an action plan, but also the strengths and opportunities it makes possible. However, a SWOT analysis is just one tool in your business strategy. Additional analytic tools to consider include the PEST analysis (political, economic, social and technological), MOST analysis (mission, objective, strategies and tactics) and SCRS analysis (strategy, current state, requirements and solution).

Consistent business analysis and strategic planning is the best way to keep track of growth, strengths and weaknesses. Use a series of analysis strategies, like SWOT, in your decision-making process to examine and execute strategies in a more balanced, in-depth way.

Max Freedman and Nicole Fallon contributed to this article. Some source interviews were conducted for a previous version of this article.

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How to Do a SWOT Analysis for Your Business

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

swot analysis in conjunction with the business plan

A SWOT analysis compares internal strengths and weaknesses with external opportunities and threats to create an action plan. A SWOT analysis is most commonly used as a business planning tool, but it also is helpful for personal development.

For small businesses , a SWOT analysis can be used as:

  • A quick way to examine a small business idea.
  • A springboard for annual business planning .
  • The basis of a marketing action plan.
  • A starting point for business contingency planning .
  • A tool for involving staff/employees in business planning , for example, solving particular problems or achieving certain  business goals .
  • A self-evaluation tool to gauge how you're doing managing staff or running your business.

How to Do a SWOT Analysis

A SWOT analysis is organized in a matrix or table form with two rows and two columns. 

The first row represents factors internal to your organization over which you have some degree of control. Strengths are listed in one column and weaknesses in another. Factors to consider include:

  • Your financial situation (income, cash flow, debt, investments, etc.).
  • Your market share.
  • The relative skills of your employees and/or contractors.
  • Your physical premises, location, and equipment.
  • Assets such as patents or copyrights.

The second row represents factors external to your organization over which you have  little to no control. Opportunities are listed in one column and threats in another. Factors to consider include:

  • The state of the economy and your particular industry.
  • Your market share and the possibility of increasing or decreasing competition for your products/services.
  • Your ability to retain or hire employees or contractors as needed.
  • Regulatory changes that may affect your business.
  • The ability to obtain financing (changing interest rates, increased loan requirements, etc.).

Fill in the boxes in your table, according to the specific purpose of your SWOT analysis so it looks something like this:

SWOT Analysis Process

Always choose a specific purpose for your SWOT analysis. Otherwise, you'll just end up with a bunch of generalizations that won’t provide specific direction for an action plan.

Because a SWOT analysis is a subjective process, different groups of people or individuals may come up with different results for the same stated purpose or topic. One of the best ways to take advantage of this is to use an outside facilitator. Employees, customers, partners, and other stakeholders are more likely to give honest feedback to a consultant who is not part of your orgnaization. If management oversees the process, feedback might be limited to wehat stakeholders think management wants to hear.

Remember that a SWOT analysis is not the be-all and end-all of business planning. It works best as a starting point for small-business planning used in conjunction with other business-planning tools, such as  PEST  (political, economic, sociocultural, and technological) analysis. This ensures that you don't overlook critical external factors, such as new government regulations or technological changes in your industry when you're looking at opportunities and threats.

Using the SWOT Analysis

Once you have completed the table, use it to create a strategy or strategies that will make your business more competitive. Four questions to use as a thinking/discussion guide include:

  • Do strengths open any opportunities?
  • How can we convert weaknesses to strengths?
  • What do we have to do to take advantage of opportunities?
  • How do we best neutralize threats?

Management and employees can come together to answer these questions developed from the  SWOT analysis. Again, continuing to use an outside facilitator can help everyone stay focused and perhaps introduce perspectives those inside the organization are less likely to consider.

IMAGES

  1. Easy Swot Analysis Examples for a Business Plans

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  2. SWOT Analysis for Business Plan Presentation

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  3. How to Conduct a SWOT Analysis for Your Business Plan

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  4. Swot Analysis

    swot analysis in conjunction with the business plan

  5. 40 Powerful SWOT Analysis Templates & Examples

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  6. 3 Easy Steps to Create a SWOT Analysis

    swot analysis in conjunction with the business plan

VIDEO

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  6. Business A’Level (SWOT Analysis) Part 1