If you have ever started your own business, you will realise just how much time, effort and energy go into making it a success. Unfortunately there are many factors that can undermine that success, some of which may be outside your control. It is also very easy to get swept along in the day-to-day administration of your business and miss opportunities for expanding your customer base, winning new business or spotting a new product niche.
Therefore it is important to make time to conduct a very simple process which will enable you to identify and act upon potential opportunities for your business, and recognise and quash (or mitigate for) any likely threats. This process is called SWOT. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The process was originally developed back in the 1960s by Albert S Humphrey, and is still conducted today by many businesses, from fledgling start-ups to FTSE 100 registered companies. Whatever the size of your business, whether you work from an office or work at home – SWOT can be a very useful tool.
The SWOT process is as easy as getting a piece of A4 paper and dividing it into four boxes, one for each area, like this:
Strengths and weaknesses are internal factors i.e. issues you have control over. Opportunities and threats are external and outside your control. To do your SWOT analysis start with strengths and brainstorm all the strengths your business has, then list the Opportunities, the Weaknesses and lastly the Threats. Below are a few pointers to get you thinking:
Strengths: what is your business good at? What do you do well? What is your USP? What does your business do that your competitors don’t? Examples for a business where you work from home might be: low overhead costs; access to a grant for funding; or you are an expert in your field and therefore have lots of contacts.
Weaknesses: what is your business bad at? What can’t your business do? What do your competitors do better? What could your business improve at? Examples for Mums in business might be: that you don’t have any experience of running your own business before; you are restricted in the hours/times you can work due to childcare; or you have a very small customer base.
Opportunities: think in terms of what your customers or potential customers would like in your particular market e.g. a cheaper product, a better service or an environmentally friendly alternative. What are the new trends in your market? Has Government policy changed recently which might favourably impact your market? Examples for a new business might be: Government policy change regarding energy sourcing might increase the demand for British made solar panels; cupcakes have suddenly become very fashionable; or currently none of your potential competitors sell your potential product online.
Threats: what could make your business obsolete? What could end it? What is happening in the wider economy, would a downturn affect your business? Can your competitors produce your product more cheaply or in a more environmentally friendly way? Has your business got cash flow problems or is it vulnerable to cyber-attack? Examples include: an envelope manufacturing business being threatened by the advance of email; an online sales business being threatened by cyberfraud; or information indicating that your biggest debtor is struggling with cash flow and you may not get paid.
You could treat the SWOT process as an MOT on your business. How is it looking today? What are its strengths and weaknesses? What are the opportunities and threats it is currently facing? Once you’ve identified each area of SWOT you can then go on to build a strategic business plan to utilise those strengths, eliminate weaknesses, take the opportunities available and minimise the potential of the threats to damage your business.
The important thing is to actually act on each area. SWOT analysis is a great way to focus your strategy in the right direction. For example if you see hackers or identity fraudsters as a significant threat to your online business you could consider taking out ‘e-risk’ insurance cover from a company like Hiscox. Or you could take advantage of the low overheads you have by working from home and make cheaper cupcakes than your competitors and sell them online.
Do a SWOT analysis on your business today and you will be on your first step to maximising your business’ earning power.