Q: A key investor in my business has suggested that I hire a consultant to do a SWOT Analysis to help plan for future. I try not to argue with my investors, but I'm not so sure I need to have this done. What do you think? -- Laurie B.
A: Laurie, before you call in SWOT team to deal with this investor (sorry, couldn't resist that one), let me tell you exactly what a SWOT Analysis is and how it can not only help you plan for future, but get a gauge of how your business is doing today.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. A SWOT Analysis is a written exercise that can help you clarify and focus on specifics that make up four areas that most affect your business. The purpose of a SWOT Analysis is to help you build on your business' strengths, minimize and correct weaknesses, and take greatest possible advantage of potential opportunities while formulating a plan to deal with potential threats.
Think of a SWOT Analysis as a checkup for your business. By spending a little time examining internal and external factors that affect your business' health you can better gauge present state of your business and identify things that may adversely affect your business' health in future.
It's a good idea for every business to perform a SWOT Analysis on occasion, especially if you are doing strategic planning, contemplating a change in direction or formulating new strategies for distribution, marketing and sales.
Should you hire a consultant to perform a SWOT Analysis for you? Speaking as a consultant who has been paid to perform SWOT Analyses for companies in past, I can honestly (and yes, without bias) say that depends on three factors: (1) size of your company; (2) how in-depth SWOT Analysis needs to be; and (3) how much of your investor's money you'd like to spend.
Larger corporations are most likely to hire professional firms to perform such analyses, primarily due to complex nature of big business. Some corporate SWOT Analyses can run on for several hundred pages. Typically, a consultant will charge up to $100 or more per hour to perform a detailed corporate SWOT Analysis and most large companies consider this money well spent as a good SWOT Analysis can reveal otherwise ignored factors that might increase company's bottom line or help avert future losses.
For a smaller business, however, a professional SWOT Analysis can be an exercise in overkill. For your money you will get an impressive, detailed report that will make for great show at your next investor or board meeting and a wonderfully expensive door stop rest of time. I don't mean to belittle value of a professional SWOT Analysis for small businesses. It's just that smaller companies can learn as much from their own efforts as that of an expensive consultant.
You can perform a simple SWOT Analysis with a #2 pencil and a fast food napkin, but to get a truly accurate view of your company's SWOT factor I suggest you do things a bit more formally (and without aid of condiments). I recommend that you involve all key players in your business, including management, employees, your attorney, accountant, even your spouse. My wife often gives me insights into my business just from listening to me talk at dinner. Sometimes we business owners and managers can't see forest for trees. It's good to have someone else point out things we might miss.
Here's how to perform a simple SWOT Analysis. On a piece of paper draw a vertical line down center. Now draw a horizontal line through center of page. The paper is now divided into four quadrants. In first quadrant (upper left) write word "Strengths." In quadrant next to that write "Weaknesses." Drop down to second tier and label first quadrant (lower left) "Opportunities" and remaining quadrant "Threats."