Develop a Strength, Weakness, Opportunity, Threat (SWOT) Analysis

SWOT? What's That?

When developing a business plan, the SWOT Analysis allows you to look at internal and external factors that are key to your successes and potential failures. Looking deep into this analysis forces you to come face to face with who you (your company) are and what obstacles you will need to overcome to achieve success. Do not be overly optimistic or unrealistic. That being said, this should not be overly complex. Keep the lists to around 5 items.

swot

SWOT: Strength

First we start with the S in SWOT, Strength. This section is an internal view of your company. What are some of the qualities that your company possess that you can utilize to succeed? This could be qualitative or quantitative quantities. Perhaps you have the top programmers, or you have a large cash stock pile. These are internal factors that give your company a leg up and a higher probability of success.

Strength Examples

  1. Starting capital of $150,000
  2. Top 4 programmers in San Francisco
  3. 2nd in sales within clothing industry
  4. Combined 12 years sales experience
  5. Flipped 12 houses in the last 2 years
  6. Local material supplier contract
  7. Experience in investing through multiple platforms
strength

SWOT: Weakness

Similar to the strengths, weakness an internal look into your company. Where are you lacking? This is a big internal look that should not be brushed over. In my opinion, this is one of the most important parts to be brutally honest. Confront your weaknesses, so you know where and how to move forward. In the book Who Not How, the author discusses that you need to find the right people for the jobs and not try to tackle everything yourself. Identifying weaknesses will highlight the vacancies you need to fill.

Weakness Examples

  1. Negative cashflow
  2. Unable to close 90% of sales leads
  3. Lengthy bureaucracy process to complete tasks
  4. Weak branding
  5. No marketing budget 
  6. Poor customer service ratings
  7. Supply chain broken

SWOT: Opportunity

Now that we have covered the internal look into the company, it’s time to look outward. What are some market opportunities that can be exploited to help your company succeed. This could be how the market is trending, a market void to be filled, or an innovation need. In this section, don’t think about how you’re going to capture all these opportunities. Instead, provide a menu of opportunities that are available to your company. Take one, or take all. Just make sure it’s clear how the opportunities apply to your company specifically in your business plan.

Opportunity Examples

  1. Software program needed to stream line production for large companies
  2. State emphasis on green energy
  3. Brick and mortar stores are being replaced by online markets
  4. Lack of food options in local area
  5. Wage increases have given consumers a larger disposable income
  6. City ordinance to improve infrastructure
  7. New diet trend requires specialized ingredients that are hard to find
opportunity

SWOT: Threat

Finally, we get to the threat piece. This is another external piece where you look at the environment and find speed bumps. Let me tell you, there will never be none. If you can only think of a couple, then you’re not looking hard enough. Don’t short change yourself. If you’re building a business plan to raise capital, identifying threats is actually beneficial. Venture capitalists (VCs) like to see that you’ve looked at all angles. There is nothing worse for your chances than a VC asking you “what about this threat?”

Threat Examples

  1. Energy cost increases
  2. Government policy restricts current business practices
  3. Breweries are not allowed in counties near me
  4. Local population average age exceeds target range
  5. Inflation is at 6.5%
  6. Interest rates are set to increase over the next couple years
  7. Similar companies are popping up, increasing competition

The SWOT is Critical

Many people find the SWOT to be unnecessary and tedious. While I don’t disagree with it being tedious, but it is very necessary. If you’re trying to start a business, or create a solid road map for your existing company, you need to do a SWOT Analysis. A good SWOT will also help you structure your business as well. This is probably the most important piece to your business plan because it shows you are approaching a business looking from all angles.¬†

Disclaimer

Once again, I am not a financial advisor. These tips are some things I have validated with my own personal experiences. If you feel you need more personal advice, please consult a professional financial advisor. Dont forget to check out the Book List for published authors on this topic!

Leave a comment

Your email address will not be published. Required fields are marked *