by Jennifer Mailhes, CPA, Consulting Partner, TR Moore & Company, A Doeren Mayhew Firm
Year-end is an ideal time to get a fresh perspective on your company’s opportunities and risks as you look to the new year ahead. An analysis of your strengths, weaknesses, opportunities and threats (SWOT analysis) may be just the ticket, and can serve as the starting point for an in-depth strategic planning process.
A SWOT analysis is a particularly powerful planning tool, because it helps you assess your business, its opportunities and threats of which you may have been unaware, then use the information you uncover to determine where your focus should be.
Here are three basic steps to a SWOT analysis I use with clients as part of our two-day Strategic Planning Module:
1. Assemble the SWOT Team
One of the benefits of strategic planning is the team component – by including others in the process, you’re creating buy-in as well as accountability. For your SWOT analysis, invite all upper management and department heads to participate, and consider also asking such influential outsiders as trusted customers and suppliers. You also could use a customer satisfaction survey to gather external opinions.
2. Work the Matrix
Your SWOT group may find it helpful to organize their thoughts via a worksheet or matrix that looks like this:
For each worksheet quadrant, you’ll have a series of questions for the group to address. They should record the answers under the appropriate heading. I recommend doing this exercise prior to your SWOT analysis meeting.
Strengths are often a good place to start, because they’re easiest to identify and get the group started on a positive note. List your advantages and the things your company does well:
- How are you better than your competitors?
- What does the marketplace see as your strengths?
- Human resources – a skilled labor force would be a plus here.
- Financial resources – do you have a strong balance sheet and cash flow?
- Marketing – do you pride yourself on a powerful brand name?
- Operations – consider efficiencies, your facility, etc
Then drill down into these to uncover the “why?” For example, if your skilled workforce is a noted strength, the “why” might be your strong recruitment procedures or an effective training program.
Weaknesses are often harder to discuss than strengths, both because they highlight your company’s negative aspects. This is where you may get the least-biased responses from customers and suppliers, or from your customer satisfaction survey results. To identify weaknesses, ask:
- Where do you lack resources?
- What could we do better?
- What would customers say are your weak points?
- What’s keeping us from improving?
- Do we have access to information that is useful in making decisions?
Opportunities arise from external factors or changes. When identifying opportunities, keep in mind the strengths that will allow you to take advantage of them. You might ask:
- Are there new trends your company can profit from?
- What else does my current customer buy that I might be able to offer?
- What regulatory or political changes may help your sales or cost structure?
- Are competitors experiencing problems that could work to your benefit? For instance, if a major competitor is going out of business or is in financial difficulty, and you are financially sound, this may be the ideal time to acquire that company.
Just like opportunities, threats exist outside your organization and may adversely affect your business if you don’t plan ahead. Ask the following types of questions to identify threats:
- Could technology render your products obsolete?
- What if a significant customer or supplier went out of business?
- What if suppliers raise prices?
3. Translate Opportunities & Threats Into Actions
The purpose of your SWOT analysis is to create awareness, prepare action plans and set priorities in the best areas. A good place to start is protecting against threats that involve your weaknesses. Say one of your weaknesses is high employee turnover, and you perceive the tightening labor market as a threat. It might be wise to develop better employee relations and retention plans sooner, rather than later.
A SWOT analysis can help ensure your business is equipped to deal with today’s issues, while keeping an eye on the horizon. You can perform your company’s SWOT analysis a single time, or repeat it on a regular basis to stay prepared for meeting challenges and seizing opportunities.
As Consulting Partner, Jennifer Mailhes guides Houston business owners and their management teams in areas such as strategic planning, CFO services and accounting analysis, and business advisory services. For more information, contact us.
