Estimated reading time: 5 minutes
It is essential to understand what you want your small business to become over time, how it will get there, and what resources are needed for success. You should also remain aware of what your competition is doing from a marketing standpoint and be prepared for internal and external events and obstacles that can disrupt your business. There are several ways to assess your small business and get a birds-eye look at what is going on, and one of the most effective means is a SWOT analysis.
The acronym SWOT stands for strengths, weaknesses, opportunities, and threats. A SWOT analysis is a simple and effective planning technique that can help you identify these four elements at any stage of your business’s growth. In this Balboa Capital blog article, we feature a SWOT analysis guide. You will learn what a SWOT analysis is, how to perform one, and how it can help you grow your small business and stay one step ahead of your competitors.
History of the SWOT model.
According to Lucidchart, the history of the SWOT analysis dates back to the early 1960s at the Stanford Research Institute¹. Albert Humphrey, an independent management consultant, worked with a team of business research experts to create an effective planning model for companies. The result of their efforts was dubbed the SWOT model, and it has been widely used by large corporations and small businesses ever since. The SWOT model is also taught at colleges and universities in their marketing, economics, and finance classes.
What is a SWOT analysis?
A SWOT analysis is a strategic planning technique that helps pinpoint the strengths, weaknesses, opportunities, and threats that affect a business. It identifies the business’s internal and external environments and the related risks. By evaluating each of these factors, business owners can develop a strategy for how to deal with them. The competitive landscape and other business-related factors are constantly changing, so most business strategists suggest conducting a SWOT analysis every six months or at least once a year.
What the letters stand for.
Strengths
These are the things that your small business does well. Examples of strengths include a strong and well-known brand, innovative technology, a forward-thinking business model, solid financials, and a large customer/client base that generates repeat sales and acts as brand ambassadors. If your business has these or other strengths, the goal is to use them to your advantage. You cannot assume that your business’s strengths will always be there. It is good to monitor them periodically and make changes when indicated.
Weaknesses
These are things your business doesn’t do well, and that inhibit growth and success. Some weaknesses include poor customer service, negative customer reviews online, generic branding that lacks a clear vision, excessive business debt, outdated products/services, and pricing that is higher than the perceived value of the products/services. If your business has these or other weaknesses, developing a realistic strategy to correct them is good.
Opportunities
These are the external factors in a SWOT analysis that can be used to your advantage. These opportunities might not be available in other areas of a SWOT analysis, and they give your business an edge over your competitors. Of course, every business’s situation is unique, and there are countless opportunities and ideas. Some of the more popular ones include introducing new products/services, hiring top-level employees, increasing profit margins, implementing customer relationship management (CRM) software, and launching a new marketing campaign or website.
Threats
There are factors in a SWOT analysis that may pose obstacles to your business’s success. They include poor-functioning equipment, outdated technology, operational inefficiency, high turnover, low employee morale, and products or services that are not selling as much as in years past. Threats might come from outside of your business as well. For example, a competitor might undercut your prices, launch an aggressive marketing campaign, or introduce a new product or technology that makes yours look obsolete. Other possible threats are natural disasters or economic downturns, which may cause the demand for your products or services to drop.
How to conduct a SWOT analysis.
If you think that conducting a SWOT analysis is a time-intensive task requiring extensive marketing knowledge and strategic business understanding, we have some welcome news. You can complete a SWOT analysis quickly on paper, poster board, or your computer. The process involves listing your business’s strengths, weaknesses, opportunities, and threats in simple side-by-side grids. It’s that simple! To be effective and accurate, you must conduct a SWOT analysis or team up with your managers. This task should not be handed off to a third party.
Before coming up with a list for each SWOT grid, you will need to write down four sets of questions about your business, the answers to which will go into their respective SWOT grids. Avoid generic, one-size-fits-all questions, as they will result in vague answers. Instead, come up with questions that deal with actual business-related issues and concerns that can be answered with quantifiable evidence.
Example of a SWOT analysis.
To help guide you in the right direction, we mapped out a sample SWOT analysis for a dental practice based on these questions:
Strength-related questions
- What makes our dental practice unique in the market?
- What do patients and referring dental specialists say about us?
- How is our dental practice better than others?
Weakness-related questions
- Do we need to use more innovative dental technologies?
- Have patients told us things that we need to improve?
- What caused us to lose patients or referring dental specialists?
Opportunity-related questions
- What innovative dentistry trends and treatments would set us apart?
- Would special offers for cosmetic dental procedures boost our revenues?
- Are there any community events or sponsorships that we should participate in?
Threat-related questions
- Are their competing dental practices capturing our market share?
- Do other dental practices market themselves better than we do?
- Is our practice doing well financially?
Here are the SWOT analysis results based on the sample questions above:
| Strengths – Open for 15 years – Gentle, unhurried patient care – Comprehensive services – Flexible financing options |
Weaknesses – Waiting room times can be long – More insurance plans are needed – No digital X-Ray unit – No CAD/CAM software |
| Opportunities – Laser dentistry, 1-hour whitening – One-visit dental crowns – $250 off teeth whitening – Booth at the street fair |
Threats – 3 new practices in the area – Our website needs an update – Our competitors advertise more – Revenues are good, not great |
| Strengths – Open for 15 years – Gentle, unhurried patient care – Comprehensive services – Flexible financing options |
| Weaknesses – Waiting room times can be long – More insurance plans are needed – No digital X-Ray unit – No CAD/CAM software |
| Opportunities – Laser dentistry, 1-hour whitening – One-visit dental crowns – $250 off teeth whitening – Booth at the street fair |
| Threats – 3 new practices in the area – Our website needs an update – Our competitors advertise more – Revenues are good, not great |
Conclusion.
A SWOT analysis helps you identify your business’s strengths so that you can capitalize on them to achieve future success. It also enables you to identify any weaknesses that need improvement or elimination before they become significant issues. A SWOT analysis complements your overall business strategy and marketing plan because it validates the effectiveness of your internal and external efforts.
Reference:
1. https://www.lucidchart.com/pages/what-is-swot-analysis
Balboa Capital, a Division of Ameris Bank, is not affiliated with nor endorses Lucidchart. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.