How SWOT Analysis and Other Tools Can Help Your Small Business

Using data and analytics is a practice large enterprises know the value of. A 2016 study by International Data Group (IDG) found 78 percent agreed that data strategy, collection and analysis have the potential to completely shift and improve business operations. Small businesses don’t need sophisticated data-gathering to produce a valuable analysis. A SWOT analysis is a simple way to help your team hone in on what’s working and what’s not so you can pivot.

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Weaknesses and Strengths are the negative and positive aspects you can see from an internal point of view, that identify the current state of what’s being examined. Threats and Opportunities are negative and positive aspects that are external, which can affect the future of what’s being examined. When writing down a SWOT analysis, you can use columns for each identifier, or create a cube with four boxes. Shopify has a free template example for download.

Whenever a team or individual needs to glean more insight into a tactic to try, conducting a SWOT analysis helps you mitigate risk and work more efficiently. A SWOT analysis should be used when you’re creating a business and throughout your operations. Here’s a look at how your small business can use a SWOT analysis to tackle typical issues.

When You’re Forming a Business Plan

In the infancy stages of your small business, creating a baseline SWOT analysis helps you focus business strategy, identify goals and monitor threats from competitors. As early as possible, a startup or small business should identify:

Say you’re opening up a new breakfast and lunch diner. Your business plan SWOT might look like this:

This early-on analysis shows you what positions you should hire next, features of your service to highlight to customers, where you need to allocate marketing spend and more. A SWOT analysis helps you refine a business plan, so investors have a clearer idea of your strategy, too.

When You’re Facing a New Competitor

Don’t ignore or become paralyzed by competition. Be better prepared to face them head-on with a SWOT analysis. This way, you can see where you have the opportunity to out-shine them and realistically acknowledge where you need to start improving to stay ahead.

For example, say you sell homemade, paraben-free soaps in a boutique store. There’s an everything-in-one-place superstore opening up a couple miles away from you. Your SWOT might look like this:

This type of store may decide to completely close the brick-and-mortar and switch to a less expensive online retail environment. Or, it could capitalize on focusing on delivering a high-quality product to shoppers who are passionate about supporting local businesses. Instead of just crossing their fingers and hoping for the best, the small business owner can adapt to changing conditions.

When You’re Considering Expanding Your Product Line

Investing money into product development, testing, marketing and management is a huge decision. This is the perfect time for a SWOT analysis, before making a significant commitment. Say you produce yoga mats. You’ve been doing pretty well, since the material is heavenly to strike a pose on, the price point is really competitive, and you’ve nailed your Google advertising strategy. But now your loyal customers have been chattering on social media and asking for more products from you. They love your yoga mats so much, they want straps and blocks, too. Should you stick to what you’re great at, or expand? A SWOT can help. Consider:

While there are plenty of growth opportunities in this SWOT, conducting this analysis also helps a business to be ready for the risks and dangers. A SWOT helps small businesses scale more smartly.

Other Analysis Tools: STEEP, STEEPLE and PEST

In addition to a SWOT analysis, there are several other types of analysis tools your business might consider in its strategy planning. These include:

• STEEP: A STEEP analysis is commonly used in marketing to identify external factors that determine trends. STEEP stands for Social, Technological, Economical, Environmental and Political. Using STEEP, marketers and business owners can identify trends, determine relationships among trends, and derive implications. You can use STEEP to analyze events such as economy crashes, new technologies, new government policies and increased or decreased regulation, and determine how they relate to your business.
• STEEPLE: Similar to STEEP, STEEPLE takes into account the first five factors of STEEP, as well as Legal and Ethical factors.
• PEST: PEST examines its four corresponding sections in order: Political, Economical, Social and Technological. These big-picture factors can be examined before a business gets more granular during SWOT creation.

Like a SWOT analysis, a STEEP, STEEPLE or PEST analysis can be helpful at the beginning of business creation and at regular intervals throughout operations. The opportunities and threats in a SWOT analysis may evolve based on what you uncover in a STEEP, STEEPLE or PEST. When new markets emerge, when you’re considering product development, when you’re considering new vendors, and in many more situations, taking both a macro- and micro-view helps you to see overarching trends and how the details in your business can help you benefit.

Analyze to Optimize

These types of analysis can be carried out by various members of your team to get a clearer view of your operations. You could empower departments to create their own regular SWOT analyses, and make sure recommendations line up with STEEP, STEEPLE or PEST analyses that are regularly updated by executives and key stakeholders. Taking inventory of your business and how it fits amid competition and the global economy allows you to gain a clearer strategy and adapt based on changing needs.