Many business owners have used strengths, weaknesses, opportunities and threats (SWOT) analyses to frame their strategic planning. If you’re looking to map out your company’s next big move, now might be a good time to take a shot at it yourself.
Think about your customers
A SWOT analysis starts by spotlighting internal strengths and weaknesses that affect the success and value of a business. Strengths are competitive advantages or core competencies that generate revenue, such as a strong sales force or exceptional quality.
Conversely, weaknesses are factors that limit a company’s performance. Generally, weaknesses are evaluated in comparison with competitors. Examples might include weak customer service or negative brand image.
A company’s strengths and weaknesses are often tied to customer requirements and expectations. A characteristic affects future cash flow — and therefore, success — if customers perceive it as either a strength or a weakness.
Envision the future
The next step in a SWOT analysis is to predict future opportunities and threats. Opportunities are favorable external conditions that could generate return if the company acts on them. Threats are external factors that could prevent the company from achieving its goals.
When differentiating strengths from opportunities (or weaknesses from threats), the question is whether the issue would exist without the company. If the answer is yes, the issue is external to the company and, therefore, an opportunity or a threat. Changes in demographics or government regulations are examples of opportunities or threats a business might encounter.
Pick your path
Generally, there are two directions you can go with the information gathered from a SWOT analysis:
- Capitalize on opportunities with strengths, or
- Convert weaknesses into strengths — or threats into opportunities.