Strategy is the key to how we’re able to help businesses #GrowSmarter. At Sauce Marketing, we implement many tools when working with our clients to help them meet their goals, but there is one that stands out as simple, yet incredibly effective: a SWOT Analysis.
In short, a SWOT analysis (sometimes just referred to as a SWOT) is an evaluation tool. It’s used by business leaders across all industries, typically during a strategic planning process, to understand their company’s strengths, weaknesses, opportunities, and threats (hence, S.W.O.T). Its application is not limited to only businesses that are already in operation, as entrepreneurs use it to understand the competitive market they’re trying to break into with their business plan.
To understand the importance of conducting a SWOT analysis, you have to understand the elements that make it up. Strengths are internal aspects of a business including, but not limited to the skills, capabilities, resources, and even brands within the company. Weaknesses are also internal characteristics that are already causing harm, or have the potential to hurt a business such as employee dissatisfaction or inefficient internal systems and processes. Opportunities are a mixture of internal and external aspects. They can be anything from technological improvements to market expansion possibilities to even competitor weaknesses. Threats are external factors that range from customer dissatisfaction to new competitors to changes in the market needs. All of these get placed into a four-quadrant outline that is typically a one-page summary.
The importance of running a SWOT analysis falls into two primary categories:
The ability to test the viability of your company and reduce risk makes this tool extremely valuable. The combination of high-impact threats with internal weaknesses can put your business’ future at risk, and the SWOT can help identify these risks. The analysis will pair external threats with internal weaknesses to bring to light the most serious issues faced by your business.
For example, if your products extend further than your service reach due to geographical resource limitations and a new competitor is coming onto the market and does not suffer from those geographical resource limitations, that can be a serious issue. By using a SWOT to identify those risks, you can then prioritize and determine an appropriate business strategy to address them.
Improving performance is the other important piece of this tool. A SWOT should help areas that can be improved, and potentially bring forward actions that can be taken to do so. You can use a position of strength to take advantage of an opportunity that may help eliminate one of your weaknesses. The idea here is to see where these findings overlap and how they can be used to improve and future-proof your business.
At Sauce Marketing, we have a saying: “Weaknesses and threats are just opportunities in disguise.” What we mean is that a business owner should not be disheartened by seeing a long list of weaknesses and threats in their SWOT analysis. Instead, they typically end up becoming opportunities to capitalize on and strengthen their business.
Ready to try this analytical exercise? Download our free template here!
The process does not require someone to have training or technical skills. Anyone can run it. In addition, the simple layout of the information makes it visually easy for stakeholders and decision-makers to gain a quick understanding of their business and where it stands, internally and externally. The information can easily be shared both up and down the chain of command.
Whether you are the leader of a multi-million dollar enterprise, or an entrepreneur starting out on a new venture, the idea of low cost is appealing. To put together a SWOT matrix, you don’t need an expensive piece of software or a high-paid consultant. A spreadsheet or word doc and the time to do it is all you’ll need for this exercise.
This tool is almost endless in how it can be used. First off, it can be applied to any company (big, small, or still in the planning stage) and any industry. Pair this concept with the low-cost factor, and you’ve got an incredibly efficient and valuable tool at your fingertips.
It can be used to analyze a business as a whole or segments within a business, such as production or marketing. A SWOT analysis can even be conducted on a personal level. Someone could easily apply this to themselves to understand their personal strengths, identify their greatest weakness, and categorize other personal traits. This could be handy when preparing for a job interview or planning one's future.
As with all things, there are a few downsides. Luckily, there are ways to minimize those limitations if you understand them and act accordingly. Here are a few limitations that you may run into, paired with how to get around them:
If you’re like me – a nerd of analysis – this tool is one of your best friends. Even with its limitations, it still provides an incredible amount of value to anyone who is making plans, big or small. Sometimes the simple visual organization of the information is enough to help sift through what’s important and what’s not. So use this tool where you can and turn information into actions that will propel your business forward towards your growth goals!