SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT's purpose is to clarify the internal and external forces that shape your business' future.
A SWOT analysis is a vital first step in building a viable strategy for growing your business. It sets the stage for your strategic decision making. Helps bring to light issues that you may have overlooked - issues that could boost your bottom line and issues that could crush it. See why doing a SWOT analysis might be in your best interest?
SWOT is a brainstorming activity with a twist. Pure brainstorming means throwing ideas on the wall without judgment or discussion. SWOT kind of works that way but discussion is mandatory. Each suggestion needs to be thoroughly evaluated.
Before diving into the nuts and bolts of SWOT we need to address the format. The first question that should have come to your mind is "Who should be involved?" The answer may be a little uncomfortable for you. To really drive quality in the SWOT, it should be a group exercise. You want as many divergent perspectives on your business and your competition as possible. Include your most trusted advisors, your best field leaders and your clerical staff. Consider bringing in outsiders who have proven to be good friends of your firm such as a key supplier or subcontractor.
Pick a room that comfortably fits everyone and has empty walls. You will be taping flip charts to the wall as you work through the SWOT. Make sure everyone has something to drink, something to jot notes down on, and something to write with. Round up a flip chart, tripod stand, permanent markets and masking tape.
Turn cell phones off. Not vibrate. Off. No checking of texts and emails.
Record the group's consensus opinion in each of the four categories. You and your most trusted advisors will take the SWOT results, huddle up in a conference room somewhere (preferably off site) and translate the knowledge into a strategic plan.
Now that we've got the preliminaries out of the way, it's time to show you how to work through your SWOT.
Strengths and weaknesses
The strengths and weaknesses pieces focus on your business' internal capabilities. You need to consider nearly every aspect of your business and decide whether it is a strength, weakness or neither. "Neither" means that the item doesn't provide a competitive advantage nor a competitive disadvantage. Discuss:
- Brand image
- Equipment fleet
- Cost structure
- Field management
- Field productivity
- Job costing and estimating systems
- Marketing and sales systems
- Hiring and retention
- Financial position
List the strengths together on one flip chart page(s) and the weaknesses on another (others). No need to list the "neithers". Pay particular attention to the strengths. Human nature is to assume something is a strength when it really isn't. Something is a strength if we are better than average at it. More than likely your strengths have not come about by accident. They probably reflect your personal priorities and habits.
Hearing others list your weaknesses may be a bit uncomfortable for you. Don't let your emotions discount the feedback especially if multiple people agree with the assessment. The SWOT isn't meant to be a fun-filled validation of your greatness. It is meant to be a honest, deep dive into your business for the sole purpose of strengthening it. If you aren't committed to running a strong business don't run a SWOT exercise.
Opportunities and threats
Opportunities and threats focus on external forces. They mostly revolve around available markets and you competitions' strengths or lack thereof. Opportunities explicitly refer to unmet client needs. Threats refer to anything that could cut into your margins and sales. Items to explore:
- Your reputation with clients
- Loyalty of your clients
- Loyalty of your competitions' clients
- The strength of the near term economy
- The ease of new competition entering the market
- Truly strong competitors who are taking market share
- If price wasn't an object what would clients want?
- How could you make the client experience better?
- Who could you partner with that would change the rules of the game?
- What legal trends are brewing that might affect you?
- Are building codes changing?
- What types of projects do your competitors hate to do?
- Who is most likely to cut you off from your best clients?
- Who has the most productive workers (this is IMPORTANT)
- Any competitors who might be ready to get out of the business?
Again, explore each of these issues in depth. Challenge assumptions. Threats are something to keep an eye on. Opportunities are something to capitalize on as quickly as you can.
Before wrapping up the SWOT, take time to check the assumptions behind each item you've listed. For example, a strength isn't really a strength until your clients have verified it in some manner.
Taking SWOT to the next level
After completing the SWOT but before building your strategic plan, SWOT your primary competition. Make educated guesses as to why they are in the position they are in and whether they are apt to
change their business approach. Will their strengths and weaknesses change? That is helpful to know prior to developing your business strategy.