What Makes a Thorough SWOT Analysis? Components & Considerations

What Makes a Thorough SWOT Analysis? Components & Considerations

Have you ever conducted a SWOT analysis?

For the uninitiated, that’s a thorough deep dive into your company’s strengths, weaknesses, opportunities and threats.

Even if you’ve never conducted a SWOT and have no idea how to get started, the future of your company could well ride on the outcome. If you’re hoping to grow your business, attract investors or secure a profitable exit anytime in the near future, you’d better have a clear picture of where your SWOT stands—because the professionals who can help you do all three of those things certainly will.

“SWOT analysis is an integral part of our due diligence process,” says William Michael Keever, president and CEO of Nashville-based venture capital firm Castle Venture Group. “We subject every candidate for investment to a thorough, inside-out review, and set aside those that fail to meet our high standards.”

Better get a move on.

Get Started With Your SWOT Analysis

It’s perfectly fine to simply download free SWOT analysis templates from reputable resources like Business News Daily or develop your own with people who’ve been through the SWOT ringer before.

But it also helps to have some sense of what you’re doing instead of simply trusting those around you to complete the process properly. SWOT analysis is a garbage-in, garbage-out situation: If you start out in the wrong place, you’re not magically going to end up where you need to be.

Let’s take a closer look at the four prongs of a proper SWOT analysis, the key questions to ask during your SWOT analysis, and the process’s basic procedural outline.

Strengths: Strengths are functions or characteristics that accrue positively toward the realization of the company’s strategy. Put another way, strengths are things the company does well. To properly assess company strengths, it’s best to conduct your SWOT analysis from a consumer or client perspective, since conditions that appear to be strengths internally are often invisible or irrelevant to end-users.

Weaknesses: Weaknesses are functions or characteristics that hinder the realization of the company’s strategy. Some weaknesses are readily apparent; for instance, a strategy that relies on high-interest debt is likely not sustainable over the long haul. Others are more subtle, and may not be obvious internally—for instance, an off-key communications strategy that alienates customers. Competitive analysis is an essential piece of weakness-finding, as weaknesses are often only apparent in relation to industry peers.

Opportunities: Opportunities are internal and external conditions that can positively impact the company if properly acted upon. The importance of affirmative action can’t be overstated here: Opportunities are potential positives, not actual positives a la strengths. Taking advantage of opportunities requires foresight, planning, decisive action and a fair bit of luck.

Threats: Threats are external and internal risks to company performance. If not quite the mirror image of opportunities, they’re issues that will negatively affect the firm if not properly addressed. Threats can affect one aspect of the firm, such as a specific product line or a proprietary process. They can also have macro-level effects on the company’s overall business case—for instance, unfavorable currency fluctuations that render U.S.-based manufacturing uncompetitive. Threats should be ranked by level of urgency, which in turn dictates the degree, speed and resource load of the response.

What To Look For – Questions To Ask

SWOT analysis is meant to be comprehensive, even tedious. These are just some of the questions you should ask as you begin your SWOT analysis. You’ll think of plenty of others, some specific to your company and industry, as you get deeper into the process.

• Who are our principal competitors?
• What characteristics do these competitors share? Where do they diverge?
• What is the competitive state of our industry? How high are the barriers to entry for new competitors?
• Who is our target market? Who are our buyers?
• How are these markets and buyers changing? How are we changing with them?
• How can we better take advantage of these changes?
• What macro forces are affecting our business and industry—regulatory, technological, macroeconomic, cultural? How are competitors responding to these forces?

Wireframe Procedure for Your SWOT Analysis

Great, but how should your SWOT analysis unfold? According to this excellent resource from Business Queensland (a department of Australia’s Queensland government), you’ll want to follow eight simple—if not quick—steps:

1. Figure out why you’re conducting your SWOT analysis in the first place
2. Exhaustively research your industry, lines of business and markets (including end-users)
3. Go through the SWOT analysis in linear order, starting with strengths
4. Proceed to weaknesses
5. Uncover opportunities
6. List threats
7. Display your four lists (strengths, weaknesses, opportunities and threats) side by side, with conditions listed in order of urgency and importance
8. Lay out a strategy to address each of the issues uncovered by the SWOT analysis, including an action plan for capitalizing on opportunities (frequently the toughest nut for business owners to crack)

Are you ready for your SWOT analysis?