A SWOT analysis can help a small business owner or business assess a company’s position to determine the most optimal strategy going forward. This business practice can help you identify what you’re doing well, what you want to do better, and what kinds of obstacles you might encounter along the way.
This guide will walk you through everything you need to know about a SWOT analysis: what it is, how it works, and how to do it. We’ll also include an example and a template to help guide you as you perform your own SWOT analysis.
What Is a SWOT Analysis?
A SWOT analysis is a strategic planning technique that outlines an organization’s strengths, weaknesses, opportunities, and threats. Assessing business competition in this way can help an organization plan strategically and execute more effectively.
The 4 Parts of a SWOT Analysis
Your business’s strengths SWOT section should include anything that your business does differently or better than competitors. Think about your unique value proposition, trends you’ve noticed in positive customer feedback, operational strengths, and company culture. This section is the perfect place to name and celebrate anything you’re already doing well.
Don’t be afraid to toot your own horn (while also remaining objective). Clearly identifying your business’s strengths not only helps you keep your spirits balanced as you address your weaknesses, it will also give you a sense of where to concentrate your resources. It’s easier to build a successful business when you’re working towards something, rather than acting in opposition.
Questions to help you determine your strengths:
- What is your business’s unique value proposition?
- What common compliments do you receive from your customers?
- What does your business do particularly well?
- How do you operate differently from your competitors?
- What gives you an edge on the competition? (This can include something product-related like “better access to raw materials” or “lower cost of goods,” or it can be an internal strength like “strong company culture” or “employee motivation.”)
- What might your competitors name as your strengths?
Your weaknesses are the areas in which the business has room for improvement. You should include structural weaknesses in this section—those that relate to your systems, procedures, resources, and personnel. This is a great place to look at common feedback from employees (either from exit interviews, anonymous surveys, or other sources) and recurring customer complaints.
Questions to help you determine your weaknesses:
- What areas of your business could stand to improve?
- What are common hiccups in your customer experience?
- How do you use your resources? Is there room for improvement?
- What improvements are needed in your employee experience?
- What weaknesses might your customers see that you tend to overlook?
- What weaknesses might your competitors think you have?
Your opportunities are the positive, external factors that your business might benefit from… but cannot directly control. That might include market opportunities, consumer purchasing trends, legal or regulatory changes, population changes, the cost of raw materials, and more. For example, businesses that provide accessibility for aging seniors might recognize the forthcoming “silver tsunami” of Baby Boomers entering the target demographic. This would be a clear opportunity to expand their customer base.
Questions to help you determine your opportunities:
- What trends might affect your industry?
- How might the right talent create new opportunities?
- your customers ask for anything you don’t offer (but could)?
- How might population changes affect your business opportunities? (think: generational shifts)
- Is there a need in the industry that you’re not creating, but could?
- Do your competitors have any weaknesses that could be opportunities for you?
- Is there a way to repackage current products to demand a higher price?
- Are there any new, or potential, regulatory or tax changes that might provide a new opportunity?
Your threats are the external factors that have the potential to negatively affect your business. A threat can be specific and competitor-based or more structural. Examples of structural threats could be supply chain challenges, shifts in market requirements, talent shortages, or changes to social media algorithms (especially if your business heavily relies on social media marketing). You might also face a threat (or threats) from your competitors. This can include the way they operate, how they’re marketing, or the products they offer.
Identifying every external threat your business faces is essential for your business to identify how it must adapt in order to meet and overcome these challenges.
Questions to help you determine threats:
- What happens if a supplier or manufacturer runs out of materials you use?
- What if a natural disaster (like a pandemic) strikes?
- Is your market shrinking?
- What are your competitors offering? Are they expanding or offering different products?
- How are your competitors marketing?
- What technological threats are you vulnerable to (website security, social media algorithm changes)?
- Are there any businesses that aren’t competitors now but could become competitors in the future?
The Benefits of a SWOT Analysis
SWOT analyses offer a variety of benefits for businesses and personal brands. Here are some of the most common benefits of a SWOT analysis:
- You can use it to determine a strategic plan.
- You can use it to drive an innovative, informed marketing plan.
- It can help you identify external opportunities.
- It can help you identify external threats.
- It can reveal environmental factors that might affect your business, either positively or negatively.
- You can develop a plan for how to tackle internal weaknesses.
