Small Business Planning: The SWOT Analysis

Small Business Planning: The SWOT Analysis

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  1. Planning is the harbinger of success. Lack a clearly defined plan with goals and measurable objectives and you set yourself and your business up for failure. Writing a business plan often appears overwhelming and sometimes seen as unnecessary. The U.S. Small Business Association defines a business plan as a document that outlines a firm’s financial and operational goals and benchmarks. Including an analysis of the company’s strengths, weaknesses and external forces provides a foundation for preparation, development and execution and is included in the Business Plan.

    Developed in the 1960s by Albert Humphrey, a business and management consultant, a SWOT Analysis is a business strategic planning method. Humphrey first produced the work at Stanford Research Institute, now called SRI International. The SWOT Analysis examines the internal resources of and external influences on a business, which is valuable information in creating and planning strategies for the competitive environment.

    1. Examine and write the Strengths (S) of the business.

    This step should include consideration of tools such as; strong brand reputation, the knowledge and skills of personnel, any market advantages the company has such as patents or innovative technology and superior customer service. Strengths are any resource or capability that can create a competitive advantage. 

    2. Identify business Weaknesses (W).

    Continue writing with a careful evaluation of any lacks or voids in the business. A weakness may be the same as a strength, viewed from a different perspective. For example, a business strength may be the ability to produce similar products as those performing well in a market or industry. Considered from a different viewpoint, products lacking differentiation can be a weakness as consumers fail to see the value in purchasing a specific brand.

    3. Look for growth Opportunities (O).

    If indeed there is a lack of product or service differentiation, an opportunity may exist in adding or changing a characteristic to draw in customers. Mergers, joint ventures and strategic alliances are also potential opportunities for growth. Adding product lines, moving into niche or segmented markets or research and development are all opportunities. 

    4. Classify Threats (T) to success.

    Strengths of competitors, including innovations and market penetration are threats to a business. Price wars in an industry, problems in channel distribution and changing legislation may all threaten the success of a product, good or service.

    5. Evaluate and refine.

    Markets and industries change over time. A SWOT Analysis, while typically used in the beginning stages of a company’s life cycle, requires evaluation on a regular basis to remain a relevant tool in planning.

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