“Know thyself,” says Socrates. “To thine own self be true,” quotes the Bible. Do you know yourself? Do you know your business?
Where your business fits into the marketplace is one of the most overwhelming yet most important evaluations you can make in your business. Are you a market leader? Are you slowly (or quickly!) losing market share? What new policies could result in costs being cut? What are some economic indicators that could wipe your business out while you’re not looking?
While you may be aware of some or all of these, what methods do you have as part of your business model to evaluate them on an ongoing basis? How do you know when things change? How are you leveraging what you do well?
A simple tool that many businesses and consultants use is called a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Here is a typical SWOT diagram.
• Strengths – Areas of your business that you need to maintain and exploit. This might be a unique product or service offering, a strong, knowledgeable team or a strong customer base.
• Weaknesses – Areas of your business that you need to be aware of in your decision-making process and avoid exploiting. Areas you might consider include your financial position, lack of resources, knowledge or inopportune brand deterioration.
Strengths and weaknesses are areas of concern that you, as a business, can do something to change. Ideally, you will want to turn your weaknesses into strengths by finding some way to work around them or a way to compensate for them. You’ll want to build your strengths through ongoing innovation, continued education, listening to your clients and watching market forces for ways to exploit your strengths.
• Opportunities – These are market and economic forces outside of your business that if you take advantage of, will enhance your business. These might include an opportunity to purchase another business (a business that compliments your products or services that can expand your market, financial or other position), a sudden need for a product or service you offer (bottled water in a drought) or a policy change (ability to increase write-offs, increased need for energy-efficient products, etc.)
• Threats – Market and economic forces that could hurt your business, such as making a product or service your sell illegal (think prohibition – the sale of alcohol), the entrance of a product or service or business that makes yours obsolete or decreases demand (you have a small retail store, then Wal-Mart moves into town) or increases your costs (additional fees to cover the cost of Homeland Security, or high fuel and dairy prices)
Opportunities and threats, as you probably have guessed, refer to external impacts on your business – things that you cannot do anything about, but can take advantage of or prepare for.
If you were in the auto industry, and suddenly, gas prices sharply increased, creating a market demand for fuel-efficient cars, had you done your SWOT, you would already have put contingency plans into place for production of these Hybrid vehicles. If you had done so, when prices increased 100%, you would have been ready to hit and set the market for the new vehicles. Toyota and Honda seem to have done that, rather effectively.
You are now in a recession. What will you do? How will your organization make its way through tight economic times, perceived or real? Your costs have increased, due to the increased price of everything. Your key employee quit, without notice. Your clients don’t have the discretionary income to purchase your products or services. While it’s not the only step you’ll want to take, a SWOT analysis should be one of the first analyses you should consider.
At Aepiphanni Business Solutions, we are dedicated to serving the needs of small business owners. We specialize in helping you develop strategies for your organization, and are committed to your success. If you have further questions about creating your strategy or developing your vision, please give me, Rick Meekins, a call at 678-265-3908, or email us at [email protected].