How to Do a SWOT Analysis
You can approach SWOT analyses in multiple ways. You can conduct a personal SWOT analysis for yourself as an individual, you can perform a marketing SWOT analysis to determine a competitive advantage in your marketing, or you can use a SWOT analysis as a part of broader strategic planning.
Whatever your end goal for a SWOT analysis, follow these steps.
1. Create a SWOT Matrix
Use a SWOT template or create your own. You can create your SWOT framework on the computer or on a whiteboard—if you choose to do the latter, be sure that someone is in charge of recording the responses so that you don’t lose key insights (you can also take a picture at the end of the SWOT session).
2. Assemble Key Stakeholders
A SWOT analysis is most effective when it collects a variety of perspectives. Gathering key stakeholders with various perspectives will help you see more than you would have seen alone. Marketing leaders might be able to give you a more specific sense of the opportunities and threats related to your content marketing efforts. Your people team is closest to all personnel changes and feedback, so they’ll have the clearest sense of an organization’s strengths and what is driving employee retention (or challenging it). Sales leaders can help translate opportunities into a cohesive business strategy.
It’s simple: when it comes to a SWOT analysis, more heads are better than one.
3. Brainstorm Around Your Companies’ Strengths, Weaknesses, Opportunities, and Threats
Go through each field of the SWOT diagram, spending some time with each one. Ask the group the guiding questions to ensure you’re developing a comprehensive picture of the internal and external environment. There are no bad ideas in brainstorming. You’re just trying to get thoughts flowing. Something that feels like a “bad idea” might lead to discovering a potential threat you’d never thought of before or nuanced analysis of how you stack up to your nearest competitor. The key here is to keep the brainstorm going.
4. Record Relevant Thoughts in Their Respective Sections
As you brainstorm, record points and ideas when they are relevant. At the end of the session, your SWOT analysis should leave you with a clear sense of the organization’s strengths and company’s weaknesses that you can use to guide your strategy formulation.
5. Edit Your List
Revisit the SWOT diagram at a later time and edit it, culling out anything you don’t really need. You can also polish up some of the key insights gleaned in the brainstorming session. This is especially important if you plan to use your SWOT analysis as a more formal document that might be disseminated broadly.
6. Create a More Formal Version (Optional)
The final step, if you choose to do it, is to take your SWOT takeaways and put them together in a polished document that you can share.
A SWOT Analysis Example
It can be easier to understand how to approach a SWOT analysis if you’ve seen a SWOT analysis example. For the sake of this example, we will imagine a hypothetical company and what its SWOT analysis might look like.
An Instagram-friendly fitness business offering virtual workouts.
- The business is not limited to a specific geographic area.
- The company offers great benefits so employees tend to stay.
- Workouts look really good, so they market well on social media (particularly Instagram).
- The app experience can be glitchy.
- High customer churn rate.
- Competitors let you filter classes by the instructor. Ours doesn’t offer that.
- There is growing interest in our type of workout.
- As a result of the pandemic, consumers are more interested in at-home workouts.
- We could start offering retail products and branded workout equipment like our competitors do.
- Our app is vulnerable to hacking.
- If Instagram changes its algorithm, we may become wholly dependent on paid ads instead of organic posts.
A SWOT Analysis Template
Use this template to create your own SWOT analysis.
Strengths Section: What Your Company Does Well
[Ask yourself questions like: What does your business do particularly well? What gives you an edge on the competition? What gives your business its unique value?]
Weaknesses Section: What Your Company Could Improve
[Ask yourself questions like: What could you improve about your business? What weaknesses might your customers see that you tend to overlook?]
Opportunities Section: External Factors You Could Use to Your Advantage
[Ask yourself questions like: What trends might benefit your industry/business? Is there anything that you don’t offer but easily could?]
Threats Section: External Factors That Could Harm Your Business
[Ask yourself questions like: What happens if you encounter a supply chain disruption? What trends could negatively impact your business? What are your competitors doing?]
Owning the Hard Truths of a SWOT Analysis
A SWOT analysis can bring up a lot of hard truths. It’s difficult to confront your company’s weaknesses and sometimes looking at threats can make them feel like the existential kind. Overcome these obstacles and give yourself the fortitude to confront business challenges head on with the Mental Toughness mini-course. The best part? It’s free.