Small Business SWOT Analysis

Help Build the Foundations for Long-term Business Success

Jul 10, 2008

A SWOT analysis helps to identify the Strengths,Weaknesses, Opportunities and Threats that face a business and is as relevant for small businesses as it is larger ones.

A SWOT analysis is an important strategic planning tool for business. It is used to determine internal and external influencing factors that can impact the growth and success of a business. However, before a small business owner clicks away through fear of boredom – read on! Carrying out a SWOT analysis needn't be boring and full of management speak, instead it can be a fun and highly relevant management tool for even the smallest of businesses.

A SWOT analysis doesn't require understanding of the latest business management buzzwords or MBA-babble. It simply requires that the small business owner has a good understanding of their own business and the marketplace in which it operates. While it is an important strategic tool, undertaking a SWOT analysis is a creative process. It should not simply be a case of stating the obvious, instead it is the opportunity to think creatively about a business and its future direction.

What Is a SWOT Analysis?

A SWOT analysis takes a look at the Strengths, Weaknesses, Opportunities and Threats that face a business. The whole SWOT theory works on the principle of balance. This means that every strength has a corresponding weakness and that every opportunity has a corresponding threat and visa versa.

As an example of this, a small company may recognize that one of the biggest strengths of the company is its staff (this is particularly important with single person businesses). The threat, therefore, would be that something happened to key staff that stopped them from performing. An opportunity might be a new market opportunity opening up and the threat might be that someone else also sees this opportunity and enters the market.

How to Undertake a SWOT Analysis

There are several ways to undertake a SWOT analysis, however the principle is always the same, and that is to draw up a grid with four squares, each with one of the headings from strength, weakness, opportunity or threat.

It is then simply a case of writing in as many different features as possible. At the end of the exercise all the different points should be checked to make sure that there is corresponding positive or negative point for every point raised. A discussion about the exercise might be useful at this point.

Tips for Running a Successful SWOT exercise

Here are some tips to run a a successful SWOT analysis exercise:

Make it fun! - The more interesting and fun the exercise is, the more likely it is that people will join in with enthusiasm.
Encourage debate – Full and frank discussion can be useful when discussing different aspects of a business. It is important, however, that people can do this in a positive way.
Set a time limit – Setting a time limit on any management exercise is important as this helps to keep the discussions on track and avoids people going off on a tangent.

What Happens Next?

A SWOT analysis on its own won't help a business. The next step is where things start to get interesting and that is when the SWOT study is incorporated into a business plan. Even if this is done informally it is imperative that an action plan of some description is drawn up – otherwise all these important thoughts will go to waste!