Every Business Needs A Good SWOT Analysis

A SWOT Analysis Is The Quickest Way To Create a Business Plan

Build on Strengths and Improve Weaknesses with SWOT. Inkastudio | Getty Images

I know what you are thinking - how could a home business possibly require something called a SWOT analysis? The name sounds confusing and far too serious for a small business, right? Wrong. I assure you, I will not lead you astray and require you to waste time on a useless business exercise. Despite the perception that a home business is simpler or maybe even less serious than the guys on Main Street, it is false.

When you rip open the chest of any business, you will find the same working components in each enterprise. No matter the size or scope, every business will find incredible value in conducting a routine SWOT analysis.

 

What is a SWOT Analysis?

SWOT analysis may sound like the whooping your mother gave you when you hit your sister, but in reality, it is simply the strengths, weaknesses, opportunities and threats currently facing your business. Conducting a SWOT analysis is like giving your business a regular health check-up. It is diagnostic of those positive and negative things facing the business at that particular time. The strengths and the weaknesses are areas within your business you have control over. The opportunities and threats are those outside forces that could benefit or hurt your business.

Why Conduct a SWOT Analysis?

A SWOT analysis isn’t just for big businesses. It is an awesome tool designed to provide the clearest picture possible for any business' current state.

Mapping out the strengths, weaknesses, opportunities and threats offers the insight necessary to create an appropriate business plan. Properly creating and utilizing a SWOT analysis will help your business reach its fully operational and earning potential.

How Do I Conduct a SWOT Analysis?

Developing a SWOT analysis is kind of like those silly lists girls would create in jr.

high or high school to decide who to date (oh yes, this kind of stuff did happen and I am totally guilty):

  • Johnny has a great sense of humor (a strength)
  • Johnny has bad taste in clothes (a weakness)
  • Johnny just broke up with his girlfriend (an opportunity!)
  • Johnny was accepted onto the football team and has no free time (a threat)

I realize the above is probably not how they teach this stuff in MBA classes, but you get the gist. Just like an individual, a business has good and bad things going for it. Your job is to sit down and start making your list for your business. Doing so will open your eyes to different marketing approaches or opportunities you may have missed. It will help you see your strengths so that you can exploit them. Identify your weaknesses so you can develop a plan to improve upon them. Show you the outside opportunities just waiting for you to seize and the threats you will need to prepare for.

SWOT Analysis Example:

Each SWOT analysis is totally unique, but here is a sampling of some items that might show up in a business SWOT analysis:

INTERNAL FACTORS (things you have control over)

Strengths

  • Brand strength (do people recognize your business name?)
  • Unique product or technology

Weaknesses

EXTERNAL FACTORS (things you don’t have control over)

Opportunities

  • Favorable economic environment (i.e. recession lifting)
  • Lowered taxes (business or consumer)
  • New distribution channels
  • New technology available
  • Decrease in competition

Threats

  • Changing customer preferences
  • Aging customer base
  • Economic conditions
  • Increasing competition
  • Changes in government policy

Next, you'll have the opportunity to view a real-world SWOT analysis example for a massage therapy home business.

This article is part of a 10-Step Guide on How to Start a Home Business.

The previous article just discussed what a SWOT analysis is, why it is applicable to any size business and what the benefits are for conducting a regular SWOT analysis. Here is a SWOT analysis example for a home business, Massage Inc., seeking to expand into a larger scale massage therapy business. It is important to note that a SWOT analysis is incredibly unique to a business. To produce a useful and accurate SWOT analysis, it requires an unbiased business review and research.

SWOT Analysis Example:

Strengths:

Remember, strengths in home business has to do with positive aspects and assets you have in your business including your skills, knowledge and experience, resources and other things that set you apart from your competition. If you're business has been active, you can include data such as repeat and referral customers, website traffic and conversion and other information that shows how well you're business is doing. Finally, it can include external factors such as a good economy or taking advantage of a trend.

Massage Inc. Strengths

  • Access to funding
  • Massage expertise
  • Already established business model
  • Access to innovative IT resources
  • Low overhead costs (i.e. the ability to run the business out of a home)

Weaknesses: 

Weaknesses are those areas you're not a strong or competent in. Knowing what you do well (strengths) is crucial so you can do more of it, but you also need to know what's not working to keep your weaknesses from closing you down.

Weaknesses include the skills, experience and knowledge you don't have but should, resources and equipment you don't have but need, competition that is out doing you, and customer service issues. External factors such as a poor economy can be a weakness as well.

Massage Inc. Weaknesses

  • Weak business model
  • Limited business management experience
  • Access to business savvy massage therapists
  • No existing customer base

Opportunities:

Opportunities are areas you can improve or expand upon. For example, are there new products or services you can offer or a market you can expand to? It can include external factors such as new laws or technology that make doing business easier. 

Environmental Opportunities

  • Influx of graduating massage therapist looking for work
  • Limited entrepreneurial skills within massage therapist pool
  • Wide acceptance of massage by general public – not just “pampering” perception
  • More employers offering wellness/massage benefits to employees
  • Consumer desires to incorporate massage into health regime
  • Consumer preference towards online search and transactions
  • Unorganized service industry

Threats:

Threats are the things that can hinder your success and include lack of capital or cash flow, heavy competition, rules or regulations that make doing business harder, etc. 

Environmental Threats

  • More hotels offering spa services on site
  • Innovative massage franchises springing up
  • Consumer’s desire for the “full” spa experience
  • Consumers are demanding more unique massage modalities
  • Increasing competition
  • Decreasing prices

     

    This article is part of a 10-Step Guide on How to Start a Home Business.

    Edited by Leslie Truex