I thought most people had come across this term and understood that it was a natural part of a business planning process. Apparently not. I remember a jaw-dropping incident when a fellow CEO dismissed the necessity for a SWOT in his business plan.
I was completely taken aback that a business plan could actually be done without one! It’s much like missing a vital organ. As the saying goes, don’t assume, otherwise you make an …. of u and me.
Provides insights and identifies gaps
For the uninitiated, the four letters stand for Strengths, Weaknesses, Opportunities and Threats. Done properly, it gives you insights that you may not have considered and identifies gaps that you can work on.
It’s possibly another of those things like vision and core values that many consultants recommend, gets developed and filed away to collect dust, but if you’ve been reading my blog for a while, then you know I believe in these things. I have used them myself and I know that they work.
Templates – to use or not to use?
Many templates are available if you do a search around the web. Use them if you think a template would be helpful, but the purpose of this post is more to get you thinking rather than coming up with a pretty chart listing your strengths and weaknesses.
One of the most common difficulties when completing a SWOT is mixing up the categories so my suggestion is to think internally with your Strengths and Weakness and to think externally with Opportunities and Threats. Following this broad guideline should help keep the categories apart.
Strengths and Weaknesses
Your strengths – what are they and how can you capitalise on them? Are they similar to the strengths of your competitors? If they are, then are they really strengths? Is it something that requires nurturing?
Your weaknesses – what are they and do you need to fix them? Do these weaknesses matter in the business/industry that you are in? Can you work around them? Can you replace them?
Are these perceived weakness that don’t matter to your target market? Or are these weaknesses perceived by your target market that you need to address with better communication?
If you are a sole trader and are having difficulty being objective, it would be helpful to do this exercise with a trusted peer. Trusted peer doesn’t mean your friend, spouse or anyone else with a vested interest!
Opportunities and Threats
With Opportunities, I find it easier to think in terms of competitors as generally, your competition’s weaknesses are opportunities for you, and similarly, your competition’s strengths are your threats.
What is the market like? What are the trends? Opportunities – think potential. Threats – think risk.
Is there any legislative risk in your industry? Is your product easily superseded? Is there untapped demand? Is there a gap that needs to be filled? Would partnerships or strategic alliances extend your reach? Is your industry subject to seasonal shifts? Do you have key staff that you rely on who could be poached?
If some of the opportunities and threats that you come up with are speculative, that’s ok. This process is about thinking over potential issues.
By the way, most of your threats should be addressed in a risk management section of your business plan. Something to keep in mind.
Sometimes the analysis is a little easier if your SWOT is broken into your operational areas such as marketing, financial, technology, human resources, but this is really a personal preference and depends on how structured you prefer to be. There isn’t a right or wrong way.
Your SWOT analysis should have helped you distil some ideas and draw some conclusions. These should then lead to strategies and action items that need to be fleshed out in the rest of your business plan.
Hopefully I have change the “What the… SWOT?” thinking into “Why haven’t I (or we) done this yet?” Good luck and please share your thoughts!