How to Conduct a SWOT Analysis for Your Business Plan
So how do you create a business plan that will seize business opportunities and sidestep potential threats? You conduct a SWOT (strengths, weaknesses, opportunities, threats) analysis. A SWOT analysis helps you analyze your company’s capabilities against the realities of your business environment so that you can direct your business toward areas where your capabilities are strong and your opportunities are great.
To conduct a SWOT analysis, follow these steps:
Review your company’s strengths and weaknesses and your opportunities and threats from your business plan.
Divide your strengths into two groups: strengths that can help you take advantage of opportunities facing your business and strengths that can help you head off potential threats.
Divide your weaknesses into two groups: those that require improvement before you can take advantage of opportunities and those that you need to completely overhaul and turn quickly into strengths in order to avert threats on your business horizon.
Use the SWOT Analysis Grid to record the findings of your analysis. The figure shows how the owners of the Soup’s On catering business completed the grid for their company. Fill in this grid to analyze your company against your business environment.
Based on the outcome of the caterers’ SWOT analysis, they made some significant business decisions: They hired a marketing consultant with experience developing restaurant chains; they conducted research to get a sense of the resources required to achieve competitive Internet presence; they tightened their management structure to prepare for growth; and they recruited two investors to improve their company’s financial condition.
As a result, Soup’s On is ready to grow into a small chain. The owners expect increased competition for catering and takeout services, but they project that growing demand will support a number of catering companies. What’s more, they’re confident that by focusing on quality, consistency, and sophisticated menus, they can compete successfully.
By investing time upfront to understand their strengths and weaknesses — and by dealing with their opportunities and threats — the caterers increased their chances of success.
Include findings from your SWOT analysis in your business plan, addressing how you intend to
Seize business opportunities by capitalizing on your company’s strengths
Improve weaknesses in order to take advantage of business opportunities
Monitor potentially threatening outside forces while maintaining internal capabilities so that you’re prepared to respond from a position of strength if a threat arises
Eliminate weaknesses to protect your business from current threats
Revisit your SWOT analysis on a regular basis — at least annually and more frequently if your business is under siege, experiencing growth problems, or failing to meet goals and objectives — to see how the balance of strengths, weaknesses, opportunities, and threats may have shifted. Your business environment is constantly changing, so you want to be sure that your business plan reflects the world around you as it is, not the way it was.