SWOT Analysis: The Most Overlooked Business Tool, And How To Use It

Originally posted on Forbes.com

By Alisha M. Pennington February 24, 2022

For those of us who never went to business school but found our way into entrepreneurship, it takes practical experience to determine which tools best serve us in the real world. After 10 years of starting and scaling multiple businesses, I can unequivocally state that SWOT analysis is one of the most efficient tools for quickly auditing a business at any stage and determining necessary next steps.

Having its origins date back to the Stanford Research Institute in the 1960s, SWOT analysis has been used across corporate planning for decades; however, it is equally applicable for businesses in any industry that are in the infant and scaling stages. It represents an opportunity to objectively approach the planning process in business while also providing accountability within each section so as not to lean too heavily into either strengths and opportunities or weaknesses and threats. For better or worse, it visually offers a snapshot of the current state of a business and market in a simple four-quadrant table.

Admittedly though, the exercise of conducting a SWOT can feel stale and/or incredibly daunting. With new techniques popping up regularly, it can be tempting to step away from the traditional approach and test out an alternative. But it isn’t called “trusty dusty” for no reason­ — it is tried and true! So, how does one go about utilizing this tool in their business? Here are three easy steps:

1. Conduct A Business Brain Dump

To effectively evaluate your business, you must be thorough in what is being considered. Whether you enlist heads of departments or you're a sole proprietor, it is important to look at the primary areas of your business and brain dump your inner workings associated with them. These can include, but are not limited to:

• Legalities: This includes business entity formation, compliance, contracts/agreements, insurances, trademarks, licenses, governing oversight and contractors versus employees.

• Accounting: This includes taxes, accounting software, accounts payable and receivable, tracking income and expenses, projections, profit margins, budgeting, procedures for payment processing and cash flow.

• Quality control: This includes customer journey, onboarding/hiring procedures, compliance, customer and product reviews, quality improvement, customer service and processes and automation.

• Marketing: This includes current brand and messaging, public relations, website functionality, social media presence, future growth strategy or customer acquisition plan, scalability of current procedures and future marketing opportunities.

2. Categorize Your Responses

Once you have a full list of what's working and what needs work in your business, categorize it into three primary areas: current markets/strategies, current roadblocks/hurdles and future/long-term aspirations.

Within the current markets/strategies, list out what is going well, the areas you're surpassing the competition and what your market knows you for. In the current roadblocks/hurdles, detail those services you're trying to bring to market, any bottlenecks or systems/procedures that are inefficient or areas within your industry or market that pose a threat. Finally, in the future/long-term aspirations, share the information that is currently in R&D, the future direction of the market/industry and aspirational projections of the business.

3. Create Your SWOT

Use a template, write on a whiteboard or use paper and pen to draw the SWOT and then begin filling it in. This will require your business brain dump and your categorized responses.

Strengths are internal areas within your business that are well taken care of. These could be key personnel, particular characteristics or attributes within the business that give it an advantage or even areas that have been well-developed that put the business ahead of the competition. This could be as simple as strong branding or as exemplary as a nameworthy CEO. Scan your business brain dump and look for areas that stand out as "green" or "very good" or that you could easily respond with because they've been addressed for a long time. In the categorized responses, this will primarily be in the current markets/strategies.

Weaknesses are the internal areas within your business that need to be addressed or that prove to be roadblocks. This might be communication strategy or lack of efficient processes and systems. These might be patterns of behavior you know about your business, areas you purposely avoid because they bring up feelings of dread and may have even been avoided for a lack of knowledge or support to execute. When looking at your brain dump, you may have "redlined" these, let out an audible sigh or cringed at the thought of having to address them. And they're likely in the current roadblocks/hurdles areas of the categorized responses.

Opportunities are external areas in the environment or market that allow us to expand and create growth for the business. Sometimes this is a future version of the industry, known technology that is emerging, an offer/service that is actively being developed or partnerships that will elevate the brand. When looking over the business brain dump, these are the areas that really excite the business owner, probably are front of mind and may have additional resources allocated to them. In the categorized responses, they're either in the current markets/strategies or under the longer-term aspirations.

Threats are the external areas in the environment or market that pose danger to the current state or future of the business. These may have already affected the revenue or profit of the business or could be impending competition or a shift in the market creating concern for the current business model. These items keep the business owner awake at night or dreading opening the email/answering the phone. In the brain dump, these are lingering "in between the lines," likely not explicitly stated but known as the cause for reduced profit margins or limited growth.

Use the SWOT analysis not just to determine the next steps for your business but to also help prioritize which areas to focus on. Then strategically detail the opportunity available, being careful to minimize threats and take full advantage of strengths. This can be done as consistently as required but is best served as an annual exercise to evaluate the procedural activity of the business year over year.