What is a SWOT analysis?
Conducting a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) helps businesses evaluate their current position by creating a simple, impactful overview of how they stand in four key categories. Strengths and weaknesses are considered internal factors that businesses have some control over, while opportunities and threats consist of external factors in the larger marketplace. When looked at holistically, the list provides a framework for businesses to leverage their internal strengths to overcome external challenges.
By running a SWOT analysis, businesses gain a clearer picture of how to strategically approach their business goals. A SWOT analysis for small business is one of the easiest and quickest ways for a company to see where they currently stand – and how they can get to where they want to go. It’s a simple but powerful tool.
The 4 elements of a SWOT analysis for small business
A SWOT analysis is comprised of four elements:
Strengths (internal): Strengths describe the areas in which a business excels, which might include a unique service or proprietary IP, an innovative marketing strategy, a loyal customer base, first-class branding or a knack for superior design thinking. A company’s strengths indicate its competitive advantage – what it does better than its competitors.
Weaknesses (internal): Weaknesses are the things standing in the way of a business reaching its full potential. Does a business lack expertise? Is it lacking visibility, or operating with outdated technologies? What areas need to be improved to keep up with the competition? A company’s weaknesses indicate its competitive disadvantage – what it needs to improve to reach its ceiling. For instance, if a company is delivering fragmented, unwieldy customer journeys, this can be identified as a problem area that could be improved through automation.
Opportunities (external): Businesses may not be able to control when or how external opportunities present themselves, but they can use their SWOT table to get an overview of their strengths and pull the right levers at the right time. Businesses will want to analyse their sales, look at what market opportunities exist, how they can leverage their strengths to maximise those opportunities, and how they can overcome any weaknesses to better capitalise on those opportunities.
Threats (external): Threats are external forces that can negatively impact a business. For example, supply-chain disruptions, rising costs of materials, labour shortages, shifting regulations, changing customer behaviour and increasing competition can all potentially harm a business. And while threats are usually outside of a business’s control, that doesn’t mean they shouldn’t try to prepare for them and become future-proof. For example, digital solutions can help keep up with new customer behaviour, while training platforms can help mitigate labour shortages.
How to conduct a SWOT analysis for small business
There are no hard and fast rules for how to run a SWOT analysis, so businesses should come up with a strategy that fits their unique needs. With that being said, here are some useful tips to get started:
Assemble the team: To conduct a thorough and effective SWOT analysis for small business, it’s important to make sure that the right team members are given a voice. Not everyone needs to be a business analytics visionary – having representatives from every department and role will help ensure that businesses are getting a detailed, complete overview of the strengths and weaknesses of their operations from the ground up.
Brainstorm: After the team is assembled, businesses can hold a brainstorming session where everyone is encouraged to contribute their thoughts about the strengths and weaknesses of the company, as well as any external opportunities and threats they recognise. There’s no need to judge the relevance or importance of these observations at this stage – this is just throwing ideas at the wall to see what sticks. Some businesses choose to brainstorm as a group, while others ask their employees to quietly generate their ideas and then compare notes.
Prioritise: After the brainstorming session, businesses can start ranking the ideas that have been generated by the team. A voting system may be helpful for this exercise, but every business has its own ideas as to how to best reach a consensus, and some defer judgement to senior executives and decision-makers.
Once a business’s strengths, weaknesses, opportunities and threats have been identified and ranked, they can be entered in a simple four-square grid, with each square being dedicated to one of the aspects. Voila; businesses now have an easy but effective tool for optimising strengths, improving problem areas, seizing new opportunities and mitigating threats.
Discover the tools for success with a CRM for Small Business
Find, gain, and keep customers with solutions for sales, marketing, and customer service - all tailored for small businesses just like yours.
SWOT analysis example – Small Business case study
Let’s take a look at a small business SWOT analysis example to see how a SWOT analysis can identify strengths, weaknesses, opportunities and threats for Black Cat 13, a fictitious craft brewery in an up-and-coming urban area.
Strengths
Location: Good city-centre location that draws in university students, football fans and walk-in traffic, in an area that’s growing by 7%+ annually.
Expertise: Founder/head brewer has 10 years of experience brewing innovative small-batch beers for restaurants and pubs around the world.
Staff with diverse skills: Bar staff includes a former chef, a marketing major at the local university and a tech-savvy aspiring artist.
Weaknesses
Lack of time: The owner functions as the head brewer, accountant and full-time bartender, meaning that they’re overworked and often operating outside their comfort zone.
Poor branding: The brewery has a good word-of-mouth reputation amongst regulars but no branding strategy to speak of. The larger potential customer base has no idea what makes the brewery unique.
No online presence: The lack of an impactful digital footprint is preventing the business from reaching a bigger audience.
Opportunities
Stimulus packages: The UK’s economic stimulus could help Black Cat 13 transform its businesses, follow new opportunities and create jobs.
Partnerships: There are opportunities for potential partnerships with sports teams, events venues, a food festival and several local restaurants.
Threats
Competition: The local craft beer scene is growing rapidly, and the brewery faces competition from new rivals.
Health and safety regulations: Tough new health and safety protocols, including capacity limits in the bar, pose a potential threat to profitability.
As you analyse the SWOT list above, a few things quickly become clear. Black Cat 13 can leverage some of its strengths to overcome its weaknesses, while also minimising threats.
For instance, perhaps the brewery can turn to its marketing major to tackle its branding issues – which could also help separate it from the competition. Maybe partnerships can also help in that area. Perhaps some stimulus money can be used to offset tougher regulations by opening an outdoor area or offering new delivery options.
What comes next?
We’re in a challenging moment filled with both threats and opportunities. A SWOT analysis for small business can help enterprises address any weaknesses, capitalise on what they do well, and maximise their chances for success. And best of all, it’s quick, easy and inexpensive.
A SWOT analysis is just one of many tools that can help small businesses improve their planning and create winning strategies; having the right technologies is also key. To see how a CRM system can help small businesses adapt to the changing landscape, check out our free eBook, The Entrepreneurs Guide to Finding the Right CRM.
The Entrepreneur’s Guide to Finding the Right CRM
Discover what is a CRM, how it can boost your sales and why small and emerging companies can benefit from it.
