What is a SWOT Analysis?
A SWOT analysis is a process used to identify the strengths and weaknesses of your business as well as the opportunities open to it and threats that it faces. By examining these internal and external factors, you can create strategies that make the most of your advantages, address challenges, and help you carve out a niche in your market.
A SWOT analysis can be used to look at a business as a whole or specific projects before they’re launched (it can even be used to evaluate individuals). It’s often displayed as a matrix with each of the categories (strengths-weaknesses-opportunities-threats) occupying a cell on a table. (check out these free templates to get started).
SWOT analysis example:
For each section, you’ll ask yourself a series of questions about your business or project. This kind of analysis can give you a picture of where you are in relation to competitors in your industry and the answers can help to form the basis of a new strategy to maximize profits, boost sales, and understand your unique selling proposition (USP) so you can create a killer marketing strategy.
We’re going to walk through each of the sections of your SWOT analysis. On your first draft, write down as many points as you can think of, but try to be as specific as possible in your analysis.
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Strengths in a SWOT analysis refer to the attributes of your business that can help you achieve your objectives and goals. They are internal factors, which could include your expertise, location, employees, or marketing efforts.
When you’re considering your strengths, think about it from an internal perspective as well as the perspective of your customers. Also think about your strengths in relation to your competitors.
Here are some questions to ask when analyzing strengths:
- What do you do well? What do you do better than anyone else? Consider the successes you’ve already had and the areas where you know you have an advantage.
- What internal resources do you have? These can be both tangible and intangible, from employee expertise to physical equipment.
- What do you own that separates you from the competition? Think about your pricing structure or other unique advantages you may have, such as a recipe, process or patent that gives you the edge.
- What other positive aspects, internal to your business, add value or offer you a competitive advantage? Perhaps you have a team with strong sales experience or staff with good connections to get preferred rates from suppliers.
- What do people in your market see as your strengths? What do customers or competitors think sets your business apart.
- What factors help you close deals, get the sale, etc?
Weaknesses in a SWOT analysis refer to internal factors that might hinder your business growth or progress toward your goals, such as high staff turnover, start up costs, or a weak marketing plan.
Again, you want to examine weaknesses from every angle – internal, customers, and competitors.
Here are some questions to ask when analyzing weaknesses:
- What factors (within your control) limit your ability to gain a competitive edge? Look at your team, processes and business plans to identify areas where you might need help.
- What areas need improvement to accomplish your goals or compete with your strongest competitor? Consider where you may lack expertise, skills or (access to) resources, and whether you’re missing a core element necessary for success, such as high-speed internet, etc.
- What should you avoid? Identify pitfalls in advance and create an action plan for dealing with them.
- What makes you lose sales? Take a critical look at why you may have lost sales in the past. Were you understaffed or out of stock? Is your business in a poor location?
- Do you have bad debt or cash-flow problems? Better manage your cash flow with your Square Dashboard to get an accurate overview.
- What might your customers or competitors see as a weakness? Are those just perceived weaknesses or are there real operational issues?
Opportunities in a SWOT analysis are external factors that can provide an opportunity for your business and get you closer to your objective. One way to do this is to look at your internal strengths and weaknesses for ideas.
Here are some questions to ask when analyzing opportunities:
- Are there any opportunities in your market that your competitors aren’t taking advantage of — or that few are? Think about your placement in the market and look out for new trends that present themselves in the industry.
- Are these opportunities ongoing or is there a window? How fast do you need to act on these opportunities? New trends should be jumped on as soon as possible before they become passé.
- Have there been any recent changes to the market? Consider changes in the law that might affect you in terms of permits or employment. If you own a lunch spot or restaurant you can look at new influxes of businesses or demographic changes as an opportunity to attract new business. Think about whether anything has happened in the past to make manufacturing/distribution easier.
- How do people perceive your brand compared to competitors? Look at brand loyalty and survey people to find out whether your brand is being received in the way you want.
- Are there new trends you can take advantage of? Are social patterns, lifestyle changes, events, or new technology opening up new opportunities?
Threats in the SWOT analysis are external issues that can create weaknesses in your business — they can also be turned into opportunities. Here are some questions to ask when analyzing threats:
- What obstacles do you face? Whether it’s a budget-related threat or a change in industry trends, think about the potential problems your company is facing.
- What are your competitors doing? Do a competitor analysis to find out how your rivals are responding to similar threats.
- Are quality standards or specifications for your job, products, or services changing? Keep on top of industry trends and news to find out what’s happening in your sector and how this could affect your business.
- Is changing technology threatening your position in the market? Square and our partners can make your business more efficient and profitable.
- Could any of your weaknesses seriously threaten your business?
Developing Strategies Based on Your SWOT Analysis
Now that you’ve completed your SWOT analysis and analyzed the results, how can you develop strategies to take your business forward?
First, take a look at your analysis and pick out key bullet points for each section. There will probably be some crossover, so delete any redundant points and make a list of the remaining ideas.
Bullet points can also be combined across sections to act as a solution or ‘cancel’ each other out in a process called a TOWS strategy (threats, opportunities, weaknesses and strengths), which helps to turn bullet points into actionable strategies.
For instance, considering your strengths can help you eliminate potential threats and take advantage of opportunities. Opportunities in turn can help to deal with weaknesses, which then help you to minimize threats.
After combining your bullet points in this way, it’s time to prioritize them in order of importance so you can start to form the basis of your new strategy.
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