Refine Your Strategic Plan with SWOT

With the year underway, your business probably has a strategic plan in place for the months ahead. Or maybe you’ve created a general outline but haven’t quite put the finishing touches on it yet. In either case, there’s a time-tested approach to refining your strategic plan that you should consider: a SWOT analysis. Let’s take a closer look at what each of the letters in that abbreviation stands for:

Strengths. A SWOT analysis starts by identifying your company’s core competencies and competitive advantages. These are how you can boost revenues and build value. Examples may include an easily identifiable brand, a loyal customer base or exceptional customer service.

Unearth the source of each strength. A loyal customer base, for instance, may be tied to a star employee or executive — say a CEO with a high regional profile and multitude of community contacts. In such a case, it’s important to consider what you’d do if that person suddenly left the business.

Weaknesses. Next the analysis looks at the opposite of strengths: potential risks to profitability and long-term viability. These might include high employee turnover, weak internal controls, unreliable quality, or a location that’s no longer advantageous.

You can evaluate weaknesses relative to your competitors as well. Let’s say metrics indicate customer recognition of your brand is increasing, but you’re still up against a name-brand competitor. Is that a battle you can win? Every business has its Achilles’ heel — some have several. Identify yours so you can correct them.

Opportunities. From here, a SWOT analysis looks externally at what’s happening in your industry, local economy or regulatory environment. Opportunities are favorable external conditions that could allow you to build your bottom line if your company acts on them before competitors do.

For example, imagine a transportation service that notices a growing demand for food deliveries in its operational area. The company could allocate vehicles and hire drivers to deliver food, thereby gaining an entirely new revenue stream.

Threats. The last step in the analysis is spotting unfavorable conditions that might prevent your business from achieving its goals. Threats might come from a decline in the economy, adverse technological changes, increased competition or tougher regulation.

Going back to our previous example, that transportation service would have to consider whether its technological infrastructure could support the rigorous demands of the app-based food-delivery industry. It would also need to assess the risk of regulatory challenges of engaging independent contractors to serve as drivers.

SWOT matrix
A SWOT matrix

Typically presented as a matrix, a SWOT analysis provides a logical framework for better understanding how your business runs and for improving (or formulating) a strategic plan for the year ahead. Our firm can help you gather and assess the financial data associated with the analysis.

Use Benchmarking to Swim with the Big Fish

You may keep a wary eye on your competitors, but sometimes it helps to look just a little bit deeper. Even if you’re a big fish in your pond, someone a little bigger may be swimming up just beneath you. Being successful means not just being aware of these competitors, but also knowing their approaches and results.

And that’s where benchmarking comes in. By comparing your company with the leading competition, you can identify weaknesses in your business processes, set goals to correct these problems, and keep a constant eye on how your company is doing. In short, benchmarking can help your company grow more successful.

Two basic methods

The two basic benchmarking methods are:

  1. Quantitative benchmarking:  This compares performance results in terms of key performance indicators (formulas or ratios) in areas such as production, marketing, sales, market share and overall financials.
  2. Qualitative benchmarking:  Here you compare operating practices — such as production techniques, quality of products or services, training methods, and morale — without regard to results.

You can break down each of these basic methods into more specific methods, defined by how the comparisons are made. For example, internal benchmarking compares similar operations and disseminates best practices within your organization, while competitive benchmarking compares processes and methods with those of your direct competitors.

Waters, familiar and new

The specifics of any benchmarking effort will very much depend on your company’s industry, size, and product or service selection, as well as the state of your current market. Nonetheless, by watching how others navigate the currents, you can learn to swim faster and more skillfully in familiar waters. And, as your success grows, you may even identify optimal opportunities to plunge into new bodies of water.

For more information on this topic, or other profit-enhancement ideas, please contact our firm. We would welcome the opportunity to help you benchmark your way to greater success.