A SWOT analysis identifies Strengths, Weaknesses, Opportunities and Threats.
When planning out a new venture or strategy, many business owners find it helpful to create a SWOT analysis — a thorough, honest assessment of the company's strengths, weaknesses, opportunities and threats. This analysis looks at both internal and external resources and factors that can help or hinder a business in achieving its goals.
Linda Pophal, owner and CEO of communications consulting firm Strategic Communications, has worked with a number of clients in writing and utilizing SWOT analyses. Bryan Weaver, a partner at Scholefield Construction Law, was heavily involved in creating a SWOT analysis for the firm. Both Pophal and Weaver have found the analyses useful and integral to their strategic planning processes.
"If done effectively, SWOT can help drive better strategy development," said Pophal, who is also the author of "The Complete Idiot's Guide to Strategic Planning" (ALPHA, 2011).
"SWOT is a useful tool that is easy to understand, and can be applied formally or informally to any business situation," Weaver told BusinessNewsDaily.
Pophal advised small business owners to keep the following things in mind when creating a SWOT analysis:
Base it on real data, not guesswork. If the SWOT is grounded in reality, thestrategies developed from it will be realistic and will appropriately direct the business' efforts. For instance, if an organization says that its strength is customer service (without data to substantiate that opinion) and creates a strategy designed to leverage this great reputation, that strategy is destined to fail. By the same token, if important data is not used or considered during the SWOT process, opportunities may be missed.
Include broad input. Once you have developed your SWOT analysis, share it with key constituencies including employees, vendors and customers. Gathering that broad input can provide an important reality check for the work done by the project team and, especially with employees, can generate support and buy-in for the plan.
Prioritize and focus on the "big rocks." Prioritize your lists using some type of group rating process to identify the most important items under each category. Those items can then provide the basis for the development of strategies.
Use it as the framework for strategy development. Strategies should be derived directly from the SWOT and should be focused on leveraging strengths and opportunities to overcome strengths and weaknesses. This is actually the area of strategy development where organizations have an opportunity to be most creative and where innovative ideas can emerge, but only if the analysis has been appropriately prepared in the first place.
Weaver provided BusinessNewsDaily with a sample SWOT analysis that his firm used in the decision to expand their practice to include dispute mediation services for construction companies.
Strategy: Take mediation courses to eliminate weaknesses and launch Scholefield Mediation, which uses name recognition with the law firm, and highlights the fact that their construction and construction law experience makes them different.
"Our SWOT analysis forced us to methodically and objectively look at what we had to work with and what the marketplace was offering," Weaver said. "We then crafted our business plan to emphasize the advantages of our strongest features while exploiting opportunities based on marketplace weaknesses."
Originally published on BusinessNewsDaily.