August 22, 2008, Newsletter Issue #11: SWOT Analysis

Tip of the Week

Some business plans will require a SWOT analysis. This is especially true when you are showing a business proposal to investors. The SWOT analysis is simple: Strengths, Weaknesses, Opportunities and Threats. The single most important tip in a SWOT construction is that you must be honest and remove assumptions. Assumptions will only confuse your investors.

Strengths are the foundation of your business. These are the things that you can do better than any other business in the same industry. Ask yourself why customers choose (or should choose) your business. This is your strength.

Weaknesses are the cracks in the foundation of your business. These are the recognizable components that limit your organization’s ability to compete. Ask yourself what is internally preventing the business from growing, or what is constricting the business. Weaknesses are generally internal, common weaknesses include financial debt vs. equity, high employee turn over, and lack of supply chain capability.

Opportunities are possibilities your business can build upon. These are the events that can create profit growth. Ask yourself what competitors in the industry are doing, and how they are doing it. Then ask yourself how you can do it better. This is your opportunity.

Threats are the predicaments that close the doors on your business. Common threats include major competitors, lack of supply, and extreme conditions. Ask yourself what is externally preventing your business from growing. These are your threats. Common threats include industry competition, product substitution and new technology that outdates your current technology.

If your business plan does not require a SWOT analysis, it is still a good idea to have these in mind. Constantly evaluating SWOT will keep you ready for increasing strengths and opportunities or decreasing weaknesses and threats.

For further information regarding SWOT:

http://www.mindtools.com/pages/article/newTMC_05.htm
http://en.wikipedia.org/wiki/SWOT_analysis
http://erc.msh.org/quality/ittools/itswot.cfm

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