When it comes to assessing your business’ health, few tools are as useful as the SWOT analysis. A SWOT analysis lists the Strengths, Weaknesses, Opportunities and Threats to your business, and uses them to make plans that maximise the positives and counteract the negatives.
In part one of our How healthy is your business? series, we'll focus on strengths and weaknesses.
Choosing strengths and weaknesses
Your lists of strengths and weaknesses should contain only internal factors. So, focus on things you can (theoretically) control, like finances or staff, as opposed to external factors which you can't, such as the economy or technological developments.
Strengths and weaknesses should also relate to the present. A strength might be that your staff are up-to-date with industry training now, not that they probably will be up-to-date in six months.
To get an idea of how this works in practice, we've taken some of the most common key small business assets and applied them to both sections, to give you an idea of how your SWOT analysis might look.
Making the most of your strengths
Financial resources – you've got capital in the bank and a healthy cash-flow fuelled by loyal customers. Perhaps it's time to invest those funds to grow your business?
Reputation – you're getting great feedback from your clients. You could harness this by asking for testimonials or reviews to promote your business. A presence on social media, or sites like TrustPilot, can help with this.
Brand recognition – people know your brand, and associate it with all the right things. Can you use that identity to expand, perhaps through an advertising or social media campaign?
Skilled workers – your business is built on a team of talented professionals, but are you making the most of everything they can offer? Ask for feedback and work out a plan to see if you can harness their skills to better your business.
Value for money – nobody can beat you on price, so maybe there's room to improve your margins. Consider whether there are products or services you can upsell, cross-sell or bundle.
Eliminating your weaknesses
Financial problems – whether your business is seasonal or struggles to cope with late payments, there are ways to respond. Explore alternative funding routes, or consider improving your invoicing process through new payment techniques, incentives or late payment charges.
Negative publicity – one option is to take ownership of the problem and publicly show you've changed. Alternatively, you might rebrand or find a solution somewhere in between.
Lack of reach – your service is great, but people aren't finding you. Research your core market to discover where they spend time, and find make yourself visible there.
Staff problems – your business is ready to grow, but your team isn't. Look into training options or shake up your hiring approach.
Tight margins – the product or service is perfect, but the sums aren't quite adding up. Consider alternative pricing structures, whether it's classics like bundling or upselling, or something original to your business.
Once you've catalogued your Strengths and Weaknesses and listed potential responses, it's time to consider the Opportunities and Threats you might face in the future. Specifically, we'll focus on how they could affect the health of your business, and what you can do about them.
This time, we'll focus on opportunities and threats, how they could affect the health of your business, and what you can do about them.
Predicting and planning
Strengths and weaknesses are concerned with the internal factors that relate to the present. Conversely, with opportunities and threats you're looking at future changes happening outside of the business.
The biggest challenge here is not in identifying the trends, but in working out whether they're an opportunity or a threat – and the line between the two is surprisingly thin and blurred.
Joining the dots
To a certain extent it's all a matter of perspective, but what will really dictate how you respond to the trends you spot is how they correlate to your strengths and weaknesses.
Generally, an opportunity is a development that your business is well-placed to use to its advantage, while a threat affects areas you've already identified as weaknesses. To illustrate the point, we'll take a look at a few possible examples.
Connecting trends to your business
1. Technology
New products, online tools, and developments in industry equipment or methods.
Opportunity: You have talented staff and a healthy cash flow. Get in first by working out how to build the development into your business.
Threat: Due to a lack of resources, your competitors could beat you to it. Respond by adapting your service or making the most of your skills.
2. Your industry
Market developments that affect how your customers go about their business.
Opportunity: If you're built to evolve with your clients, make the most of your position to grow your market share.
Threat: Changing habits could alienate you from your customers. Consider repositioning by finding a niche, or try rebranding to connect with their new lifestyle.
3. The economy
Recession reduces disposable income, while growth does the opposite.
Opportunity: Your finances are healthy and your customers are loyal. Consider taking advantage of new talent or wealthier potential customers to expand.
Threat: Weak cash flow or a small customer base could make you vulnerable. Tighten your pricing, manage your stock and look into alternative financing to ensure you survive.
4. The regulatory environment
Rules, regulations and laws that affect your industry.
Opportunity: You meet all best practice standards and more – let potential customers know and see if you can expand your clientele.
Threat: Your staff aren't aware of impending changes to the law. Budgeting for new training is essential.
5. Supplier relationships
Takeovers, corporate reshuffles and business cycles affect your suppliers, too.
Opportunity: If business is booming and your supplier relies on you, take the chance to renegotiate favourable terms.
Threat: You've relied on them for years and if they raise prices your margins crumble. Time to shop around.
When conducting your own small business SWOT analysis, remember that a successful breakdown is detailed, realistic and directly applicable to your business. Get it right and you'll have both a clear picture of your business' health, and a plan to improve it for the future.
