Launching a new business is a major undertaking. It’s vital that you do your research upfront to make sure you’re prepared. In fact, 55% of seasoned small business owners say researching the competition is the first thing you should do before you start a new business, according to a recent QuickBooks survey.
According to the same research, 75% of people who plan to start a business in the next year intend to do just that. Just 19% said they wouldn’t be doing any competitor research before opening their doors.
When you’re sizing up the competition and developing a strategic plan, conducting a SWOT analysis is an effective way to identify potential holes in your business strategy. It’s something that doesn’t require a significant investment of time but may generate big returns in terms of your success.
What is a SWOT analysis?
A SWOT analysis allows business owners to evaluate their position in the marketplace. The acronym SWOT stands for strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses are internal factors. They’re things that you as a business owner have the power to change. Your organization’s strengths are things your company does well and the qualities that set you apart from your competitors. Your company’s strengths might also be assets and resources within your business, like knowledgeable team members or proprietary technology. Weaknesses are things that could be holding your business back. These are things your competitors do better than you, or things your business lacks.
Opportunities and threats are external factors that are outside the scope of your control. But they can impact your operation for better or worse. External opportunities include everything you could do to increase sales or grow your business. Opportunities can be new markets, new products, or emerging needs. Threats include anything that poses a risk to your success or growth. Threats can be new competitors, financial risks, and negative attitudes towards your business.
Performing a SWOT analysis
Many larger companies seek outside help when conducting a SWOT analysis. But if you’re a sole proprietor or your business only has a few employees, it’s something that you should be able to do on your own. You can use a four-square template (or SWOT matrix) or make a simple list. The format isn’t as important as the questions you ask yourself and what you discover about your business throughout the process. So get your brainstorming hat on and dive in.
Assessing strengths and weaknesses
Start by listing all of your business’s strong suits. Focus on what you do well, what unique skills or experience you possess, and how it gives you a competitive advantage. You also want to include tangible and intangible business assets, such as highly capable employees or a significant amount of startup capital.
Next, take an honest look at what areas of your business are ripe for improvement. If you’ve got a product that isn’t making a profit or you’re not very effective at managing your time, these are the areas that need to be addressed. Zeroing in on these negative traits typically isn’t a pleasant experience, but it’s necessary to ensure your business is taking steps forward.
Evaluating opportunities and threats
As you dive into the opportunities section, take a look at your current situation, what your short and long-term goals are, and what you need to do to achieve them. You should also be thinking about ways you can help your business grow or expand your existing customer base. This could be something as simple as making an effort to connect on Facebook and other social media sites, or offering a broader range of services. The wider you cast your net, the more opportunities you’re likely to catch.
Last but not least, you need to identify potential threats to your business’s success. For example, it’s not enough to know who else is offering the same types of products or services. You also have to be aware of what their strengths are and what they’re doing that’s putting them at the top of the market. The more tuned in you are to your threats, the better equipped you are to resolve problems early on.
Why is all of this important?
A SWOT analysis can be extremely valuable in business planning because it gives you a chance to see things from different perspectives. It may lead to the discovery of a previously untapped niche in your market or help you to pinpoint an obstacle that could hinder your business’s growth. As you reaffirm what your business’s strengths are and correct your weaknesses, you can use this to shape new opportunities and counteract the impact of external threats.
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