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SWOT classifies a business’s strengths, weaknesses, market opportunities, and competitor threats in a chart to aid the business owner in developing a calculated plan for moving the company forward in a positive direction. It assists in helping recognize which opportunities need implementation, and which threats need to be overcome, in order to improve the success of the company. Not only does this model take into account the assets and flaws of the business itself, but also its relative position within the market.
SWOT has been successful for many business owners because of its simplicity and representation in visual form. This chart only requires consideration and a handful of bullet points in order to establish the outline for improved business goals. The following outline will assist business owners in creating their own SWOT analysis spreadsheet and direct them toward improving the profitability and market success of their business.
Begin on a positive note by considering the things that the business does well. What gives the business the competitive edge that has caused it to be successful thus far? What significant experience do the business owner and key managers possess? What barriers to entry have been established; in other words, which key elements give the business the ability to stand out among competitors? Think about the various assets the business maintains—tangible and intangible—from a buyer’s prospective and how they would add value to the business’s worth overall.
Consider organizing these strengths by type for simpler evaluation.
What aspects of the business are limited by certain factors such as funding, skills, or lack of access to necessary equipment or technology? Examine how the business could improve if none of these limitations were in place. Reflect on which areas money is being wasted. Also, study aspects of the business that may not necessarily be weaknesses, but have room for improvement, and add these elements to the chart as well.
Strengths and weaknesses are categorized by internal factors, while opportunities and threats are external and are aspects out of the business owner’s control.
Analyze external factors that affect the business’s niche market. These factors can include large-scale influences such as political and legal policies. Perhaps with a changing industry law, the business is capable of taking advantage of adjusted regulations. Also, utilizing new releases in technology may be advantageous to the company.
The market is ever-changing, so it is imperative that business owners continually study trends and how they affect the business. It may be beneficial to also consider opportunities that are somewhat within the control of the business owner. For example, are clients asking for a new product feature that is reasonable to provide? Would the business fare well with a group of new clients? When listing and assessing opportunities, be sure to add timelines wherever appropriate.
The final piece of SWOT analysis is recording relevant threats to the business. In variation from weaknesses, threats are viable hazards to the business that the owner has little control over. Threats develop within the changing market and should be assessed as frequently as opportunities. Specific threats could include price competition and economic downturn within the business’s specific industry.
Threats are also often competitors that have the means to take away business from the company. It is important to analyze which advantages the competitors possess that place them at an advantage over the business in question.
Once the SWOT chart has been established, it is time to turn bullet points into business strategies. Utilize strengths to unlock new opportunities. Compare how weaknesses align with threats and see what can be done to minimize negative forces. It can also be beneficial to parallel strengths with threats in order to eradicate them, as well as analyzing how weaknesses might encumber possible opportunities.
As the market fluctuates, it is advantageous for business owners to update the SWOT chart periodically in order to stay actively engaged with market trends. However, be wary of spending too much time focusing on lists rather than assimilating goals. Some business owners get so caught up in creating a SWOT chart that they forget to utilize its valuable material. If you would like to learn how your SWOT analysis affects your business valuation or would like assistance in evaluating a SWOT chart, please contact George & Company in full confidentiality.