Do you want to increase your business’s profits this year? Of course you do!
But here’s the thing — you don’t simply stumble on higher profits. If it were that easy, every business would be profitable! Instead, you must be intentional about growing your company’s profits, and that starts with vigilant planning.
One of the best ways to plan and develop new strategic priorities that lend to increased profits for your business is to perform what is called a SWOT analysis.
Today, I’m going to discuss the SWOT analysis in detail and share with you why it’s such an important tool — especially during challenging economic times like the ones we’re currently facing. Let’s dive in!
What Is a SWOT Analysis?
SWOT is an acronym that stands for strengths, weaknesses, opportunities, and threats. In performing a SWOT analysis, you will be able to assess your business’s current position before creating and implementing new strategy.
Typically, the SWOT analysis is visually represented as a square matrix. The top row consists of strengths and weaknesses — internal functions that are within your company’s control. The bottom row, on the other hand, consists of opportunities and threats — external functions that are largely outside of your company’s control.
During a SWOT analysis, you and your team will address each of these four functions as they pertain to your company:
Your business has its own unique strengths — areas that help drive success. Here are some of the key questions you should ask to identify your business’s strengths:
- What does our business do really well?
- What kind of experience does our business have?
- What do we have that our competitors don’t have?
- Which of our products or services bring in the most money?
- What would our customers say that our strengths are?
Similarly, your business has weaknesses — areas that may be detrimental to your success. Some key questions should include:
- What are the areas that need improvement?
- What resources does our business lack?
- Which products or services do we lose money on?
- What do our competitors have that we don’t have?
- What do our competitors do better than we do?
There will also be opportunities — areas that your business can take advantage of that you’re not taking advantage of currently. Be sure to cover the following questions:
- How can we do more with our existing clients?
- What other products and services can we offer?
- How can adopting new technology enhance our products and services?
- Is there a new market segment that we have the potential to reach?
- How can we turn our strengths into opportunities for larger profits?
- What are some of the current trends that we can take advantage of?
Finally, your business will face threats — potentially harmful areas that you may be able to foresee and evade with a little planning. Here are a few questions to ask:
- What types of threats are most common in our industry?
- What do our weaknesses expose us to?
- How could the current economic climate impact our business?
- What are the different obstacles that we can anticipate?
- In which ways could technology hinder us?
Why Is the SWOT Analysis So Important for Your Business?
The SWOT analysis is critical to your company’s success for two reasons.
First, companies that perform a SWOT analysis annually not only stay afloat during tough times but also discover brand new ways to increase their profits each year.
Second, the SWOT analysis is vital for the long-term outlook of your business. The company that performs a SWOT analysis is self-aware, and they develop strategies that will help them take advantage of opportunities in their industry. The company that doesn’t perform a SWOT analysis, on the other hand, has the potential to fall to its competitors and even become obsolete.
A famous real-world example of this is the rise of Netflix and the fall of Blockbuster. Netflix exploited the popularity of the Internet to develop a business model that would endure in this day and age. Blockbuster, however, failed to adapt to the various changes that were occurring in the video entertainment industry.
Today, Netflix is consistently among the most-used streaming services every year, while Blockbuster has closed its doors nationwide.
Be a Netflix — not a Blockbuster!