Using a SWOT Analysis to Evaluate Your Small Business

For any small business to survive, an entrepreneur must learn how to analyze current performance and products, anticipate potential challenges and threats, and strategically position the business to successfully thrive in any environment. An easy way to do this is to understand how to organize and utilize a SWOT analysis.

What is a SWOT Analysis?

A SWOT analysis is a categorized list that helps businesses put the current state of the company into perspective. Each categories includes internal and external factors that can be either helpful or harmful to the company. The categories include strengths, weaknesses, opportunities, and threats.

Internal vs. External Factors

There are two types of influences in a SWOT analysis - internal and external factors. Strengths and weaknesses are internal factors that the company can control. These can include product lines, customer service, and operational area. External influences are factors that are beyond the company's control such as government regulations, competitors, and changes in the market.

Strengths

Strengths are any aspect of your business that gives you an advantage over your competitors. This can be anything from a superior product to faster customer service response. Many companies highlight strengths in their marketing campaigns as an opportunity to show their superiority in the market. For example, T-Mobile has run several television campaigns lately boasting their faster network speed in an attempt to sway customers to use their service. Ask yourself, why would customers purchase my product or service over my competitor?

Weaknesses

Weaknesses are the exact opposite of strengths. By asking, why would a consumer use my competitor's services or product instead of mine? Let's say for example that you own a company that makes toaster ovens. Your company offers a 3-year warranty with the purchase of a new toaster. Your competitor sells a similar toaster oven that has a 5-year warranty. From here, you can see that your weakness is that your service warranty is inferior to your competitor's and may cause customers to buy the competitor's model instead of yours.

Opportunities

Opportunities are factors that can benefit your company's performance, but you cannot control directly. For example, let's assume that your business is a small café and coffee shop. The city decides to build a new subway station a block from your establishment. As a result, the increased flow of foot traffic from the nearby subway could cause your sales to increase significantly.

Threats

Changes in your uncontrollable environment can also harm your business. For example, a major company might own an office building right next door to your café and coffee shop. Many of the workers there frequently visit for their morning coffee or lunch in the afternoon. The shop could take a huge financial blow if the company decided to downsize and close the office building.

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