You’ve worked hard to get your business off the ground. It now has strong foundations and solid day-to-day processes. What’s next is to embark on a process of growth. You want your firm to start growing its presence and its profits.
The best kind of growth is that which delivers results in the short-term, is sustainable, and aligns with your long term goals. You don’t want to outgrow your resources or your capabilities. Working out how to achieve that kind of growth isn’t easy. Deciding which direction to take to ensure growth, can seem like a daunting task.
You must give yourself the best chance of exploring the right avenues of growth. The way to do that is by gaining a full understanding of where your business stands right now. You need to evaluate your strengths and weaknesses. You also need to assess where you sit within the wider business environment. A SWOT analysis is a tool that can make that process much easier.
What is a SWOT Analysis?
A SWOT analysis is a common assessment and evaluation tool. It can be used in a variety of fields. Some people utilise SWOT analysis to aid in personal growth. Most often, it is utilised in business. There, it can help managers or boards make informed, effective decisions.
As you’ve likely realised, SWOT is an acronym. It stands for Strengths, Weaknesses, Opportunities and Threats. An analysis of these is able to produce a comprehensive picture of a firm’s current situation.
It helps CEOs or decision makers to understand the state of their firm and how they sit within the field. That kind of understanding aids them in a variety of ways. It helps them to:
- Determine issues with company processes or day-to-day operations
- Identify areas of strength that aren’t being fully leveraged
- Find and address organisational issues
- Evaluate the current workforce and what may be needed moving forward
- Locate areas of potential improvement
- Realise opportunities that can be grasped
All of those things are key to a firm ensuring rapid yet sustainable growth. Conducting a balanced assessment of strengths, weaknesses, opportunities and threats helps to map out a pathway toward sustainable growth. This is why many successful firms rely on SWOT analysis for growth planning.
Performing SWOT Analysis
There are two main parts to a SWOT Analysis. The first is to make an internal assessment of your firm (the strengths and weaknesses). The second is to assess external factors that may impact your business moving forward (opportunities and threats). It’s important to take both internal and external factors into consideration when developing a business strategy.
Simply evaluating your own strengths and weaknesses is useful. It won’t necessarily provide the correct pathway to growth, however. Not if factors beyond your control put obstacles in that particular pathway. Your SWOT analysis should start with a review of the internal factors.
Internal Focusses – Strengths & Weaknesses
To know where your firm needs to go, you first must understand where you are now. The first step to that understanding is assessing what your business’s strengths are. What are the things which have helped you achieve your biggest successes to date? What sets you apart from your competitors in a positive way?
It can sometimes be tough to objectively identify what these strengths are. The following are some common examples to give you an idea of where to start:
- Positive and growing cash flow
- Superior customer services
- Skilled, dedicated and efficient workforce
- Effective branding and marketing
- Low employee turnover (this can be compared against the average for your sector)
- Strong and long-lasting relationships with clients
The more of these strengths you can identify the better. Not just because it suggests your business is in good health. Also, because it gives you more data to use in your SWOT analysis.
Once you’ve drawn up a list of your firm’s main strengths, it’s time to turn to the weaknesses. Some managers and boards find these easy to pinpoint. Others find them harder to identify than company strengths.
Whichever camp you fall into, it’s a crucial part of the analysis. You need to be exhaustive and honest when assessing your weaknesses. Some common examples of weaknesses you may find include:
- Low or falling profitability
- Limited staff resources
- A high number of negative customer comments or reviews, suggesting poor customer service
- Lack of expertise in a particular area (often related to a technological aspect of your operations)
- Low brand recognition or ineffective marketing
- Inflexibility of day-to-day operations or business processes
With your strengths and weaknesses identified, you need to turn your focus outwards. That’s the next stage of your SWOT analysis.
External Factors – Opportunities & Threats
In addition to your internal situation and processes, there are external factors you need to analyse during your SWOT analysis. These are the things which will impact your firm as you move forward. They can be positive or negative.
External factors are often more difficult to discern than internal strengths and weaknesses. As factors outside of your control, they can also crop up without you expecting them. There’s no way to include unforeseen circumstances in a SWOT analysis.
You should, though, be able to identify a range of opportunities. They’ll be afforded to you by events or situations outside of your firm. Some examples could include:
- A new market related to that which you currently serve, which you could move into (this is where approaches like Blue Ocean Strategy can be useful)
- A new way of promoting your product or service, or a new marketing channel
- New technology which you could leverage to improve production or other operations
- Changes in legislation or regulations. These might ease a business process or open new markets
- A seasonal uptick in demand for your product or service
Identifying threats is a similar story. You won’t always be able to see such risks to your firm before they come up. A good understanding of your field will help, however. It should allow you to generate a fair list of prospective threats.
Some possibilities that may apply to your firm, depending on your niche, are:
- The establishment or growth of a competitor
- A new law or regulation which impacts your business operations or limits who you can sell to
- Falling demand for a product or service
- Negative media coverage of your industry or your firm
Those are the main things that you want to identify when performing a SWOT analysis. How, though, can you ensure you generate a full and accurate list? A comprehensive rundown of real strengths, weaknesses, opportunities and threats? Fortunately, it’s not too difficult.
What you need is to include the right people in the process and give them the freedom to express themselves. It’s crucial for business decision makers and boards to be involved. It’s their overall strategies and plans which a SWOT analysis will shape. They shouldn’t be the only people whose opinions are sought, however. What you want are a range of perspectives on your firm.
That means bringing a variety of people into the process. Staff from different departments, of different ages and at different levels of the firm should be included. You might even think about approaching customers, clients or suppliers for their opinions.
Each participant in the analysis should first look to generate their own ideas. These can then be drawn together in a collaborative, brainstorming session. That may help to spark insights. It will also identify which things have been mentioned the most.
With these results you can set about assessing the state of your business and developing strategy. A good way to do this is by visualising the strengths, weaknesses, opportunities and threats in a 2 x 2 matrix. That makes it easy to evaluate and cross-reference the points you’ve identified. From there, you can use them to develop a strategy for growth.
Evaluating & Planning For Growth
After your initial SWOT analysis, it’s time to convert what you’ve learnt into a real strategy for growth. The best way to think about this, is as a process of cross-referencing. You need to look at how your strengths, weaknesses, opportunities and threats relate to one another. You also want to see how you can use what you’ve identified in one category to answer what you’ve put in another.
The best way to illustrate this is with a set of questions to ask yourself:
- Can we use a strength to maximise an opportunity?
- Can one of our strengths mitigate a threat?
- Is a weakness preventing us from seizing an opportunity?
- Does a weakness make us more vulnerable to a potential threat?
- Can we leverage an external opportunity to fix one of our weaknesses?
The answers to these questions will form your strategy moving forward. They will reveal what areas of your business you need to improve. They’ll show you which opportunities you need to try and make the most of. Most importantly, they’ll allow you to identify courses of action that will spur growth.
The key here when developing your strategy is ranking these opportunities according to the impact that they will have on your business, and the time it will take to implement. These can broadly be broken down into quick wins that increase profit, and long term solutions that are either resource intensive or take time to implement.
With a clearly defined set of options available, the task is then to prioritise these opportunities based on the resources, both financial and labor, that are available. Of course, there will need to be a compromise. You can’t do everything at once. This is the tricky part of the SWOT analysis. We have experience making these difficult decisions and providing insights that can help you grow your business. Get in touch to learn more.