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What a SWOT Analysis Is and How to Conduct One

What Is a Business SWOT Analysis?
Susan Guillory
Susan GuilloryUpdated February 28, 2022
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SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities, and Threats, and a SWOT analysis is a tool for assessing these four aspects of your business. A SWOT analysis can help you analyze what your company is doing well right now, uncover areas where it may be vulnerable or need improvement, and enable you to devise a successful strategy for the future. While you may think you already have a good sense of these four aspects of your business, a fact-based, data-driven SWOT analysis can be an eye-opening exercise that can help you boost your profits and unlock previously unseen opportunities.Read on for a simple step-by-step guide on how to conduct a SWOT analysis of your small business.

What Is a SWOT Analysis?

SWOT analysis is a technique for assessing the performance, competition, risk, and potential of a business. A business SWOT analysis looks at four aspects of your business:
  • Strengths
  • Weaknesses
  • Opportunities
  • Threats
By systematically looking at each area of your business, you can use this information to plan for future growth, position your business more strongly in the marketplace, and shore up any vulnerabilities you may have.

How to Do a SWOT Analysis

Depending on the size of your business, you may want to do a SWOT analysis on your own, or you may want to assemble a team of people from different areas of your organization and have them work together to assess each of the four “SWOTs.” You can simply make lists for each category. However, a SWOT analysis is typically done using a four-square design, with one square for each of the four aspects of SWOT. The four-square matrix helps you compare these lists side by side, which can be revealing. It allows you to notice connections and disconnects, which you may want to highlight and explore. You can create your own four-square template or use one of the many free SWOT templates available online. You can start your SWOT analysis by having a brainstorming session in which you identify the factors in each of the four categories. Once you are finished brainstorming, you can create a final, prioritized version of your SWOT analysis, listing the factors in each category in order of highest priority at the top to lowest priority at the bottom.

Strengths

Starting your business SWOT analysis with listing your company’s strengths sets you off on a good note. It should be fairly easy to come up with the assets your company holds. Strengths are things that your organization does particularly well, or in a way that distinguishes you from your competitors. Think about the advantages your organization has over other organizations. Strengths might be things like:
  • Leader in the marketplace
  • Superior products or services
  • Skilled workforce
  • No debt
  • Excellent customer service
To come up with your list of strengths, ask:
  • What do we excel at?
  • What valuable resources can we draw on that others can’t? 
  • What makes us stand out? 
  • What do others see as our strengths?

Weaknesses

Unfortunately, you can’t skip over this part. Knowing your company’s weaknesses can actually help you because once you’ve identified them, you can work on fixing them.Weaknesses stop an organization from performing at its optimum level. They are areas where the business needs to improve to remain competitive, such as:
  • Poor location
  • A weak brand
  • Lack of access to technology
  • Inadequate supply chain
  • Higher-than-average turnover
To uncover your company’s weaknesses, ask:
  • Where can we improve?
  • What’s keeping us from growth?
  • What products are underperforming?
  • Where do we have fewer resources than others?

Opportunities

Once you’ve looked at strengths and weaknesses, which are internal to your company, you can look at opportunities, which are external to your company.These can include things like:
  • An opportunity to acquire another company
  • Tax laws that changed in your favor
  • Ease up of regulations in your industry
Finding opportunities takes some work. Here are some questions to ask yourself and your team to uncover opportunities:
  • What opportunities are open to us?
  • Are there policy changes or regulations that impact us that we can leverage?
  • Is there an opportunity to take market share from competitors?
  • What trends could we take advantage of?

Threats

Threats refer to external factors that have the potential to harm your business. These are things that are beyond your control and can include changes, such as:
  • Increase in cost for supplies
  • Bottlenecks with shipping of supplies
  • Lack of skilled labor
It’s wise to always be on the lookout for potential threats so you can do your best to mitigate their impact on your organization. Here are questions to keep in mind:
  • What’s changing in our industry?
  • What consumer trends/new regulations threaten business?
  • What are our competitors doing well?
  • What’s impacting our supply chain?

