SWOT Analysis

A SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats and Trends) is a careful look at your company with the purpose of improving and protecting it.

Strengths: Your company’s strengths can be skills, experience, great location, or high cost to enter your market, limiting the entry of competitors, for example. It could also include the good things about being in the industry you’re in, like a growing market, few competitors, or unique products or services that are difficult or impossible to duplicate.

Weaknesses: Could be the opposite of any of the above. They could be employees who lack proper training or supervision, old or outdated equipment.

Opportunities: Opportunities may include the bankruptcy of a competitor, the opening of new territories, favorable market conditions, or new uses for your product or service or a related product or service that you may develop. The most important thing is that there is a want or need that you recognize in your customers and that you can satisfy.

Threats: Threats can be economic conditions, regulatory changes, shortages of raw materials or skilled labor, or a new competitor.

Trends: What is happening or is likely to happen in the future that could affect your business? Is your product becoming obsolete? Are there local conditions that allow it to expand or should it contract? This may be the hardest of the five lists you’ll make because it means looking at things that haven’t happened yet. It can also involve challenging ideas that you built the business on. In the housing industry, we built houses at a record pace for many years using principles that we all knew from long experience were sound. We buy land to provide a cushion for three to five years of future lots. Hardly anyone in the industry saw the financial crisis that turned three to five years’ supply of raw earth into decades’ supply.

When you’ve made your list in each category, you can build on strengths, reinforce weaknesses, put yourself in a position to take advantage of opportunities, and defend against threats.

You should repeat the SWOT analysis regularly and get input from key employees and advisors, such as your accountant. It’s hard to be honest with yourself and challenge the beliefs you used to build and grow your company.

Original content copyright 2010 Thomas Robinson