A powerful business plan addresses all of the known factors pertaining to your company’s future, but before you can build your plan, you should complete an honest evaluation of the positives and negatives around your idea. Developing a thorough SWOT analysis will identify many items you will need to include and address in your plan.
SWOT stands for:
Strengths
Weaknesses
Opportunities
Threats
These 4 elements can be put into two main categories:
Internal (strengths and weaknesses)
External (opportunities and threats)
A detailed inventory of your weaknesses and threats will put you in position to anticipate the challenges you will face as you get your business up and running. You can then leverage your strengths and opportunities to build strategies for facing those challenges. Planning this out in advance will allow you to act quickly and decisively when issues arise.
These can be communicated in your business plan to show that you know what you are up against and how you will deal with it. This is important to prospective lenders, investors and partners. More importantly, it gives you a solid foundation from which to view your business and the environment in which it must function.
Internal Factors
Strengths – What are the strengths that your business and your key people bring to the table? This may be experience, education, contacts in industry, physical or intellectual property, expressions of interest, access to capital, etcetera.
Weaknesses – What is currently lacking when it comes to your business and key people? This may be lack of equipment, industry knowledge, capital, key contacts, business acumen, etcetera.
Note: These are simply suggestions and not an exhaustive list. Each of these could be included as a strength or weakness depending on your specific situation. Be open minded and honest as you populate your own lists.
External Factors
Opportunities – What opportunities exist outside of your business that you may be able to capitalize on? These could be a growing market, changing legislation, economic shifts, lack of competition, success of a complimentary service, government support for your industry, etcetera.
Threats – What threats exist outside of your business that you may need to deal with in order to succeed? These could be a surge in competition, inflation, labor shortages, new technologies taking market share, lack of government support for your industry, etcetera.
Note: These are simply suggestions and not an exhaustive list. Each of these could be included as opportunities or threats depending on your specific situation. Be open minded and honest as you populate your own lists.
SWOT Summary
In your business plan, you can include your entire SWOT analysis, but it is recommended to have a summary outlining the findings and learnings of your SWOT analysis. This gives you the opportunity to easily demonstrate how your strengths and opportunities can be used to deal with the weaknesses and threats the business must deal with.
Targeted SWOT Options
A general SWOT analysis, like the one mentioned above, is helpful in analyzing and presenting an overall view of your business. It can be applied at the startup phase or at any time during the lifecycle of your business where an evaluation might be helpful.
It is also possible to use the same format to analyze specific parts of your business. For example, many businesses use SWOT specifically to analyze their marketing, operations or human resources. You can also apply the SWOT format when researching your competition to see where you may be able to get an advantage.
A Living Document
Like your business plan, a SWOT analysis is a tool that is valuable throughout the life of your business. Situations constantly change, so use your SWOT as a living document and revise it on a regular basis. Use it to keep track of the strengths and weaknesses within your business as they evolve, stay ahead of new threats and capitalize on emerging opportunities.