Are you about to launch a new startup?
Change your career?
Switch to a new job?
Whenever you’re facing a major business decision — or any decision, for that matter — doing a SWOT analysis can provide just the insight you need.
The SWOT in SWOT analysis or SWOT matrix stands for strengths, weaknesses, opportunities, and threats.
And any individual or organization can apply these four factors to effectively analyze their present situation and devise a strategy for the best way to move forward.
This post aims to break down all the elements of a SWOT analysis, the best times to use one, and the many benefits they offer, whether you’re using them for personal or business purposes.
What Makes Up a SWOT Analysis?
It starts off simple enough — a SWOT analysis compiles your top strengths, weaknesses, opportunities, and threats in a simple two-by-two grid.
The first two factors, strengths and weaknesses, are internal — things that you can typically control or change.
Strengths are the positive features that give you an advantage over others, while weaknesses are the negative features that put you at a disadvantage.
These, for example, can be a company’s size, location, and third party suppliers.
The next two factors, opportunities and threats, are external.
Although you can take advantage of opportunities and protect yourself against threats, you can’t change them — they exist in the outside environment.
Some examples of these are government laws, third-party suppliers, and socioeconomic trends.
The SWOT analysis is a square grid with four quadrants.
The strengths and weaknesses (the internal factors) are on the top row, and the opportunities and threats (the external factors) are on the bottom row.
The positive factors conveniently align on the left column, and the negative factors line up on the right column.
This clear, concise format helps show how all the factors correlate and tie in together.
What Is a SWOT Analysis For?
Although not fully verified, many people credit the creation of the SWOT analysis to Albert S. Humphrey, an American business and management consultant.
While working at the Stanford Research Institute in the 1960s, he developed a team-based method called the SOFT analysis.
This marked one of the first times that employees were included in the business planning process, although the method was later renamed as the SWOT analysis.
While managers and owners are crucial in any strategic planning initiative, getting all parties involved can help to paint a more complete picture.
The best SWOT analysis results from different people with different perspectives.
From operations to logistics to marketing, everyone should have a seat at the table.
This is the objective of a SWOT analysis — to look at things from all different angles, and present the collective knowledge in an easy-to-understand format.
Once completed, a SWOT analysis enables you to see your situation much more clearly — how strengths can be leveraged to take advantage of opportunities and help eliminate threats, and how weaknesses must be overcome if they stand in the way of opportunities or leave you vulnerable to threats.
When to Use a SWOT Analysis
Although first used in businesses, the SWOT analysis is now just as common for government, organization, and even individual purposes.
The framework is so simple, it easily applies to almost any situation — when you’re about to make a big decision, explore a new initiative or opportunity, or distinguish between where you are now and where you want to be.
Stakeholders may find a SWOT analysis to be especially helpful in many business cases, such as when deciding on which strategy is more likely to be successful, or to see where a potential investment stands in the marketplace.
An analysis can also be done at any scale.
Aside from assessing a business’s entire performance, SWOT can work just as well for a single part of the business, such as a new product, project, or department.
On an individual level, the SWOT analysis can also help you take inventory of a particular area in your life.
This can be your career, education, or even something completely personal (i.e., what laptop to buy, where to go on your next vacation).
As you can see, the SWOT analysis is an extremely flexible tool.
There are several free SWOT analysis templates available online, and if used correctly, they can help in the decision-making process in all kinds of circumstances.
How to Make a Business SWOT Analysis
Before putting pen to paper, start by gathering individuals from different areas of the business together to work on the SWOT analysis.
As the facilitator of this brainstorming session, provide everyone with a small pad of sticky notes and a pen or pencil.
Start with one area, like strengths, and have everyone quietly write down all the ideas that pop into their mind.
This helps prevent groupthink and ensures that all opinions are expressed.
Gather and post the sticky-notes up on the wall, grouping similar ideas together.
Allow anyone to add new notes if they see fit.
Once all of the notes are organized, it’s time to rank them.
A good way of doing this as a group is to give everyone five or 10 “votes” (represented by stickers) that they can distribute in any way they like.
Once all the votes have been cast, you’ll have a well-defined list of ideas.
Follow the above process for each of the four areas in your SWOT analysis, moving from strengths, weaknesses, opportunities, and threats.
A few good questions to jumpstart the ideas, which can be shared verbally or written, are as follows:
- What does your business have that separates it from others?
