SWOT Analysis – The Proper Way

June 5, 2018

A SWOT analysis is a very popular tool and if used right can have a profound effect on your business. The biggest key to proper use of a SWOT is objectivity. If this is your baby and you can’t see its flaws, then hire a 3rd party to do the analysis. It has to be objective and brutal or its value drops exponentially.

The very best business owners and managers self-reflect regularly to look for things they can improve. They have uncomfortable de-brief meetings to pick apart a project looking for improvement opportunities. You can’t improve a problem until you first admit there IS a problem! If you proactively seek out these problems and proactively fix them… you will be a top performing company.

The easiest way to go about the analysis is to first understand that the Strengths and Weaknesses are internal. Meaning you should look at yourself in the mirror. You can generally think about the 3 broad categories of people, operations, and finance. Marcus Lamonis of the CNBC show “The Profit” calls them “people, process, and profit”.

Strengths – Start with the boss even if that’s you! Then go through all your partners, employees, sub-contractors, suppliers, etc. If you have an uncle that supplies to you cheaper than anyone else… that’s a strength. If you have a great employee with an MBA in your business… that’s a strength.

If you have a new piece of equipment that most don’t have yet… that’s a strength. If you have plenty of capital on hand to grow the business… that’s a strength.

Weaknesses – If a subjective third person might critique your lack of experience and/or education, it’s a weakness. Mark it down! If you are short on cash, are in a poor location, or can’t find and/or afford top level people… these are all weaknesses. Be as specific as you can. For instance if you and your partner are great at operations and finance but neither of you is a good sales person, that is a huge weakness.

Now list the Opportunities and Threats which are external to your organization.

Opportunities – This tends to be the most difficult part. It is easier for some startups as it was an opportunity that caused them to start. But for a going concern, this can be a challenge.  Maybe there is an opportunity to negotiate your supply costs down. Maybe there is a vertical market you could enter.

Open your eyes and your mind and look for opportunities. Again, this is sometimes hard when you are caught up in the day to day of running a business so look for an objective 3rd party if need be!

Threats – Most owners/managers are keenly aware of threats; its human nature to notice the most obvious ones. But think outside the box and look for things that might not be so obvious like the economy or trends. For instance, desk top computers are trending down very fast. This “threat” would surely be on Dell’s and Apple’s SWOT analysis.

Take care not to simply list your competitors. Thats should actually be done in detail in a competitive analysis. However, if one of your competitors invented some special thing that could crush you all, it can go here.

One of the biggest mistakes people make when doing a SWOT is to turn the Opportunities section into a big wish list of new ideas. This is very common in non-profits. The President (who ultimately answers to the board) initiates the SWOT and does it at a board meeting to get everyone’s input.

Instead of concentrating on the  big list of Weaknesses and discussing how to fix them, avoidance of anything negative prevails. The “bright ideas” flow; volunteers raise hands; and you end up with a long list of fantasy initiatives. The meeting ends before anyone can get to Threats; all fire power goes towards the new initiatives, and the Weaknesses are left to fester.

The four sections of a SWOT analysis should be looked at as whole. Connections, causes, and effects between one and the others should be explored prior to any action and all actions should be ranked.