Small Business Advice

What SWOT stands for & how to use it

Learn what SWOT stands for and how analyzing your strengths, weaknesses, opportunities, and threats can set your business up for success.

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Learn what a SWOT analysis stands for and how analyzing your strengths, weaknesses, opportunities, and threats can set your business up for success.

To have a successful business, you need to be a smart competitor. And for entrepreneurs, starting a business can be difficult. This is why it is important to have innovative and strategic planning when entering the market to ensure your product line sells successfully. However, if you are a first-time entrepreneur or small business owner, you may have more questions than answers to your challenges. For example, how do you create a winning strategy that considers your competition and gives you a unique selling proposition that gives you and edge in the market? To put it simply, you do so with a personal SWOT analysis. SWOT is a simple tool that can be used whether you’re in the early days of your startup or if your business is already up and running. Therefore, to learn what SWOT stands for and how to use it effectively during your business planning, keep reading. 

What Does SWOT Stand For?

The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

It is an assessment tool designed to help entrepreneurs and business owners make realistic, evidenced-based examinations on the various aspects of their organization so they can tailor their initiatives towards business opportunities that lead to more streamlined success. The SWOT analysis was developed by Albert Humphrey who was a successful business and management consultant. He specialized in organizational management and transforming company culture. 

Strengths and weaknesses are the internal factors of your business. You have the most control in these two areas. If something isn’t working internally, look at your business’s strengths and weaknesses to correct them. Some examples include your team members, patents, location, marketing strategy, and new product line.

On the other hand, opportunities and threats are external environment factors. They’re parts of the larger market that you have less ability to change. The goal is to use opportunities presented in the market to improve your business and protect it against threats. Examples include competitors, pricing of raw material, customer shopping trends, and demographics.

Most SWOT matrix analysis models used by businesses are visualized as a two-by-two grid and organized in list form. Each box lists the top strengths, weaknesses, opportunities, and threats.

SWOT Analysis Layout and Examples

Here is a closer look at what your SWOT template and some sample questions you can ask yourself to begin the in-depth analysis of your business. 

What is a SWOT Analysis Used For?

Preparing a SWOT analysis may seem like something you don’t have time for while running your business. However, taking a step back to analyze these factors can quickly lead to new and thoughtful business strategies. Additionally, it can also help with guiding intelligent decision making. The preparation of a SWOT analysis helps you look at processes from a different angle.

If possible, utilize the assistance of others to help you with a SWOT analysis in addition to your team members. As a founder or owner, you may have a biased approach. People who are not closely affiliated with your business could offer the perspective you need. Not only does this provide you with an opportunity to establish open communication throughout your organization, but it can also help you develop a new marketing plan that may not have been possible prior to receiving an outside opinion. 

How to Do a SWOT Analysis

  1. Gather the right people: Having people from different parts at your company would create the best team for a SWOT analysis. One department may be able to better analyze an aspect of the SWOT analysis than another, so make sure that each team is represented.
  2. Brainstorm: Let everyone come up with ideas quietly before throwing ideas out all at once. After brainstorming individually, compile and group together similar ideas.
  3. Rank the ideas: Once the ideas are organized, rank them through discussion. There should be someone of authority available for this step of the process to make the final call for each of the SWOT ideas.

Questions to Help Guide the SWOT Analysis

These questions can help guide the SWOT analysis:

Strengths are internal, positive attributes of your business.

  • What business processes are currently successful?
  • What assets do you have within your team?
  • What assets do you have that provide value and strength to the business?
  • Do you have competitive advantages?

Weaknesses are the internal and negative factors that detract from your strengths.

  • Are there things that your business needs to be competitive?
  • What processes are currently in place that need to be improved upon?
  • What tangible assets does your business need?
  • Are there gaps within your team?
  • Is the location of the business ideal for success?

Opportunities are the external factors that contribute to business success.

  • Is the market growing, and are the trends encouraging people to buy more of what you are selling?
  • Are there any events in the future that the business can take advantage of for growth?
  • Are there any upcoming changes to regulations that might positively impact business?
  • What do customers think of your business?

Threats are external factors that you have no control over.

  • Are there potential competitors that may enter your market?
  • Will suppliers always be able to supply the materials you need for the products or services you offer?
  • Could technology in the future change how you do business?
  • Could changes in consumer behavior impact you negatively in the future?
  • Are future marketing trends a potential threat?

Create Business Strategies and Goals

Once the analysis is complete and the ideas have been placed in the respective quadrants of the grid, it’s time to put the plan into action as a strategy.

Begin by looking at the strengths and figure out how you can use them to maximize on opportunities. Also look at the strengths and see how you can use them to combat your threats. Finally, use the external opportunities to develop ways to combat your internal weaknesses. Use these to create a list of goals or strategies you can take on as a business in the next quarter.

When you use a SWOT analysis to create operational strategies, you become a smarter competitor. One of the best ways to gain an advantage over your competition is to develop strategies deeply based upon it. Staying on top of your competitors and frequently reflecting on your business helps assure stability.

Pros and Cons of SWOT Analysis 

Further, now that you have some examples of SWOT questions, let’s take a look at the pros and cons of a SWOT analysis. 

Pros of SWOT 

  • It provides your team with a visual representation of what internal and external factors are affecting your business.
  • A SWOT analysis encourages active listening from diverse perspectives to help your planning process.
  • It can help produce innovation while providing you with the competitive edge you’ve been searching for. 

Cons of SWOT 

  • The analysis may not provide you with all relevant factors influencing your business which may lead to missed opportunities. 
  • It does not provide you with an analysis of how your identified factors may change over time. Therefore, it may not be the best solution for long term planning. 
  • The identified factors may provide you with a skewed perspective as they can be subjective to how you interpret your findings, rather than how they are actually presented. 

Improve Processes with Nearside Business Checking

As you can see, while performing a SWOT analysis, while a simple concept, can yield successful results that provide you with the clarity you need to take your business to the next level. Remember to elicit outside opinions from your team to gain unbiased information and work as a team to develop new innovative strategies moving forward. As such, you can increase your cash-flow and your market share, and potentially lead you to entering new markets. For more assistant with your business, the Nearside Business Checking creates more opportunities for your small business. We eliminate monthly fees, offer cashback rewards, and have small business perks to help you grow. 

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