A business plan is often regarded as the starting point to any business. But sometimes these plans run long, tend to be more cumbersome and many entrepreneurs would rather just dive in. Don’t! But if you must throw some caution into the wind, at the very least conduct a SWOT analysis.
What Exactly Is It?
A SWOT analysis forces you to evaluate a venture’s Strengths, Weaknesses, Opportunities, and Threats. The first two qualities get at the businesses internal features (strengths and weaknesses) and the last to measure the external forces (opportunities and threats).
Strengths- In this section you want to identify the positive attributes of your business, ideas, or assets. These should focus on current and actual items or features. For example, a strength for a new technology company may be sufficient seed funding.
Weaknesses- These are features of the business or venture that can be improved upon. Usually, the strengths analysis should lead you to some obvious weaknesses. What aspects of the business or venture are you least likely to brag about? What keeps you up at night about your business idea? What factors are holding the business back from being as great as it could be?
Opportunities- Here, you want to look outside of your business. Determine the things or conditions that are outside of the business that may help it succeed. A new entertainment district or stadium being constructed next to your restaurant/bar would qualify as an opportunity to attract new clients. Think about positive external features.
Threats—These are external factors that could undermine your business or idea. They are the opposite of opportunities. Think increased regulations, stiff competition, decline in market growth, lack of investors, etc.
Why Is it Important?
Conducting this exercise forces you to think deliberately and critically about a new business venture, management decision, capital investment, and even litigation strategy. It is a systematic way of decision making and gut checking. It diffuses the role of emotional decision making and fosters rationality.
Be Brutally Honest with Your Assessments.
There are no grades given. No one to impress per se. So, you do a disservice to yourself by not being realistic or honest about these factors. And risk wasting scarce resources. There is the temptation to overstate a venture’s strengths and opportunities and understate the weaknesses and threats. Fight this urge. Otherwise you run the risk of conducting a blind analysis that ends up not being useful.
Try it today. SWOT that idea, decision or venture.