When you’re running a business, it can be hard to be ready for everything that lies ahead. It’s like the old line about the “light at the end of the tunnel.” You have no way to tell if you’re about to find a pot of gold or … a freight train barreling down at you.
Entrepreneurs are especially vulnerable to this phenomenon. Why? Because they are doers, living for today and maybe tomorrow. This is especially true with early-stage entrepreneurs. Few look far enough forward to foresee events or business conditions that could dramatically impact their operations.
One tool that all owners can use to objectively evaluate their businesses is a SWOT Analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. SWOT Analysis requires entrepreneurs to disconnect themselves from day-to-day business activity and look at their business from a strategic or 10,000-foot level. Doing so helps them prepare for whatever’s around the corner.
Let’s take a closer look at each step of SWOT …
Strengths: The strengths of the business are the reasons why customers purchase from you instead of a competitor. Strengths are finite attributes that competitors cannot easily duplicate. These can be service-, product- or technology-oriented. Once your businesses’ strengths are clearly identified, assess your marketing collateral. Does your collateral highlight your strengths? If not, it should. Your strengths set you apart from your competition!
Weaknesses: The weaknesses of your business are the reasons why customers do not purchase from you. They inhibit growth, and they’re why you do not win every bid or proposal that you submit. Weakness can be found in every area of your business. Look at customer service, delivery, pricing, technology and product families, and assess your position in each category compared to your competition. Once your weaknesses are documented, what action will be taken to overcome these weaknesses? When will it be done and by whom? If you don’t have a plan to address your weaknesses, I would say you don’t have a plan.
Opportunities: New customers, new markets, new products and product extensions all offer opportunity. Economic or political changes can also create opportunity. If your business can be impacted in any of these areas, you should analyze them. Businesses that do the same thing in the future that they did in the past will produce similar results or, more likely, declining results. Documenting your opportunities will allow you to build an action plan to take full advantage of each.
Threats: This is probably the most difficult to assess due to the “unknown.” Do you think the electronic “Big Box” stores like Best Buy and Circuit City had a plan for when mobile and portable gaming started to replace disc-based video game technology, which had helped draw kids and their parents into those stores? They reacted to this technology change, but it was clearly after the fact. Threats can come from the competition, new technology, replacement technology, the economic environment, the political environment and many more. The key is to assess each and perform a “what if” exercise: What if a new product was introduced that replaced 25 percent of your business? What would you do? How would you react?
The SWOT analysis is a foundational exercise for developing a strategic plan for your company. It allows you to develop a plan based on your strengths, take advantage of opportunities, mitigate weaknesses and sidestep threats. (The Helzberg Entrepreneurial Mentoring Program (HEMP) has tremendous resources to assist entrepreneurs on this journey.)
A SWOT analysis should be done every one to two years. Things change. Clarity in your plan will identify the pot of gold or the freight train at the end of the tunnel!
