How a SWOT Analysis Can Bring Focus to Strategic Planning
June 8, 2021 •Oak Street Funding
As today’s businesses conduct their strategic planning, there’s more uncertainty than ever. Technology continues to transform every aspect of the industry, while turmoil in Washington leaves uncertainty about regulatory oversight, taxes, interest rates, and more. That said, the current environment presents an ideal time to revisit your company’s strategic plan so you can be prepared to pivot quickly when changes occur. One of the most practical approaches to do this is the time-proven tool known as the SWOT analysis.
What is a SWOT analysis?
This simple but surprisingly insightful business planning technique provides an excellent way to assess what you're doing well and where you need to improve. It also creates a framework that will help you respond to changes in the economy by forcing you to examine your business and the environment in new ways.
Developing an effective SWOT analysis
SWOT is an acronym for strengths, weaknesses, opportunities, and threats. While business plans are often lengthy, the most useful SWOT analyses are quick summaries, often using bullet points rather than sentences and paragraphs. By using fewer words, the analysis is more focused and impactful.
One of the best ways to develop a SWOT analysis is to ask direct questions about each of the four factors:
Strengths are the internal attributes of your company that make a positive contribution to the business. An example is the knowledge and experience you bring to client needs. To identify strengths, ask questions that provide insight into the assets your company has that will help it grow and succeed, such as:
- What do you do better than competitors?
- What specialized experience or knowledge do you have?
- Which lines of business are most profitable?
- How would satisfied customers describe you to others?
- Why would someone choose to do business with you?
In a SWOT analysis, weaknesses represent the internal areas in which a company must improve to be more competitive. Questions that probe for factors that could hurt your progress include:
- What internally has caused you to lose business in the last couple of years?
- Which lines of business are less profitable?
- Does everyone on your team have the training they need?
- What resources does your company lack?
- Where are the inefficiencies within your operations?
These are external situations that have the potential to increase your business and contribute to your success. Questions that can help you see ways to grow or improve your company include:
- How can you increase business among current clients?
- What would upgraded technology allow you to accomplish?
- What external circumstances could lead to growth?
- Are there new types of clients or new geographic areas you can pursue?
- Do you have local competitors who might consider being acquired or merged?
The final category explores risks that are outside of your control. You may not be able to prevent threats from happening, but a SWOT analysis can call attention to known and potential issues, so you are better prepared to deal with the situation. To get a sense of the external factors that might interfere with your objectives, ask questions such as:
- What do your most formidable competitors do better?
- Is the average age of your client base too old?
- Are you missing out on specific groups of clients?
- Are there economic issues affecting your community?
Have your team do the hard work
While you could easily develop a SWOT analysis yourself, there's value to be gained by turning the task over to your team. The most valuable SWOT analysis is a brutally honest one, and who better than your team to tell you what is working and what's falling short? Providing a formal means to express their thoughts empowers them and develops them as your next generation of leaders.
A team-driven SWOT analysis will give you a better sense of your company by combining a wide variety of viewpoints and perspectives. It also gives employees a reason to buy into your business strategy. Since they have had a voice in assessing the company and identifying goals, they are more likely to take ownership of and responsibility for achieving them.
How to make it happen
There are two essential steps when starting the SWOT analysis process. Your team must know that you genuinely want candid input and that you are going to empower them to manage the process. Second, you'll need to explain the basics of a SWOT analysis, so they clearly understand the expectations. It may be beneficial to engage an outside facilitator who can explain the process and guide your team through the steps. Employees may be more comfortable asking tough questions and clarifying instructions when they are not talking to the boss. It's critical that you step back and avoid trying to influence the process. Resist the urge to check on your team's progress or to ask them how things are going.
Putting your SWOT analysis to work
Developing a SWOT analysis is only the first step. Once you've identified strengths, weaknesses, opportunities, and threats, you need to create or update your strategic plan - implementing what you've learned and how you will go about achieving your objectives.
The key is to use the insights you've gained from the SWOT to act as a guide for keeping your company moving forward. Conducting a SWOT analysis once or twice a year can provide a powerful tool to identify areas where improvement or additional resources are needed and where your company may already have opportunities for impact and growth. Also, if the business environment shifts in any way, you can revisit and refresh your analysis. No matter what happens in the economy or the outside world, you’ll be more confident in your ability and capacity to respond efficiently and effectively.
Once you've identified promising opportunities for improvement or growth, you may realize financial resources are necessary to implement them. If you are thinking about a working capital loan – or one for an acquisition – please feel free to contact us. At Oak Street Funding, we have experts in lending who have helped thousands of potential clients determine if a loan from a specialty lender is right for them.
Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.
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