- What unique assets or resources does it have (i.e., knowledge, network, reputation) that others don’t?
- What does your business do better than any others?
- What do people in your market see as your business’s strengths?
Consider your strengths from both an internal perspective, and from the point of view of your market.
Focus on your most competitive advantages, those in relation to others in the same market.
For example, if all your competitors offer affordable products, then affordability is not a notable strength in your market — it’s a necessity.
- What are the things your business could improve on?
- When things don’t go as planned, what is the usual reason behind this?
- Are there assets or resources your business needs to be more competitive?
- Are there any gaps in your current situation that are holding you back?
- What are people in your market likely to see as your business’s weaknesses?
Weaknesses stop a business from performing at optimum level, and are therefore good areas for improvement.
Although this may be unpleasant, it’s best to face any pain points as soon as possible.
- Is your market growing, and are there any trends or opportunities that may help to increase your business?
- Are any of your competitors failing to do something that you may be able to succeed in?
- Are there upcoming events you can take advantage of to grow the business?
- Are there changes to regulations, policies, or technology that might impact your business positively?
A good approach is to look at your strengths and see where they can open up any new markets or opportunities.
Alternatively, you can look at your weaknesses and see what opportunities would allow you to eliminate them.
- Could any of your weaknesses eventually turn into serious threats to your business?
- Are there any upcoming changes in the regulations relating to your business, products, or services?
- Are consumer behaviors or market trends changing in a way that could negatively impact your business?
- Is technology changing in a way that may threaten your business?
- Are any potential competitors expected to enter your market share?
- Will your third-party suppliers always be able to supply your business with the needed raw materials?
Although threats are external factors that are beyond your control, they’re just as important to the health of your business.
They work alongside other areas of the SWOT analysis and are crucial when coming up with the best strategy for your business.
How to Make a Personal SWOT Analysis
One of the keys to success, especially if you’re a startup business owner or independent contractor, is self-awareness.
The SWOT analysis provides a proven, clear-cut way to be more aware.
It helps you see what distinguishes you from your peers, what holds you back, and all the ways in which you can advance your career or achieve a personal goal.
To apply the SWOT analysis for personal decisions, the following questions can serve as a guide:
- What advantages do you have that others don’t have (i.e., skills, certifications, resources, network)?
- Are there significant skills or tasks you do better than anyone else?
- What values do you hold that others fail to exhibit?
- What do other people (especially supervisors, co-workers, or clients) see as your strengths?
When listing your strengths, don’t be modest or shy (or overly confident, either) — be as objective as possible.
Think of your strengths in relation to others in a similar field or position.
For example, if you’re a graphic designer, being able to use the Adobe Suite is not likely a distinguishable strength — it’s a necessity.
- What things do you tend to avoid because you don’t feel confident or knowledgeable enough to do them?
- When things don’t go as planned, what is the usual reason behind this?
- Do any of your personal traits hold you back (e.g. fear of public speaking, tardiness, short temper)?
- What do other people (especially supervisors, coworkers, or clients) see as your internal weaknesses?
Consider your weaknesses from both an internal and external point of view.
Look at yourself in relation to others and be realistic.
It’s better to face any harsh feedback early on.
- Is there a current gap that you would be able to fill?
- Do you have a network or contact who can advise or assist you?
- Are there any upcoming events, openings, or trends you can take advantage of?
- Are there new technology innovations that may be able to help or open new doors for you?
To get started in this section, it may help to look to your strengths for any possible ways they can open up new opportunities.
You can also use your weaknesses, and come up with all possible opportunities that would help you to eliminate them.
- Could any of your weaknesses eventually turn into a threat?
- Is the nature of your job (or the demand for it) changing?
- Are any colleagues or peers in competition with you?
- Are new market trends, consumer behaviors, or technology changing in a way that could negatively impact you?
Threats are the external factors that, although scary, can most definitely help put things into perspective.
They’re that gentle push you need to move things forward, compelling you to make the most of your strengths and opportunities.
Getting Started on Your SWOT Analysis
The SWOT framework is a strategic planning tool that lends itself perfectly to almost any setting.
Whether you’ve been thinking about something in your business, professional, or personal life, doing a SWOT analysis will greatly help.
It provides a simple, straightforward breakdown of all the internal and external factors, positive and negative points, and current and future potential.