In self-employment, one of the most important skills you can have is the ability to reflect honestly on your enterprise. It’s a common trait in entrepreneurs to regard their efforts optimistically – a trait that plays a big role in success – but it can also make it more difficult to anticipate stumbling blocks and weaknesses. SWOT is a great way to cover this.
It’s important to know what you are good at, so that you can play to your strengths and work on your weaknesses. SWOT analysis is intended to give insight into exactly that.
What is a SWOT Analysis?
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. By taking time to reflect on your business and identify aspects of your performance which fit into each of these categories, you can start to develop a strategy for growth. A good SWOT analysis will help you to identify where you may need the support of others, the resources you need to grow and which areas of your performance bring the biggest rewards.
The key to a good SWOT analysis is being as honest and objective as possible. You probably already have a good idea of what will fit into each of those four categories, but getting it down on paper can be a great way of formalising your thinking.
Highlighting what you are good at should be fairly straightforward. From a personal point of view, you should know where you own strengths lie. It could be your sales skills, your product knowledge, or organisational capabilities. Those skills could also be more material in nature – maybe your IT systems are ahead of the competition, or your cash flow is especially reliable. From there, you’ll be able to look at building on those strengths.
Your weaknesses, especially as a self-employed individual, are never easy to reflect on, but understanding them is key to your growth. It may be that you lack confidence selling, that you struggle to organise administrative responsibilities or that you have no money to invest in the business. If you struggle to think of weaknesses try and consider what other people might say when describing you or, even better, ask someone for honest feedback.
Once you’ve identified the strengths and weaknesses, SWOT analysis allows you to think about how you might go forward by identifying the opportunities and threats.
The opportunities for growth should stem from those strengths and weaknesses you listed earlier. For example, the opportunity to sell more core product might result from strong sales skills and high demand. If your financial position is particularly strong, it may be that you have the opportunity to recruit or that you can outsource some work to third parties in order to concentrate on other matters.
Threats can come from any number of directions and it’s important that you are aware of them always. Shrinking demand in the marketplace, changes in the economic climate or developments in technology may all pose a threat to your business. Closer to home there may be competition threats or even challenges on your time. Seeing these issues coming as far in advance as possible will give you the best shot at putting a plan in place to avoid them.
SWOT analysis should be used on a recurring basis. As your situation changes, so will your strengths and weaknesses, so it’s a good idea to consider those regularly. That’ll set you in the best position for planning effectively for the road ahead.
For more information and software tailored to self-employment, visit our Quickbooks Self-employed page.