What is a SWOT Analysis?
I've watched plenty of founders run on gut instinct alone, and it works right up until it doesn't. A SWOT analysis is one of those old-school tools that forces you to slow down and actually look at your business from every angle instead of just the flattering one. Ten minutes with this framework can save you months of building on a shaky assumption.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
A SWOT analysis organizes your top strengths, weaknesses, opportunities, and threats into an arranged list. It is usually showcased in a simplistic model like the one you see below.
Strengths and weaknesses are internal to your startup, and things you have control over and can change. Examples: Key employees, unique skills, intellectual property, brand value, etc. You can hire talent, you can develop brand value, or build a specific product.
Opportunities and threats are things happening in the world around you, not inside your company walls. The macro-environment throws these your way—think competitor moves, shifts in rent or material costs, cultural trends rippling through society. You can absolutely take advantage of good opportunities and guard against threats, but you can't actually control them. Your rivals will do what they do, material prices fluctuate beyond your reach, and global forces are mostly out of your hands too.
But Why Should You Make A SWOT analysis?
Plenty of founders feel pretty confident about how their business works—and hey, sometimes that confidence is earned. But even if you've got a solid grasp on your operation, it pays to step back and look at things from fresh angles. New perspectives can shake loose insights you might've missed, plus it's a great way to get your whole team on the same page about where you're headed and why. When everyone's rowing in the same direction, you'll cover distance a lot faster.
When you take the time to do a SWOT analysis, you’ll be developing a plan for prioritizing what you need to build your startup in a considered manner. It forces you to think holistically about your startup, which is normally a very hard thing for human beings to do. We’ve a limited focus area and tend to view the world from one angle at the time.
How Do I Make A SWOT Analysis?
1. Decide on the objective
To get the most bang out of your SWOT analysis, you should have a question or objective in mind from the beginning. For example, you could use a SWOT analysis to help you decide if you should hire a new employee, bring a new product to market, or change one of your processes.
2. Do some research
You’ll need to conduct some research about your industry, market, competitors, and your startup. The SWOT analysis is technically an overview, and the better data you’ll feed it, the better will the overview turn out, which is thus the end business strategy.
3. List all your strengths, weaknesses, opportunities, and threats
Create as many as you can’t and don’t think about priority/ranking yet. This is just brainstorming.
4. Establish priorities
Find the 3-5 most essential factors in each category. Now you have a picture of how these 4 areas look in your startup.
5. Develop a strategy to address issues in the SWOT
Review your four prioritized list by asking:
- How can we use our strengths to take advantage of the opportunities identified?
- How can we use these strengths to overcome the threats identified?
- What do we need to do to overcome the identified weaknesses to take advantage of the opportunities?
- How will we minimize our weaknesses to overcome the identified threats?
Once you have answered these questions and finalized your lists, you can now use the SWOT analysis to develop strategies for achieving your business goals.
Grab a pen, be honest with yourself, and I promise this simple grid will pay for itself many times over. — Cuttles
