Home
>
Strategic Planning
>
SWOT Analysis Is No Magic 8 Ball

SWOT Analysis Is No Magic 8 Ball

Q: A key investor in my business has suggested that I hire a consultant to do a SWOT Analysis to help plan for the future. I try not to argue with my investors, but I'm not so sure I need to have this done. What do you think? -- Laurie B.

A: Laurie, before you call in the SWOT team to deal with this investor (sorry, couldn't resist that one), let me tell you exactly what a SWOT Analysis is and how it can not only help you plan for the future, but get a gauge of how your business is doing today.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT Analysis is a written exercise that can help you clarify and focus on the specifics that make up the four areas that most affect your business. The purpose of a SWOT Analysis is to help you build on your business' strengths, minimize and correct the weaknesses, and take the greatest possible advantage of potential opportunities while formulating a plan to deal with potential threats.

Think of a SWOT Analysis as a checkup for your business. By spending a little time examining the internal and external factors that affect your business' health you can better gauge the present state of your business and identify things that may adversely affect your business' health in the future.

It's a good idea for every business to perform a SWOT Analysis on occasion, especially if you are doing strategic planning, contemplating a change in direction or formulating new strategies for distribution, marketing and sales.

Should you hire a consultant to perform a SWOT Analysis for you? Speaking as a consultant who has been paid to perform SWOT Analyses for companies in the past, I can honestly (and yes, without bias) say that depends on three factors: (1) the size of your company; (2) how in-depth the SWOT Analysis needs to be; and (3) how much of your investor's money you'd like to spend.

Larger corporations are most likely to hire professional firms to perform such analyses, primarily due to the complex nature of big business. Some corporate SWOT Analyses can run on for several hundred pages. Typically, a consultant will charge up to $100 or more per hour to perform a detailed corporate SWOT Analysis and most large companies consider this money well spent as a good SWOT Analysis can reveal otherwise ignored factors that might increase the company's bottom line or help avert future losses.

For a smaller business, however, a professional SWOT Analysis can be an exercise in overkill. For your money you will get an impressive, detailed report that will make for great show at your next investor or board meeting and a wonderfully expensive door stop the rest of the time. I don't mean to belittle the value of a professional SWOT Analysis for small businesses. It's just that smaller companies can learn as much from their own efforts as that of an expensive consultant.

You can perform a simple SWOT Analysis with a #2 pencil and a fast food napkin, but to get a truly accurate view of your company's SWOT factor I suggest you do things a bit more formally (and without the aid of condiments). I recommend that you involve all the key players in your business, including management, employees, your attorney, accountant, even your spouse. My wife often gives me insights into my business just from listening to me talk at dinner. Sometimes we business owners and managers can't see the forest for the trees. It's good to have someone else point out things we might miss.

Here's how to perform a simple SWOT Analysis. On a piece of paper draw a vertical line down the center. Now draw a horizontal line through the center of the page. The paper is now divided into four quadrants. In the first quadrant (upper left) write the word "Strengths." In the quadrant next to that write "Weaknesses." Drop down to the second tier and label the first quadrant (lower left) "Opportunities" and the remaining quadrant "Threats."

Now just fill in each quadrant accordingly. Strengths and weaknesses are internal factors that affect your business. Opportunities and threats are the external factors. Let's look at a quick overview of each.

Strengths are those things that make your business stronger. Strengths might include: a product or service that sells well; an established customer base; a good reputation in the marketplace; a good track history; a high traffic location; strong management; qualified employees; ownership of patents and trademarks; and any other aspect that adds value to your business and makes it stand out from the competition. Strengths should always be gauged by the strengths of your competitors. If your business does something well just to keep up with the competition, it is not a strength. It is a necessity.

Weakness are the antitheses of strengths. Weaknesses are those areas in which your company does not perform well or could stand improvement. These are the areas of your business that make you susceptible to negative market forces and aggressive competitors. Weaknesses might include: poor management; employee problems; lack of marketing and sales expertise; lack of capital; bad location; poor products or services; damaged reputation; etc.

Opportunities are those things that have the potential to make your business stronger, more enduring, and more profitable. Opportunities might include: new markets becoming available or old markets that are expanding; possible mergers, acquisitions, or strategic alliances; a competitor going out of business or leaving the marketplace, making their customers open to you; and the potential availability of a desired employee.