Internal SWOT Analysis

The first two elements of the business SWOT analysis, strengths and weaknesses, are internal factors. They are things happening inside the company and therefore, they are, to a large degree, within your control.If one of your weaknesses is that your company has a lot of debt, say because you took out accounts receivable financing that hasn’t been fully paid off, you can strategize to pay down that debt faster. If it’s that you lack experienced employees, you can make a recruiting push to find the help you need to better serve customers.You’ll also want to look closely at your strengths, since you can never rest on your laurels. Consider what strengths you have today that could easily be gone tomorrow if you don’t fight to keep them. For example, if you are a market leader in your industry, brainstorm ideas for how to keep that position. You can also think about how to build on your strengths.Recommended: What Capital Structure Is and How It Works 

External SWOT Analysis

In your business SWOT analysis, opportunities and threats are considered external, meaning you may have little to no control over them. They are happening outside your company, like when tax laws change or storms affect your supply chain.That doesn’t mean you have to sit idly by, however. There may be things you can do to work around these issues and lessen their impact on your business. For example, if your supplier recently raised prices, you might be able to find a new supplier with more favorable pricing. If there are clogs in the supply chain, perhaps you can find another path to getting your orders fulfilled.

SWOT Analysis Example

Here’s a SWOT analysis example using a company that sells accounting software.Strengths
  • Strong position in the marketplace
  • High profit margin
  • High percentage of return customers
WeaknessesOpportunities
  • Competitors are lacking in customer service
  • A competitor is selling its business
  • Our type or product is more popular than ever
Threats
  • Increasing number of competitors
  • Competitors are racing to the bottom (lowest pricing)
  • Possible industry regulations coming
In this example, the company has a lot going for it. Customers seem happy because they keep coming back. But the business has taken on a lot of debt. Paying some of that down could eliminate that weakness. Additionally, the company has trouble keeping employees. The company might look at developing better onboarding and training processes, as well as providing enrichment courses for managers to help them become better communicators.This company sees a gap in the market because many competitors aren’t offering great customer service. If the company invests more in this aspect of their business, it can likely take more market share. It can also do this by acquiring the business that’s for sale.This company needs to watch out for new competitors coming into its space and find value-adds to compete with companies who just want to offer the lowest price.

Benefits of Conducting a Business SWOT Analysis

A SWOT analysis allows you to analyze what your company does best right now, and to devise a successful strategy for the future. SWOT can also uncover areas of the business that are holding you back, or that your competitors could exploit if you don't protect yourself. SWOT results can also help you assess a changing environment and respond proactively in order to mitigate any negative external events. Market conditions constantly change, so it’s important to continue to keep an eye on where your business is positioned.A SWOT analysis is not only beneficial for existing businesses, but can also be helpful for new businesses. If you’re launching a new venture, you can use a SWOT analysis as a part of your planning process. Thinking about your startup in terms of its unique “SWOTs” can help you begin on the right path and avoid future snags. It can also make it easier to write your business plan. 

How to Use the Results of a SWOT Analysis

Conducting a SWOT analysis for small business is just the first step in strategic decision-making. The next step is to carefully analyze your SWOT before making any decisions. As you talk through the four quadrants, you may want to consider: 
  • How can we leverage our strengths as well as protect them long-term?
  • How can we eliminate or reduce our weaknesses?
  • What opportunities can we jump on now? Which can we plan for down the road?
  • How can we protect against threats?
Answering these questions can help you build your strategy for the next year, next five years, and beyond.After a SWOT analysis, for example, you may decide you need to make more investments in new technology. You can then start exploring business loans to see what type of financing you may qualify for.Recommended: Applying for a Small Business Loan in 6 Steps 

The Takeaway

Conducting a business SWOT analysis gives you a visual snapshot of where your business is right now, which helps you plan for its future. A SWOT analysis is a square segmented into four quadrants, each dedicated to an element of SWOT. This visual arrangement provides a quick overview of your company’s position.By identifying your business’s core strengths, weaknesses, opportunities, and threats, a SWOT analysis can lead to data-based analysis, new perspectives, and innovative ideas.

Small Business Loan Tips

  1. Online lenders generally offer fast application reviews and quick access to cash. Conveniently, you can compare small business loans by filling out one application on Lantern by SoFi.
  2. Traditionally, lenders like to see a business that’s at least two years old when considering a small business loan.
  3. SBA loans are guaranteed by the U.S. Small Business Administration and typically offer favorable terms. They can also have more complicated applications and requirements than non-SBA business loans.
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Frequently Asked Questions

What are weaknesses in a SWOT analysis?
What are strengths in a SWOT analysis?
Why conduct a SWOT analysis?
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About the Author

Susan Guillory

Susan Guillory

Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
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