How to conduct a SWOT analysis for your small business

As a business owner, you make decisions all day, every day. But do your choices support your goals? A SWOT analysis can help ensure that your daily choices support your overarching vision. It’s a simple and powerful tool for strategic planning that highlights your business’s strengths, weaknesses, opportunities and threats. You can also use this information to evaluate your competitive position, identify smart opportunities for growth or fine-tune your business plan, including writing a powerful business description.

What is a SWOT analysis in business?

SWOT stands for strengths, weaknesses, opportunities and threats. Strengths and weaknesses capture your business’s internal workings, and opportunities and threats focus on external factors that could affect its overall health.

Strengths

These are the things your business already does well. Identifying your strengths can help you find more efficient ways to problem solve or potential directions for growth. For example, your strengths could include your core products or services, financial position or talent base. When determining your strengths, consider the following questions:

• What is your business known for? Your core product or service offerings can provide clues about what you do best. Your reputation itself could be a strength, too.
• In what ways do you outperform competitors? Your customers choose you for a reason. Comparing yourself with similar businesses highlights your competitive edge.
• Where are your greatest efficiencies? Think about areas in your business that feel effortless or have low administrative costs. If possible, use data from your company’s project management or sales software to back up your claims.

Weaknesses

We can’t be equally good at everything. A weakness in your SWOT analysis is any area in which your business is underperforming. Identifying your weaknesses is the first step toward correcting them, and you may even find that your weaknesses are also some of your biggest opportunities for growth. Ask:

• Where do you get stuck? Identify areas where you frequently experience bottlenecks or drain resources. Then brainstorm solutions for those inefficiencies. A single change such as hiring a new staff member or switching to a different software program could make a big difference.
• Are there any trends in your negative feedback? Customer satisfaction is subjective, but repeated complaints could point to your weaknesses. This applies to your own employees, too, since continued frustrations from your team could indicate areas in need of improvement.
• Where do your competitors outperform you? You don’t need to be better than your competitors at everything, but knowing their strengths can help you decide where to compete directly and where to differentiate.

Opportunities

In your SWOT analysis, opportunities are external factors that your business is positioned to capitalize on. These could result from your own analysis of your strengths and weaknesses, broad economic forces like changes in tariffs or interest rates, or competitor shortcomings. Get creative and think outside the box. Consider:

• What are the market trends in your industry? Keep your eyes on any shifts in the marketplace, and think about how your business can stay ahead of the curve or adapt.
• How is your customer base evolving? The customers you started with may not be the ones you grow with. Refresh your customer segmentation to decide if you need to adjust your core products or marketing strategy.
• Can you build on existing relationships? Dig through your network to identify any vendors, partners or even clients who may be open to new ways of collaborating.
• Are any of your weaknesses a chance for growth? Sometimes, solving for your weaknesses is one of the best opportunities to transform a sore point into a strength.

Threats

Threats are external factors that have the potential to hinder your business performance. For example, a tight labor market, inflation or a new competitor could eat into your profits. Threats can be tricky to address because they’re out of your direct control, but identifying them early can help you minimize damage and adapt. Think about:

• What’s the biggest threat to your supply chain? When supply chain disruptions cause production delays, your sales and revenue suffer. Identify the biggest threats and have a backup plan in place.
• How are you prepared to handle natural disasters? Acting quickly during a climate event can help limit the damage. Create an emergency plan — and brief your employees on it, too.
• Do you have the right security measures in place for your location and industry? Consider which types of cyber and physical attacks pose the greatest threats to your business, and create a plan to address them.
• Is there any proposed legislation that could affect your business? You don’t need to be a legal expert to keep up with relevant policy changes. Industry groups, websites and newsletters can help you stay informed.

Pros and cons of SWOT analysis in business

SWOT analysis is just one tool in your toolbox. Although it’s helpful for making decisions and evaluating your competitive position, it’s not a perfect measure of your business’s performance.

Pros of SWOT analysis

• Simple: Running a SWOT analysis doesn’t require that you buy new software or hire consultants. It’s cost-effective and can be completed with resources you already have on hand.
• Versatile: A SWOT analysis can be used in many scenarios where you need to organize information to make a decision. It works across different scales of magnitude, from big choices like which product line to develop to smaller decisions like which email marketing strategy to use.
• Collaborative: Complete your SWOT analysis as a team to get the most out of the exercise. Bring together stakeholders from across your company to weigh in with data and share their perspectives.

Cons of SWOT analysis

• Subjective: Because you fill out your own SWOT analysis, the information reflects your team’s perspectives, biases and blind spots. To minimize subjectivity, it can help to bring in a variety of stakeholders and to back up your claims with data when possible.
• Static: A SWOT analysis only captures your business’s current position. It doesn’t consider how your business has already evolved or its long-term trajectory. Conduct a SWOT analysis regularly to paint a more complete picture.
• Incomplete: Your SWOT analysis provides a wealth of information, but it doesn’t give you clear next steps. To get the full value, it’s important to align on priorities with your team and come up with a list of action items.

How to conduct a SWOT analysis for your business

A SWOT analysis gives you robust insights into your business using a simple matrix. This four-quadrant grid helps you capture all your thoughts in one place. Here’s how to conduct a SWOT analysis in four steps:

1. Gather your team. Consider which stakeholders should be involved. For example, you might want to bring in people who work on different products or have access to financial or marketing data.
2. Align on your goals. It can help to have a specific objective in mind to keep your SWOT analysis focused on what’s most important. Without clear goals, it’s easy to get too broad and lose sight of your target.
3. Fill out your SWOT matrix. Review internal factors (strengths and weaknesses) first because you have more control over changing them. Then continue to external factors (opportunities and threats) and make a plan for how to respond.
4. Discuss priorities and next steps. After filling out your matrix, analyze your findings and decide what’s most important to your business success. Come up with action items and delegate tasks to help everyone move forward with clarity.

Business SWOT analysis example

Let’s take a look at an example of a SWOT analysis using the fictional boba tea shop Tara’s Taro.

Looking at the SWOT matrix above, what do you think Tara should do to improve the competitive position of her boba shop? She could easily address some weaknesses by posting more regularly on social media and selling branded tote bags and T-shirts. She could also take advantage of boba’s growing popularity to market to a wider client base. While none of her threats are urgent, reaching out to vendors and hiring more staff members could help her get ahead of issues before they arise.

FAQs: SWOT analysis for business

How can a SWOT analysis help your business?

One of the benefits of a SWOT analysis in business is that it helps inform strategic decisions. You can also use it to evaluate your current business strategy, organize information or clarify opportunities for growth.

Who usually conducts a SWOT analysis for a business?

A SWOT analysis is best performed as a team exercise. A person in a leadership position is best suited to run the exercise, but involving stakeholders from across your business can yield stronger results.

How often should you conduct a SWOT analysis for your business?

A SWOT analysis isn’t a one-time exercise. Regularly running a SWOT analysis can help you keep up with changes in your business environment and find new ways to adapt. Consider performing a SWOT analysis twice a year or once every quarter.

What is the relationship between a SWOT analysis and a business plan?

You can use a SWOT analysis to evaluate your competitive position and identify opportunities for growth. A business plan is a formal document that details your current position and long-term vision. While your SWOT analysis can inform your business plan, it isn’t a formal or comprehensive document.

Position your business for growth

A SWOT analysis can be a powerful tool for strategic planning and growth, but it takes a thoughtful approach to be effective. By following the steps and tips above, you can successfully conduct a SWOT analysis to hone your competitive edge. For more ways to grow your business, check out our Coaching for Impact℠ program or reach out to a Chase business banker.