Your business plan should contain a SWOT analysis — a matrix that lists strengths, weaknesses, opportunities, and threats related to launching your startup. However, a SWOT analysis can also help an existing business determine if its current or planned strategy will work. The analysis can guide your decision-making about a potential expansion, changes to your marketing strategy, or the addition of a new product or service.
Think of the SWOT matrix as the blueprint of your business. You are the architect and contractor who must use that blueprint to build the real-life business.
The SWOT analysis can show you where you are now and where you need to be to achieve your goals. This piece of strategic planning provides a realistic picture of your business model and processes, whether they are strengths or weaknesses.
The analysis also focuses your efforts on the most critical issues to address going forward. To make the most of the SWOT process, you’ll need to distill the information you gain from it and transform it into specific action steps. Here’s how.
Ensure your SWOT is complete
Look at other SWOT analysis examples to ensure you’ve put enough thought and commentary into yours. That way, you know what you have to do to address the findings in each of the four sections.
It’s important to create balance so that one section doesn’t dominate, which can obscure possible strategies. That means balancing the controllable internal factors (i.e., strengths and weaknesses) with the external factors that are outside your control (i.e., the opportunities and threats).
The optimal scope will vary from business to business, but a good average is six to eight points for each of the four sections in your SWOT. This generally yields a vivid picture of what the company can and cannot do, without overwhelming you as the founder. This approach also helps your team and any investors to see competitive advantages and strategic pathways.
Make connections between each of the four sections
The four sections in your SWOT don’t operate in a vacuum. Each section influences the results of another section in some specific way. Identifying these connections helps you spot solutions for threats and weaknesses.
For example, one of your company’s weaknesses may be that your product is struggling to differentiate itself from the competition. Therefore, a threat could be existing or new competitors that clearly demonstrate how their products solve customer needs.
Ranking the information in each section may help you see these connections because the more critical issues in one section may be entirely dependent on a problem, threat, or opportunity listed in another.
The solution is to identify the strengths that can leverage the opportunities and minimize the threats. At the same time, you should determine how to turn weaknesses into opportunities and eliminate weaknesses that would otherwise result in threats. This exercise is also known as TOWS analysis.
Create a list of tactics related to each of those four connections
The answers to the questions you pose during each section of the TOWS analysis will inform the tactics you need to implement. In the case of weak differentiation as a threat, tactics might involve adding more product features or changing your marketing strategy to focus on how your product alleviates specific pain points that the competition cannot.
Prioritize the tactics based on your understanding of the connections between strengths, weaknesses, opportunities, and threats. This process helps determine which tactics will have the most impact on your startup.
Add more quadrants to your SWOT table to list the tactics corresponding to each of these pairings: Strengths–Opportunities, Strengths–Threats, Weaknesses–Opportunities, and Weaknesses–Threats. These additional sections deepen your understanding of whether your business strategy is feasible.
The enhanced SWOT analysis can also illustrate to an investor the level of clarity about your company’s internal strengths, future obstacles, new opportunities, and potential wins.
Identify and address anything unknown that appeared during the planning process
In conducting this analysis, you can uncover new insights that you might not have otherwise noticed had you siloed each section. The new information you’ve uncovered will impact your startup, so include it in your business planning.
For example, these unknown aspects might include strengths, external opportunities, or hidden threats that the TOWS analysis revealed. Armed with this information, you can increase the chances of capitalizing on those strengths or threats to drive your business forward.
The insights might also reveal a better path to strategic alignment. Through a deeper analysis, you can show your team how to work toward the same goals. Investors will also get a clearer picture of your business, its purpose, and your action plan to achieve that purpose.
A process that lets you take action
Your SWOT analysis serves as more than a summary of your research. It tells your business plan readers, investors, and team what needs to get done. The expanded commentary you add by undertaking the TOWS analysis will help identify and prioritize those actions. Your SWOT analysis evolves beyond a mere matrix and becomes a living, breathing strategy for your small business.