Running a business is hard work. With so many different things pulling at your attention, it's easy to get caught up in the minutia at the expense of the big picture. The only way to make sure your business sticks around for the long haul is to periodically step back and look at things from a broader perspective.
That's where SWOT analysis comes in. A SWOT analysis will push you to look at your business's potential, whether you're just starting a business or working taking it to the next level. You won't just examine how your company is performing today, you'll investigate how it's going to perform next week, next month, and even next year.
What is a SWOT analysis?
A SWOT analysis lists the good and bad things about your business, both from an internal and external viewpoint, by identifying strengths, weaknesses, opportunities and threats. SWOT analysis sounds like some kind of scary accounting process... it’s not. Doing a SWOT analysis doesn’t involve addition or subtraction, but it is very helpful. SWOT stands for:
S - Strengths
W - Weaknesses
O - Opportunities
T - Threats
It's basically the ultimate to-do list. A SWOT analysis forces you to think about the future of ecommerce for your business. You know how your business is doing today, but do you know where it will be tomorrow? This process will help you figure it out and—more importantly—plan for it.
Strengths and weaknesses are internal factors, while opportunities and threats are external factors. Internal factors come from within your ecommerce business while external factors come from the larger environment surrounding your business.
Strengths and weaknesses mostly focus on the present, while opportunities and threats mostly focus on the future. What is happening versus what could happen.
Strengths and weaknesses are under your control. It may be difficult, but you can change them over time. Examples include:
Conversely, opportunities and threats are typically outside of your control. You can try and plan for them or influence a positive change, but at the end of the day, it’s not up to you. Examples include:
Who should do a SWOT analysis?
In short, everyone—whether you're launching a new product or run an established business—should do a SWOT analysis. If you’re just starting out or are still in the planning phase, a SWOT analysis will give you a competitive advantage. Doing it will inform your break-even analysis and give a more realistic picture of what you’re signing up for. Both should be included in a business plan, if you need to seek financing.
Existing businesses should perform a SWOT analysis annually. Think of it as your annual State of the Business. Having it will allow you to keep your business running smoothly, anticipate problems, work on necessary changes or improvements, and make smarter decisions throughout the year. Basically—an annual SWOT analysis will keep you from losing touch with your business, customers, and industry.
How to conduct a SWOT analysis
A SWOT analysis is far from scientific. There’s no objective way of measuring how well you do one. It relies on your ability to observe and recall internal and external factors that can impact your business. It’s not about making accurate predictions so much as it is about knowing what to plan for.
Step 1: Gather the right people
While important business decisions typically need to be made by founders and senior-level employees, there’s no such thing as "too many cooks in the kitchen" with a SWOT analysis. Having more input, even from people who don’t fully understand your business, will only make it stronger.
You may also find that you’ll get better buy-in on the strategy decisions that come out of the analysis if you include your employees in the process. Heck, even your customers can provide valuable insight.
Step 2: Host a brainstorming session
Once you’ve assembled your team, host a brainstorming session with everyone involved. You can either list strengths, weaknesses, opportunities, and threats together or ask participants to create and submit lists individually.
Include everything that comes up in each category. Don’t worry about how important each observation is at this stage—the idea is to not miss anything. Just write it all down.
Step 3: Fill the gaps
Once you’ve exhausted everyone’s ideas and come up with four big lists, it’s time to start filling in gaps where additional explanation is needed. This is an opportunity for you and your team to ask questions that will determine how important each item on the list is. Ask everyone in the group to choose their top three items for each category. Most likely, a pattern will emerge that will show you what to focus on.
Even if it’s only you working on the analysis—don’t worry! In this case, you are likely involved in all parts of the business and will have good insight into what you need to consider. Crack a bottle of wine or brew a pot of tea, and dig in!
31 SWOT analysis questions to guide you
Whether you’re working alone or with a diverse group, getting the brainstorming started can be tough. The following questions are here to help get things moving. I recommend reading through them no matter what to avoid missing important factors.
These are positive, internal factors that affect how your business performs. Although they may be difficult to change, they should be within your control:
What are we good at?
What do we do better than anyone else?
What is our competitive advantage?
What do we do that no one else does?
What resources do we have at our disposal?
What are our ecommerce company’s advantages?
What advantages do our employees have?
What valuable assets does our company have?
What do our customers like about our business?
These are negative, internal factors that affect how your business performs. Although they may be difficult to change, they should be within your control:
What are we bad at?
What do our competitors do better than us?