Last updated January 31, 2024
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What is a SWOT analysis?
A SWOT analysis is a tool that companies use to evaluate internal and external elements of their business. Its purpose is to allow a company to analyze itself, overcome challenges, and determine new strategies for the future.
SWOT stands for:
- Strengths: Things your company does well that separate you from your competitors.
- Weaknesses: Things your company lacks that your competitors may do better.
- Opportunities: Areas of the market your company can seize to grow and succeed.
- Threats: Anything that presents a risk to your company.
You complete a SWOT analysis by listing your company’s strengths, weaknesses, opportunities, and threats. The “strengths” and “weaknesses” categories usually analyze the internal factors of your business. The “opportunities” and “threats” categories look at the external factors that can help or harm your company.
Why is a SWOT analysis useful?
A SWOT is useful because by looking at your company’s strengths, weaknesses, opportunities, and threats, you can:
- Continue to develop the areas that are leading to success
- Refine the areas that are lacking
- Take advantage of beneficial circumstances
- Minimize risks
You can perform a SWOT before making any major company decisions. It gives you a bird's eye view of your business and allows you to manage issues that may initially seem overwhelming. SWOT analysis can be used at the project management level or for strategic planning of a business.
A SWOT analysis is often part of a bigger Business Plan.
If you want to perform a SWOT analysis, your first step should be forming a team of people who bring unique perspectives on your company to the discussion. You want to leave no stone unturned, and having a variety of voices will give you a more well-rounded SWOT.
Everyone involved in the process should be transparent about how they view the company. This is especially true when telling hard truths about the company’s weaknesses or competition.
Once you have a team, determine what you want to achieve with your SWOT. Your goal can be related to the company as a whole or a specific area that needs evaluation. If you’re concerned about multiple areas of your business, you can make as many SWOTs as necessary.
Next, make a list of things you need to know to properly evaluate your company. This will help guide your research. For example, if you own a plumbing company, you may want to know:
- How much profit you’ve earned in each quarter this year
- Which type of customer you most commonly attract
- Which type of customer your competition attracts
- How much money you’re spending on employee training
- How much your competition pays their employees
- The number of plumbing companies in your area
All this data can help you create an informed SWOT analysis.
How do I make a SWOT analysis?
Use LawDepot’s questionnaire to customize your SWOT analysis. Our template will ensure you complete all the required steps:
Step 1: Specify the type of business the SWOT analysis is for
Start your SWOT analysis by specifying whether this document is for a new or existing company.
Step 2: State the company’s name
Your SWOT analysis should display the company’s name at the top.
Step 3: Brainstorm a list of company strengths
Create a list of all your company’s strengths for your SWOT analysis. Your strengths should be internal factors that your company directly controls or influences.
Think about what your company does well and what makes it unique. Maybe your goods or services differ from your competitors, or your business location is ideal for attracting your target customer. Perhaps you own intellectual property rights or proprietary technology (e.g., patents or licenses) that can give you a leg up on similar companies.
Include anything that can give you a competitive advantage.
Step 4: Make a list of company weaknesses
Make a list of your company’s weaknesses. Think about internal factors that could cause your business to fail or ways your competition outperforms you.
Some questions you can ask yourself when making your list include:
- Which areas of my company need improvement?
- Is my company experiencing financial difficulties?
- What advantages or resources do my competitors have that you do not?
- Is my business in a poor location?
- Is my business reputation weak or damaged?
- Do my employees lack relevant skills or expertise?
Step 5: List the company’s opportunities
Brainstorm a list of your company’s opportunities. Consider external factors that can help your business succeed.
Some examples of opportunities you might want to include in your list are:
- Demand for new products
- Possible affiliates or partnerships
- Evolving market trends
- New technology and digital platforms
- Availability of skilled workers
Step 6: Create a list of threats to the company
The final step in your SWOT analysis is listing the external threats to your company that can cause it to fail.
There are a wide range of threats to take into consideration, such as:
- Supplier dependability
- New competitors easily entering the market
- Larger competitors undercutting your pricing
- New tax regulations
- Inflation or an economic decline that affects consumer spending habits
SWOT Analysis Example
Hillfort House Goods is a family-owned company that offers a wide selection of high-quality home goods, such as small furniture, kitchen and dining items, linen and sheets, storage solutions, and decors. Hillfort House Goods has been proudly serving the city of Bristol and surrounding areas since 2010.
Here is what its SWOT analysis looks like:
