Great Business Plans

SWOT Analysis

SWOT Analysis

(Strengths, Weaknesses, Opportunities, Threats)

 

A “SWOT” analysis is an objective look at your company’s strengths, weaknesses, opportunities and threats. This section will answer two questions for the reader: “Can this company’s leaders look at themselves and the outside world objectively?” and, “What do they see when they look?” Be sure to address the first question, so the reader will be interested in your answer to the second.

SWOT analysis will help you organize and identify internal and external business factors. The acronym “SWOT” itself serves as a template: Strengths, Weaknesses, Opportunities, Threats.  We’ll dive deeper to make it easy.  This section is fundamental to any business plan because it shows that the writer clearly understands their current business environment, as well as the market place as a whole, and how their model would fit in favorably to make a profit. Make sure to pay careful attention and take your time when writing a SWOT analysis, as it’s paramount to any great business plan.

 

Business Plan Outline for SWOT Analysis Should Include:

• Internal Strengths
• Internal Weaknesses
• Outside Opportunities
• Outside Threats

 

Important Considerations

While SWOT analysis is used for a wide variety of disciplines, this section will apply it specifically to your business plan.

The SWOT Analysis section of your business plan will likely be only two or three pages long. Yet it could be the section in which you’ll invest the most time. Creating a SWOT analysis involves a rigorous look at both your own company and the outside world of customers and competitors.

As shown in the SWOT Diagram at the end of this section, Strengths and Weaknesses refer to issues internal to your company, such as your people, your processes, operations or cost structure. Opportunities and Threats refer to external factors, such as competitive issues or factors about your potential customer base.

Start by identifying as many Strengths, Weaknesses, Opportunities and Threats as possible, but include in your diagram only the most important (as a general rule, no more than five in each category). It’s not uncommon to have just one item in a particular category, if that item stands out above all others.

The best way to create a SWOT analysis is to involve the key leaders of your company in a brainstorming session. For each category, create a long list. If you’re just getting started or you’re planning to be a solo entrepreneur, your initial brainstorming session might be with just one other person. Next, for each category, prioritize the list, and select those statements that are truly the most impactful.

The next step is the most important, and the one that takes considerable time. Identify what you could do right now to eliminate or reduce the impact of threats and weaknesses. In the same way, identify how you could exploit strengths and opportunities, or lock them in for the long term. This exercise will help you identify your niche and create strategies that truly take advantage of what makes your business unique. The thinking that comes from this analysis will impress potential lenders and investors, and position you to succeed—both at getting the funding you need and at running your business.

Good SWOT statements are those where you could honestly say, “Customers would agree with this.” Or, “Competitors could not dispute this.” Keep your SWOT statements factual and unemotional. For example, instead of saying, “Our products are superior,” you might say, “Customers will prefer our products because they can be shown to last twice as long.”

As a proud entrepreneur, you’re likely to discover weaknesses and threats that you would never want to acknowledge to a potential lender or investor. You recognize immediately that they are simply too glaring to be overlooked. As an example, a weakness might be, “Nobody on our team has ever led or even worked on a sales team.” The point of a SWOT analysis is to identify and address key issues up front. To improve the quality of your business plan, either remedy the weakness now, thereby eliminating it, or include your plan for compensating for the weakness.

A compelling business plan reduces threats and weaknesses to issues that could be resolved with additional funding. Think about it—if you have issues that could be resolved without funding, a wise investor would have you do so and come back afterwards. Similarly, if after receiving additional funding you still don’t have a plan for addressing the threats and weaknesses, why would someone want to invest? Remember, your goal is to make it easy for the investor/lender to say “yes,” by clearing away the obstacles and highlighting the opportunities.

Once you’ve identified your unique strengths and opportunities, your business plan should be written to capitalize on them. To truly exploit what is unique about your business, your opportunities should be well matched to your strengths. Your business plan should address how you will make the most of your advantages and perpetuate them for as long as possible.

swot analysis

 

Following your SWOT diagram, include a brief description of each statement from each category. For strengths and opportunities, explain how you’ll take advantage of them, why competitors can’t immediately duplicate them, and how you’ll build them into your business strategy.

For threats and weaknesses, address how you plan to compensate for them. While you don’t need a detailed, point-by-point plan, your text should make it clear that you have a workable solution and a plan for implementing it.