SWOT Analysis – What is it and how can it help my Small Business?

There is no doubt that setting up a new business is an exciting prospect – albeit time consuming and stressful! It is important that you take care and proceed with caution when you are planning to set up a new business in order to avoid potential pitfalls along the way. A well know analysis technique used by many business owners and investors is something called a SWOT Analysis.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.  To fully understand it, let’s look at each area separately.


These are not only what you’re good at, but more importantly, what you’re good at compared to your competition.  Think about what you can offer your customers that no one else does?  What is going to bring business to you instead of everyone else?  Knowing your strengths can help you capitalize on them because you can use these as the highlight of your advertising and in your presentations to investors.


Finding your businesses’ weaknesses can take a little longer! Don’t take this lightly though, as it will be well worth your time.  One of the ways to find your weaknesses is to look at it from your customers’ perspective.  Are clients waiting too long for a product?  Are you difficult to communicate with? Do your staff lack product knowledge? One easy tip to gain more insight into your weaknesses is to simply send out a questionaire to your customers to see what they think.

Most good business owners are well aware of the strengths and weaknesses of their organization, simply because these are issues which they face day in and day out.  The Key benefit of a SWOT analysis is that it also looks outside the business at external factors which can affect it. A business can have many strengths and few weaknesses, but if it neglects the competition and other external issues, it’s likely to fail. So what can you do? Well, this is where analyzing opportunities and threats comes in.


Opportunities means looking at the ways your business can expand, grow, and increase profit that originate from external factors rather than from within your business.  This could mean creating a new product or expanding into a new market, or it could be as simple as outsourcing some of your functions – for example HR – to free up resources and reduce costs. 

A good business will find opportunities and do their best to expand into these areas. Make sure you analyze all opportunities carefully and pursue the ones which offer the best chances of success. It can be tempting to go in all directions and chase every opportunity but this will only result in you spreading yourself too thin and not being able to concentrate on the areas which offer the best returns.


Threats are quite simply things in the outside world which can have a negative impact on your business. They could be anything from competitors in your market, to new laws and regulations or new technology that could have a significant effect on your business.  While it would be practically impossible to protect against every threat in your marketplace, you can take steps to ensure you are aware of them and create back-up plans to protect yourself and your business.
Like everything else in business, the theory of a SWOT Analysis is great but it is vitally important to learn how to apply your findings. Once you know your strengths and weaknesses and you have listed them, you need to carry out some research and apply techniques to make use of all your strengths to your advantage and take action to fix or at least limit your weaknesses.  Prepare an action plan to take advantage of the opportunities in your market and work on protecting against threats. One final point to keep in mind is that you must balance all four of these areas of the SWOT Analysis and not just focus on one.

The SWOT Analysis is obviously not an all-encompassing analysis technique, however, it is a great technique to help you get started and think realistically about your business and its chances of success. The information obtained will give you a quick insight into whether your business idea is viable and worth pursuing.

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