SWOT Analysis for small businesses

Running and growing a business isn't an easy task. Fuel prices are increasing, the economy is stagnant and customers aren't spending. In order for our business to prosper, you have to know what is going on in your business and its surroundings. You have to play to your strengths, identify new opportunities, know about possible threats to your business and try to limit your weaknesses. One of the best ways to identify these factors is the SWOT analysis.

What Is a SWOT Analysis?

SWOT (Strengths, Weaknesses, Opportunities, Threats) is a useful analytical technique that can assist you in identifyingwhat yourcompany does well right now, so you know where to focus your efforts going forward. It can also provide insight intoareas of your company that need attention, or that your competition may be able to exploit if you don’t keep up with them.

When performing a SWOT analysis, look at both internal and external factors, but don’t worry if some of them aren’t up to you. Always choose the best option available. As long as you've identified, recorded, and analysed as many variables as you can, the right decision will become obvious.

SWOT seems simple, but, if used correctly, it can be very helpful. You may be aware of your company's strong points, such as its ability for delivering high-quality products at low prices. Even so, until you record these qualities alongside their weaknesses and threats, you won't know whether they're reliable or not. By systematically analyzing them, though, you might be able find an opportunity that would outweigh any potential risks.

How to use a SWOT Analysis?

Swot analysis can be applied to your entire business or to specific projects. Once completed, business owners will have an overview of the internal factors as well as the external factors that impact their businesses, and this will enable them to perform strategic planning that may provide a competitive advantage.

How does a SWOT Analysis look?

A SWOT analysis consists of the following 4 elements:

• Strengths
• Weaknesses
• Opportunities
• Threats

A SWOT analysis is usually presented as a grid-like matrix that consists of the above-mentioned elements. We will provide a SWOT analysis template at the end of this post.

Let's take a look at the 4 elements of the SWOT Analysis

In order for you to perform the SWOT analysis, you will have to ask yourself, and your team a few questions.

Strengths

• What does my business do better than my competitors?
• What makes my business different from my competitors?
• What do our clients/customers love about my business?
• Do we have any resources at our disposal that our competitors don't have?
• Do we have a unique selling proposition?

Weaknesses

• What can we do better?
• What do our clients/customers dislike about our business or products?
• Why are we losing clients/customers?
• Do we get many negative reviews? Why?
• What are our biggest obstacles?

Opportunities

• Are we using our resources effectively and efficiently?
• How can we improve client service?
• What can we do to differentiate our business from our competitors?
• Are there any additional market opportunities that can be exploited?

Threats

• Are our competitors leaving us behind?
• Are our products/services still relevant?
• Are our competitors out-innovating us?
• What impact does the economic environment have on our business?
• Are we losing market share to our competitors?
• Do we have sufficient financial resources to fund our future operations?

The above are just a few of the questions that you can ask to complete the SWOT Analysis. You should take care to consider both internal factors and external factors.

PEST Analysis / PESTLE Analysis

External factors that may impact your business can be difficult to identify. The PEST Analysis / PESTLE Analysis can be very helpful to identify external factors. It consists of the following elements:

• Political
• Economic
• Sociocultural
• Technological
• Legal
• Environmental

You should consider these elements when you perform the external analysis

I have completed the SWOT Analysis. Now what?

Once you have identified the internal strengths and weaknesses, and the external opportunities and threats, you can start to work on an action plan. The first thing you have to do is try to match your internal strengths to the external opportunities and convert the internal weaknesses into strengths.

Then the information that you obtain from the SWOT and PESTLE Analysis will assist you in your strategic planning and will allow you to make informed business decisions. Your business strategies should never be static, and you should always be looking for new market opportunities that will give your business a competitive advantage.

Click here to download your free template

JM Bennett is a Chartered Accountant (SA), a Registered Auditor and a Registered Tax practitioner. He obtained an MBA from Wits Business School in 2020 and a Higher Diploma in Tax from the International Institute of Tax and Finance in 2016. He has almost 20 years of experience in accounting, auditing and tax of SMEs.