I know what you are thinking - how could a home business possibly require something called a SWOT analysis? The name sounds confusing and far too serious for a small business, right? Wrong. I assure you, I will not lead you astray and require you to waste time on a useless business exercise. Despite the perception that a home business is simpler or maybe even less serious than the guys on Main Street, it is false. When you rip open the chest of any business, you will find the same working components in each enterprise. No matter the size or scope, every business will find incredible value in conducting a routine SWOT analysis.
What is a SWOT Analysis?
SWOT analysis may sound like the whooping your mother gave you when you hit your sister, but in reality, it is simply the strengths, weaknesses, opportunities and threats currently facing your business. Conducting a SWOT analysis is like giving your business a regular health check-up. It is a diagnostic of those positive and negative things facing the business at that particular time. The strengths and the weaknesses are areas within your business you have control over. The opportunities and threats are those outside forces that could benefit or hurt your business.
Why Conduct a SWOT Analysis?
A SWOT analysis isn’t just for big businesses. It is an awesome tool designed to provide the clearest picture possible for any business' current state. Mapping out the strengths, weaknesses, opportunities and threats offers the insight necessary to create an appropriate business plan. Properly creating and utilizing a SWOT analysis will help your business reach its full operational and earning potential.
How Do I Conduct a SWOT Analysis?
Developing a SWOT analysis is kind of like those silly lists girls would create in jr. high or high school to decide who to date (oh yes, this kind of stuff did happen and I am totally guilty):
- Johnny has a great sense of humor (a strength)
- Johnny has bad taste in clothes (a weakness)
- Johnny just broke up with his girlfriend (an opportunity!)
- Johnny was accepted onto the football team and has no free time (a threat)
I realize the above is probably not how they teach this stuff in MBA classes, but you get the gist. Just like an individual, a business has good and bad things going for it. Your job is to sit down and start making your list for your business. Doing so will open your eyes to different marketing approaches or opportunities you may have missed. It will help you see your strengths so that you can exploit them. Identify your weaknesses so you can develop a plan to improve upon them. Show you the outside opportunities just waiting for you to seize and the threats you will need to prepare for.
SWOT Analysis Example:
Each SWOT analysis is totally unique, but here is a sampling of some items that might show up in a business SWOT analysis:
INTERNAL FACTORS (things you have control over)
Strengths
- Brand strength (do people recognize your business name?)
- Unique product or technology
- Existing customer base
- Strong sales team
- Processes, systems (i.e. organized customer management system)
- Poor online presence
- Low gross margin
- Low repeat customer sales
- Disorganized internal processes
- Low customer retention
EXTERNAL FACTORS (things you don’t have control over)
Opportunities
- Favorable economic environment (i.e. recession lifting)
- Lowered taxes (business or consumer)
- New distribution channels
- New technology available
- Decrease in competition
Threats
- Changing customer preferences
- Aging customer base
- Economic conditions
- Increasing competition
- Changes in government policy
Next you'll have the opportunity to view a real-world SWOT analysis example for a massage therapy home business.
This article is part of a 10-Step Guide on How to Start a Home Business.
