team of coworkers in a conference room for a meeting
Performing a SWOT analysis of your business can help you plan for the future and prepare for and possibly avoid any unwanted or unexpected factors. — Getty Images/Prostock-Studio

A SWOT analysis is a strategic planning tool used for evaluating the internal and external factors affecting your business. You can use this tool to improve your business strategy and stay competitive in the market.

[Read More: How to Write a Business Plan During a Pandemic]

What is a SWOT Analysis?

SWOT stands for strengths, weaknesses, opportunities and threats. This tool is a technique for analyzing each area of your business. You can do a SWOT analysis for your entire business or you can use it to look at a specific aspect of your business.

When implemented correctly, a SWOT analysis can help you identify ways to stand out from your competitors and increase your market share. It does this by helping you leverage your company’s strengths while, at the same time, reducing your chance of failure.

Strengths and weaknesses refer to the internal factors pertaining to your company, like your products, brand, and business location. With some effort, you can change these things over time.

In comparison, opportunities and threats are things that are happening in the market — like your competitors, pricing and a market downturn. You can’t change any of these factors, but you can decide how your business will respond.

How to do a SWOT Analysis

A SWOT analysis is a well-organized list of your company’s strengths, weaknesses, opportunities and threats.

Conducting your SWOT analysis is similar to completing a brainstorming activity. It’s best to do this with a group of employees who have varying perspectives about the business.

To get started, have everyone begin generating their ideas about each of the four categories for five to 10 minutes. From there, you can share your ideas and begin prioritizing them.

Let’s look more closely at each of the four categories you’ll be evaluating:

Strengths

Strengths are the things that set your company apart and differentiate it from your competitors. Your strengths could include things like your employees, processes or products.

These strengths are an integral part of your company and what drives your business. Here are some questions to ask when identifying your business’s strengths:

  • Is there anything your business does really well?
  • What unique resources do you have at your disposal?
  • What would your competitors see as your strengths?
  • What are the intangible assets your company has? (Your network, skills, brand, etc.)
  • What are the tangible assets your company has? (Products, equipment, customers, etc.)

Weaknesses

Like strengths, weaknesses are an inherent part of your organization. But instead of giving your business a unique advantage, they hold it back in various ways.

It’s not pleasant to look at your company’s weaknesses, but it is necessary. Here are some questions you can consider when identifying weaknesses:

  • In what areas could your business stand to improve?
  • What would your competitors likely see as your company’s biggest weaknesses?
  • What resources do you need to be more competitive in the market?
  • Are there any gaps in your current team or business strategy?

[Read more: Adapting and Surviving: What’s Next for Small Businesses]

The ability to see and make the most of opportunities is what can set your business apart in the long run.

Opportunities

Opportunities are situations outside of your organization that you can use to make something positive happen. However, you have to know how to spot opportunities to be able to take advantage of them.

The ability to see and make the most of opportunities is what can set your business apart in the long run. Here are some questions to help you identify possible opportunities:

  • Are there any big or small market opportunities you could be taking advantage of?
  • How can you leverage your business’s strengths as opportunities?
  • Are there any regulation changes that could positively impact your business?

Threats

Threats are any external factors that could negatively affect your business, like a global pandemic or a policy change.

Threats are always outside of your control, but you do have a choice in how you respond to them. When handled appropriately, a threat could even turn into an opportunity.

Here are a few questions to help you identify potential threats:

  • Do your company’s weaknesses expose it to any threats?
  • Is there anything your competitors are doing that poses a threat?
  • Could future policy changes affect the way you do business?
  • Could changes in consumer behavior pose an eventual threat?

How to implement what you’ve learned

After you’ve analyzed and completed your SWOT analysis, it’s time to implement the things you’ve learned. But how do you turn your analysis into actionable business strategies?

The first thing to do is look for ways to turn your company’s strengths into opportunities. From there, you can look for ways to use those same strengths to minimize the threats your business faces.

Likewise, you can look for ways to use your opportunities to minimize the weaknesses you identified. And by minimizing your business’ weaknesses, you may also be able to avoid certain threats.

This outline shows how this process works:

Opportunities

Threats

Strengths

How can your company’s strengths be used to leverage any available opportunities?

How can you use these strengths to minimize any potential threats?

Weaknesses

How can you use the opportunities you outlined to minimize company weaknesses?

How can reducing company weaknesses help you avoid potential threats?

[Read more: Scenario-Based Business Planning: What It Is and How to Use It]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published December 03, 2020