SWOT the Competition

SWAT Team Business can be like marriage- it’s much more effective to be proactive. If you have waited until you have gone from black to red and you are having trouble making ends meet, it may be too late to fix anything.

One example of a proactive business is Maine Indoor Karting, featured in this blog and this audio story. The owner has been preparing for the slow times and doing extra preparation for the supposed economic downturn. If he had waited until his company was broke to try to control costs, getting that building loan would have been impossible.

To get you on the road to better preparation and proactive thinking, use the SWOT analysis. Many business owners have heard of, or seen, a SWOT analysis and may have even used one to look at their business; however, in my experience most of us don’t use it enough. The SWOT analysis is a quick and easy method to gauge the current health of your company and see potential roadblocks ahead.

SWOT consists of the following:

Strengths- These are advantages your company has over others. Some may be your sustainable competitive advantages, and some may be temporary aspects of your business that are better than your counterparts. The more specific your statements the better. What do your customers love you for? Why do people choose you over others? What are you doing right? Example: a Wal-Mart strength may be, “On average, we have access to goods 5% cheaper than any of our competitors.”

Weaknesses- What is your competition doing better than you? If you could improve things at your company, where would you start? As business owners, we spend a lot of time touting what we are good at and why we are better than everyone else. It’s time for a reality check. Why don’t ALL your ideal customers buy from you? What do prospects and customers see as weaknesses in your company: Service quality? Product craftsmanship? Brand? Longevity? Response time? You know what your weaknesses are, but it may take you a little while to face the truth. Example: AOL might say, “We have the worst customer service reputation of any company, regardless of industry.”

Opportunities- Where strengths and weaknesses are internal to the company, opportunities and threats are external. What types of market trends are you well positioned for? What types of legislation may help you get more business? What kinds of events are happening that your company could participate in? What opportunities could your strengths provide you; what about eliminating weaknesses? An opportunity is useless if you don’t act on it. That’s why it’s important to be proactive- otherwise you will miss any and all great things your business could be doing. Example: A home lender could look at falling interest rates as an opportunity to get more people to refinance.

Threats- Now its time for some serious thinking about potential events beyond your control that threaten the success of your business. First and foremost, what is the competition doing right now that scares you? Is there any legislation that could affect your business? What about tax laws? What if your biggest customer failed to pay his invoice or went out of business? Your company’s health depends on the financial health of your customers- its best to be informed and prepared. Example: A bar in a town that has legislation to revoke liquor licenses and become dry would most certainly see that as a threat.

Considerations:

When you are finished, draw some conclusions about what you need to do right away.
Determine how to eliminate your weaknesses and/or turn them into opportunities.
Use your strengths to create opportunities.
Create plans to ensure you are prepared when the threats actually happen.
Get thoughts from your lawyer, accountant, bookkeeper, and sales reps.
Perform the same analysis on your competitors.
Use this on each of your services or products, or each aspect of your business for more specific results and thus more useful conclusions.

This will be a pointless exercise if you don’t do anything with the information. Go out there and act on it. Good Luck!

Mike Freeman
I think doing a SWOT analysis is a great way to spend a Saturday.