Threats are those things that have the potential to adversely affect your business. Threats might include: changing marketplace conditions; rising company debt; cash flow problems; a strong competitor entering your market; competitors with lower prices; possible laws or taxes that may negatively impact your profits; and strategic partners going out of business.

Once you have filled in all four quadrants, you can use this information to create strategies that will help you make the best of the information learned. For example, once you have identified your strengths you can better use them to determine which opportunities to pursue and to help reduce your vulnerability to potential threats.

Now that you know your weaknesses you can formulate strategies to overcome them so you can pursue opportunities. Knowing your weaknesses can also help you establish a defensive plan to prevent your weaknesses from making your business particularly susceptible to external threats.

Whether you use a consultant or create a SWOT Analysis on your own it is important to remember that a SWOT Analysis is a subjective analysis tool that can be strongly influenced by the opinions of those performing the analysis. For small businesses especially it is imperative to keep the analysis simple and to the point. Don't overanalyze and don't immediately take the results as gospel.

Remember, it's an analysis tool, not a magic 8 ball.

Here's to your success!

Tim Knox

Small Business Q&A is written by veteran entrepreneur and syndicated columnist, Tim Knox. Tim serves as the president and CEO of three successful technology companies and is the founder of DropshipWholesale.net, an online organization dedicated to the success of online and eBay entrepreneurs.

licensed cleaning services Park Ridge ..

In The News:

Scammers create fake Evite invitations that mimic legitimate event emails, requiring users to verify senders and use antivirus software for protection.

The new Apple Watch hypertension feature passively monitors blood pressure patterns over 30 days using sensors to detect chronic high blood pressure signs.

Chrome extension spyware disguised as a free VPN service highlights security risks after it captured private browsing data from trusted sites.

New research shows how fatty acids in cooking oil can safely dissolve and recover silver from circuit boards without harmful chemicals or environmental damage.

The Fox News AI newsletter gives you information on the latest AI technology advancements, and about the challenges and opportunities AI presents now and for the future.

Anthropic investigates alarming AI abuse case where hacker automated entire cybercrime campaign using Claude, stealing sensitive data from defense and healthcare firms.

TikTok, Meta and YouTube restrict Charlie Kirk shooting videos with age gates and warnings while X faces criticism for allowing continued circulation.

Cybercriminals use fake troubleshooting websites to trick Mac users into running terminal commands that install Shamos malware through ClickFix tactics.

San Francisco startup Fable launches Showrunner, an AI platform dubbed the 'Netflix of AI' that generates animated episodes from text descriptions with Amazon support.

Apple raised iPhone prices for some models despite receiving tariff relief from President Donald Trump, with the new lineup starting at $799 for the base model.

A two-story 3D concrete printed home in Western Australia demonstrates faster construction methods that could reshape American housing amid rising costs.

Credit scores remain important during retirement for insurance rates and housing applications, while seniors become prime targets for identity theft and financial scams.

Scammers now send unexpected packages with QR codes that redirect victims to fraudulent websites or download malicious software to steal sensitive information.

Meeting AI tools record private conversations alongside work discussions, creating privacy risks that can be managed with proper settings and awareness.

Hotel privacy concerns are valid but rare, with methods to detect hidden tech using smartphone flashlights, mirror tests and scanning apps.

Improve your Wi-Fi speed and reliability with 10 simple router optimization tips that don't require special apps or expensive subscriptions.

A Columbia University breach exposed names, Social Security numbers and academic records of nearly 869,000 people, with notifications beginning in August.

Rental car drivers use AI-powered apps like Proofr to protect themselves from unfair damage fees as major companies deploy automated inspection tools.

Fox News' AI newsletter brings you the latest on technology advancements around artificial intelligence.

OnTrac data breach between April 13-15, 2025, exposed personal information of over 40,000 people including Social Security numbers and medical records.

A woman named Wika announces her engagement to an AI chatbot sparking worldwide debate about virtual relationships and technology.

The notorious people search site National Public Data relaunches despite a previous breach affecting 3 billion individuals, raising fresh privacy concerns.

Revolutionary TRAUMAGEL gel controls life-threatening bleeding from gunshot wounds and traumatic injuries, helping first responders prevent prehospital deaths.

Protect your home network by enabling proper encryption, creating strong passwords, checking connected devices and using VPN and antivirus software.

The Navy's solar-powered Skydweller drone flew nonstop for 73 hours in Mississippi, proving renewable energy can power long-endurance military missions.

SWOT Analysis Is No Magic 8 Ball

Strategic Planning