Business success is not an accident - it is planned. Scientific studies have established a link between strategic planning and business success and failure. Yet, only one out of five small-business owners practice any type of strategic business planning regularly.
Regardless of whether you develop a full-blown strategic plan or not, you certainly want to do some planning for your business. Planning is about setting objectives, prioritizing, allocating resources and establishing milestones to better manage your business. A SWOT analysis is a good place to start.
In the 1960s, Albert Humphrey of Stanford University developed the SWOT analysis technique as a strategic planning tool. The concept is simple and easy to apply to any business. SWOT stands for Strengths, Weaknesses, Opportunities and Threats of an organization as follows:
- Does your company have strengths that are an advantage over your competition?
- Are weaknesses unnecessarily holding you back?
- Are there opportunities within your market that you might pursue?
- Are there some unknown threats to your company that you need to address?
Begin a SWOT analysis by getting key players involved and brainstorming. If you run a very small business, invite a trusted friend who knows your business and your accountant, attorney or consultant. Brainstorm a list of the strengths, weaknesses, opportunities and threats to your company. Record this information on a flipchart and then identify the most important ones based on likelihood of occurring and degree of impact. Remember that brainstorming means generating a lot of ideas, not just good ideas, and then editing them down to a concentrated most important, high impact strategic list.
Every organization has certain strengths such as dominant market share, a highly skilled labor force, or a strong balance sheet. Even companies not experiencing success, have strengths. Sometimes companies over look their strengths. For example a small company may be able to innovate much faster than a large company and that is a strength. Some of the questions to ask to determine company strengths are listed below:
- What is the company's market share?
- What are the company's most successful lines of business?
- Does the company have a pool of skilled employees?
- Are the company's sales & marketing functions effective?
- Does the company have a strong financial position? Can it raise capital?
- What are the company's historical operating results?
- Has the company demonstrated the ability to adapt and change?
- Has the company built customer loyalty?
- How is the company different than the competition? Is it a positive difference?
List Company Weaknesses
Every organization also has weaknesses, such as an inability to find skilled labor or cumbersome processes. Ensure you really dig deep because not every weakness is evident. Bad morale or key employee turnover are often overlooked but still are weaknesses in today's highly competitive search for exceptional talent. Every company, even those that are dominant in their markets, has weaknesses. How much these weaknesses will affect the company is a matter of analysis. Some of the questions to analyze weaknesses are listed below:
- What are the company's least profitable areas of business?
- Are any of the company's projects losing money?
- Is the company losing talented employees?
- Is the company's financial position weak? Can it raise capital?
- Is the company innovative?
- Is the company able to take on higher capacity to grow?
- Is the company able to recruit technical talent?
- What is the biggest drain on your employees' time or what hurts your productivity the most?
All organizations have opportunities within their marketplace. A thorough review of the company's market will unearth opportunities which the company should pursue. Opportunities may also be identified as a goal for the future but must be worked on each year. Use the list below to spark your thinking: