How to conduct a SWOT analysis for a small business

A SWOT analysis is a simple and valuable tool to help small and large companies develop and adapt their business strategies. You can use this exercise if you are starting your business or figuring out the next steps to grow. So how do you conduct a SWOT analysis for a small business? This article will dive into the following areas:

• What is a SWOT analysis?
• How can SWOT analysis help a small business?
• Step by step guide on to create a SWOT analysis of a small business

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT analysis is an exercise in listing these business features as a way to create a business management strategy.

Strengths and weaknesses will be things that you (as the owner of the business) have control over, like:

• What do you do better or worse than your competitors?
• In what areas is your business an expert?
• Do you have the right level of cash flow?
• What skills do you have or lack?
• Do you have the right technology to help you manage the business effectively?
• Do you have employees, and if not, what skills would you bring in?

Opportunities and threats are external factors that you do not have control over and are subject to the broader market, such as:

• Competitor activity
• The price of raw materials or supplier costs
• Market demand or trends in customer behaviour

Performing a SWOT analysis allows you to see your business from different perspectives to understand where you can make improvements.

Get employees involved in the process. If you are a sole trader without employees, ask friends, family, your support team (such as financial advisors or accountants), or potentially even regular customers to give you feedback on your SWOT analysis. They can be objective and may see things from a different perspective to you. Having another pair of eyes on this exercise will help you get a fresh take on the situation and could lead to improvements you may not have thought of on your own.

Gather your team to get their feedback together in one document – this way, your contributors can bounce ideas off one another and lead to some interesting findings. If that’s not possible, ask your external contributors to give you their feedback for you to compile. 

You can use a spreadsheet, a word document, or a flipchart and sticky notes to lay out the SWOT sections. A ‘one pager’ with four sections on one page can be helpful so you can reference each item quickly. Choose whichever format you prefer and make sure it is easy to understand when you analyse it later.

First, list the business’ positive attributes that are within your control. Then, here are some questions to ask to get started:

• What do you do successfully?
• What do you do better than your competition?
• Do you have a unique selling point? For example, do you specialise in a particular industry or service?
• What customer feedback are you especially proud of?
• What operational processes work really well?
• What assets do you have, in terms of knowledge, education, network and reputation?

Now list your weaknesses in a separate section. These are things that are also within your control, such as:

• What do your competitors do better than you?
• Which business processes could work better?
• Is your location crucial to your success? Could you have a better site, or would a home-based business be more effective?
• Could hiring an employee fill skills that you lack?
• Are there assets (both tangible assets, like money or equipment, or intangible such as digital literacy) that you are missing that could improve business success?

Opportunities are factors in your industry that you could capitalise on, such as:

• Is your market growing? For example, you could spot a new sector that you could specialise in before any competitors.
• Are there new or exciting events that your firm could attend?
• Are there any upcoming regulatory changes that may impact your business or your clients?
• Are there any audiences you could capture that you haven’t yet? Would your product do well with another audience that you don’t target?

Now list your threats. These are risks that could emerge. You can protect your business with contingency plans, but you cannot prevent these threats from materialising. These could be factors such as:

• Are there new competitors entering your market?
• Will changes in technology affect how you do business?
• Is consumer behaviour changing in a way that could affect you? For example, are you store-based, but customer behaviour favours online shopping? This could mean you need a website.
• Do you have any clients in industries that are failing or falling behind in market trends that you may lose?

To create a business strategy, you have to analyse your findings. First, examine your strengths and opportunities, and try to match them up to use the strengths you identified to take advantage of available opportunities. Then look at how your strengths can protect you from any threats. This analysis will allow you to tap into the potential of your strengths in a focused way.

By looking at your weaknesses, you can make a plan of action of how to change those too.

Finally, create a list of actions based on the analysis. The actions will be your strategy, giving your business a list of things to focus on for the foreseeable future that will help achieve business growth and adapt to the future market.

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