If you are contemplating the prospect of a new business, it is crucial to start off on the right foot, and if you think that means writing a business plan, you would be wrong. Before you can attempt to create a realistic and credible business plan, you must first perform a detailed assessment of your projected business, as well as your competitive environment. That first step is a SWOT Analysis. “So, now you are scratching you head, and wondering what a SWOT Analysis is.” First of all, the term “SWOT” is an acronym for “Strengths, Weaknesses, Opportunities, and Threats,” and believe me, every start-up business or established corporation has them. These four characteristics change or continue to develop, so you will actually reassess them throughout your business life. What is important in the beginning is that you recognize those characteristics, understand what they mean, weigh your options, then proceed as planned, make changes, or if necessary, go in a completely new direction.
A SWOT Analysis essentially shows you, in black and white, if there is a viable niche for your business, or the need for a new product or service. It equips you with the knowledge and confidence you need to make sound business decisions. That is, it enables you to capitalize on your strengths, improve any weaknesses, tap into all available opportunities, and block any threats that may impede the success of your business. So, what are some examples of those characteristics; Strengths are internal assets and advantages that may include a lack of debt, cash reserves, education, experience, financial backing, a product, or a businesses location. Weaknesses are internal hindrances such as debt, a lack of experience, an inefficient accounting system, lack of a website, inconsistent marketing, or employee problems. Opportunities are external items or events that present an opportunity for your business. These could include a new market, a new contract, a competitor that is going out of business, or anything that can strengthen your businesses profitability. Threats are external conditions that can be harmful to your business. These might include the economy, a new or bigger competitor, a shrinking market, or competitors pricing or incentives.
Once you know what your SWOTS’s are, you will have a clear idea of what your business looks like. Knowing that will assist you in deciding where you want to go, and how you plan to get there. Once the project of a SWOT Analysis is complete, then and only then, will you be prepared to sit down and design a solid business plan that financial institutions, backers, or partners can take seriously.