Over the years, I have reviewed many Strategic Plans. Some are very detailed, others a bit sparse, but most cover at least some of the following:

• what the business does
• the market in which it operates
• its competitive advantages
• its marketing strategy
• how its operations and management work
• financial information
• its principal risks.

One area that is regularly missing is a SWOT analysis.

For anyone unfamiliar with the acronym, SWOT stands for:

• Strengths
• Weaknesses
• Opportunities
• Threats.

It’s one of the most useful things you can do for your business, and without it you’re missing important details that can help shape your plans.

Why You Need a SWOT Analysis

Many owners of SMEs spend so much time working IN the business that they rarely have an opportunity to step back and work ON the business. This is understandable, particularly when customers, employees, suppliers and cashflow all need immediate attention.

Time working on your business is always well spent. If you don’t do this, you risk bouncing from one urgent problem to the next without ever deciding where you actually want your business to go.

This matters even more during periods of relentless change. Since 2020, businesses have dealt with Brexit, Covid, inflation, energy price rises, labour shortages, global instability and digital and AI transformation (here’s an article I wrote about this earlier this year).

And as we’re learning this summer, economic and political turmoil doesn’t stop. We are adjusting to more and more change - whether that’s a new Prime Minister, tax policies or increasing costs.

While things shift around your business, if you understand your market, your competition, your customers and your goals, you’ll be able to make quicker, better decisions when you need to. You can’t do this if you don’t know where you are strong, where you need to improve, what your opportunities are and when you’re at risk. That’s where a SWOT analysis is invaluable.

Be honest about your strengths

Ask yourself the following to get a realistic idea of your business and team strengths:

• What does your company genuinely do well?
• Where are your margins strongest?
• Why do customers choose you rather than somebody else?
• Do you have specialist knowledge, loyal customers, an experienced team, strong local relationships or intellectual property that competitors cannot easily reproduce?

I always remind my clients that there’s no point in exaggerating: you need to understand your real strengths so you can decide how to use them. In a difficult market, this may mean concentrating on profitable work and pulling back on areas where turnover is slow. You may find that you’re not making the most of things you’re really good at and that might help you be more competitive or reach a new customer group.

A weakness does not disappear because you ignore it

This bit is never easy and sometimes it feels hard to acknowledge weaknesses, particularly when you’re working really hard to make your business a success.

Identifying a weakness is not an admission of failure. Instead, it gives you a new purpose: to change that weakness into a strength. Does too much income comes from one customer. ? Are you relying heavily on a single supplier or an outdated pricing model? Do you have one key employee that you’d struggle to manage without?

Again, be realistic. If your management information arriving too late to be useful, you can fix this. If your efforts around cyber security, succession planning or staff development are creating risks, take action. These issues are always easier to address when your business is performing well than during a crisis.

Look beyond the business

Strengths and weaknesses are mostly internally focused. Opportunities and threats arise largely from the world around you. This distinction is important because it separates what you can control from what you cannot.

You cannot control inflation, government policy, a competitor entering your market or the speed at which new technology develops. You can control how closely you monitor these issues, how exposed your business is to them and how quickly you respond.

Opportunities might include a gap in the market, a new customer group, collaboration with another business, stronger relationships with local suppliers or technology that improves efficiency and service.

Threats come in all shapes and sizes. They may include increased raw materials costs, changing regulation, cyber attacks, the loss of a major customer, supply-chain disruption, new competitors or changing customer expectations.

The pandemic demonstrated how quickly an unexpected event can disrupt otherwise sound businesses. We can’t predict the next major shock but it’s entirely reasonable to expect a well-managed business to consider where it is vulnerable and how it would respond.

Connect your analysis to the plan

A SWOT analysis should not be completed at a management meeting, filed away and forgotten. With this one tool, you have created a solid market analysis and a realistic evaluation of risk and this can help you plan strategically. Use your company’s strengths to maximise genuine opportunities, address weaknesses before they become serious and prepare the business to adapt when circumstances change.

For example:

• Can a strong local reputation help you enter a related market?
• Could an overdependence on one customer be reduced by developing a different service?
• Could collaboration with a suitable partner address a gap in skills or capacity?
• Does new technology present an opportunity for greater efficiency?
• Would better cashflow forecasting give you more time to respond to a downturn?

A Final Thought

My advice is do it, use it, then repeat it. Keep it under review and you’ll be in a much stronger position to weather the storms. 

If you’d like an external perspective to help you create a realistic SWOT analysis and strategic plan, please get in touch.

Stay safe - and think strategic.

PS: Charities need SWOTs too.  Check out this article from my archive and get in touch if you want some guidance on whe