A SWOT analysis for small business is a powerful but simple process. It gives businesses a clear view of their current position and helps them understand how to be more successful.
The term ‘SWOT’ stands for Strengths, Weaknesses, Opportunities and Threats. Within these four categories, businesses can discover their strengths and potential weaknesses.
Why is a SWOT analysis important?
A SWOT analysis includes both internal and external factors. Internal factors (strengths and weaknesses) are those that businesses can control or change. External factors ( opportunities and threats in the wider economy ) are those that lie outside of a business’s control.
These four key factors provide the foundations that businesses can use to plan for the future. They can do this by using their internal strengths to counter external threats.
4 Key elements of every SWOT analysis for Small Business
When conducting a SWOT analysis, a small business will look at the following four categories.
- Strengths (internal factor): A business’s strengths are a sign of its main advantages in the marketplace. Strengths can include a one-of-a-kind product, or excellent service and aftercare. These business strengths help maintain customer loyalty.
- Weaknesses (internal factor): These are the elements of a business that are not operating as efficiently as they could. Internal factors can hold them back from competing effectively. They might lack experience in design, or they might be using outdated systems that don’t talk to each other. A business’s weaknesses are a sign of what it needs to do better to operate at peak efficiency. For example, a company might be failing to generate repeat purchases due to poor after-sales communication and a sub-optimal customer journey. Improve this by increasing staff training, or by automating certain processes.
- Opportunities (external factor): Opportunities can present themselves at any time, and can sometimes come out of the blue. Small businesses can ensure they are ready to take advantage of them whenever they arise. Having identified their strengths and weaknesses through SWOT analysis, businesses can understand how to capitalise on opportunities - and where they need improvements.
- Threats (external): We live in an unpredictable world, and threats can come at any time. From changing regulations, rising materials costs and shifts in customer priorities. Threats are external factors, as they are things that businesses can’t influence. But businesses can try to future-proof themselves in key areas. Automating processes can make it easier to adapt to a changing climate. Making contingency plans using digital solutions can help operations to run smoothly in times of crisis.
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How to conduct a SWOT analysis for small business
A SWOT analysis is a highly flexible tool that can be tailored to fit the needs of the individual business that’s using it. Here are some key points to consider when conducting a SWOT analysis.
Put together a broad team: For a SWOT analysis to be effective, it needs to gather a range of viewpoints from around the business. Only talking to customer services or business analytics teams will give a skewed perspective. Ensure that each major department is represented, from those handling day-to-day operations on the ground to those planning for the future.
Listen to ideas: The team you assemble will be unique, with a particular mix of perspectives and skills. A good first step is to encourage everyone to share their initial thoughts, perspectives and ideas. Do this either in person, as a group, or via anonymous online tools – or as a combination of those. The most important thing is to allow people to share their views in an open and non-judgmental setting.
Plan: When everyone has shared their ideas, it’s time to make some decisions. Those leading the SWOT analysis will want to identify key areas of focus, choose a methodology and decide on a timeline.
Present the findings: A simple grid, with one quadrant each for Strengths, Weaknesses, Opportunities and Threats, is a great way to visually represent the findings of a SWOT analysis. In this form, the insights can be easily shared across the business.
SWOT analysis example – small business case study
Here’s a SWOT analysis example small businesses can use to identify their strengths, weaknesses, opportunities and threats. We will use Clara’s Cake Kitchen, a fictitious bakery.
Strengths
Location: Suburban location near a train station that draws in foot traffic during rush hour.
Product: The owner produces high-quality artisanal cakes that customers come back for again and again.
Marketing: The owner successfully uses social media channels to generate buzz about the business.
Weaknesses
Unpredictable customer flow: Although the bakery is very busy at several points during the day, and at weekends, there are lots of quiet times during the day.
No online ordering: The owner has not invested in click-and-collect or online services, as she doesn’t know if it will be worth it in the long run.
Equipment: Some of the kitchen equipment is second-hand, and is prone to break, needing expensive repairs and causing delays to orders.
Opportunities
Stimulus packages: The EU’s €2 trillion+ economic stimulus could help Clara’s Cake Kitchen to expand, upgrade its equipment and capitalise on new opportunities, potentially creating jobs in the process.
External events: There are some new food festivals and markets starting up in the nearby city. Having a presence at these events could help to expand the brand’s reach.
Threats
Cost of raw materials: The cost of the raw materials that the owner uses to bake the cakes is likely to increase. It’s becoming harder to find some key ingredients without a long lead time.
Competition: More local bakeries are offering custom cakes from home kitchens, without the same overheads.
Clara’s Cake Kitchen will need to use its strengths to counter its weaknesses while taking advantage of opportunities and preparing to tackle the threats that it may face.
What’s next for small businesses?
We’re in a challenging moment where competition is fierce, the landscape is in flux and seizing new opportunities is crucial. A SWOT analysis for small business can help today’s companies address weaknesses, double down on what they do well, and position themselves to succeed in the new normal and beyond.
A SWOT analysis can help small businesses maximise their resources and create winning strategies, but leveraging technologies is also key. Download our free eBook, The Entrepreneurs Guide to Finding the Right CRM, to see how small businesses can discover the digital platform that’s right for them.
