This topic actually takes me back to business school at the University of Missouri. As we look at the education I got there, I will have to say that a lot of it was focused on large, Fortune-500 type businesses. And as a current thought leader in the small business community, there really aren’t a lot of things I learned in business school that are directly applicable to the real world in terms of entrepreneurship and small businesses. That just wasn’t the focus.
However, one particular topic I studied in school is used and applicable in any company, small or large. It’s called the SWOT analysis, and it’s very, very helpful. SWOT stands for strengths, weaknesses, opportunities, and threats. There’s a few different ways SWOT is taught, depending on the coach or consultant. Here’s how I teach it:
Strengths and weaknesses are internal within the company. Opportunities and threats come from the external environment. Here are some examples:
Strength: This one is simple. Maybe you have a strong business development culture within the company.
Weakness: Suppose you don’t have a pulse on the metrics or numbers. Your weakness is the financial side of the business. Perhaps you don’t understand the cash flow statement or the balance sheet.
Opportunity: The economy in your city is booming. Specifically, people that are in the market for your product or service are going to have more money over the next few years. Or, you might have an opportunity in a different geographical location than the one you’re currently operating in now, because the economy there is booming. So then you could consider opening another store or offering your services in that location.
Threat: A competitor opens up shop just a half-mile down the street. That would be a pretty big threat. It’s even worse if the said competitor uses better technology and/or has a bigger marketing budget. Being aware of a new threat is the first step to eventually overcoming it.
That’s SWOT in a nutshell. So here’s what you need to do as a company. Preferably quarterly, go through a process where the leadership team (if you’re self-employed, you can do this yourself) does a SWOT analysis of the company. If possible, hire a coach or consultant who can come in and help you with this. Do this consistently every quarter and compile a list of 3-5 takeaways each time. You can then incorporate them into your goals for the next quarter.
For example, if one of your weaknesses is that you don’t understand the sales metrics very well, one of your action items may be to hire a financial expert to educate you one hour per month for the next three months on how to read the income statement, balance sheet, and cash flow statement. We want to link the results of the SWOT analysis with specific goals. And the way to really dominate your competition (because the SWOT analysis is not something your competition doesn’t know about either – they’re probably using it as well) is to do the analysis consistently every quarter, create goals, and then try your best to achieve them.
In closing, I want to encourage you to get your team together for the SWOT analysis, today!