OK, you’re in business for yourself, but you are not sure if you have this monster mastered. The business seems to have a life of its own, and lately it seems to be running you. Really, all you wanted to do is what you love! Remember, you had a dream - a dream of helping other people get healthy, fit and happy and share your own passion. Now you find yourself burdened with little time for yourself or your loved ones, a financial overhead and a tighter market. This isn’t what you planned for. Oops, I guess there is more to business planning than you thought? What do you need to do? Where do you start?
One of the components to business planning is the strategic plan. While there is a lot of overlap between strategic planning and business planning, they are not usually the same thing. The outputs are different because the plans are utilized differently.
Strategic planning is a systematic way of planning for the future, but it is based on strategic thinking it's a particular way of thinking about your business that sometimes requires a "mental shift.” To plan strategically, it is important to cultivate a mindset or a way of thinking about a business or organization. Often this requires
- Focusing on the bigger picture, the long term objectives (five, ten, twenty, fifty, or more years)
- Engaging systems thinking
- Identifying leverage (how can we use what we have to maximum advantage) is both analytical and creative processes
- Examining assumptions, "the way things have been done," and taking a critical approach that questions what “we believe.”
- Taking into account that our thinking is going to be partly based on inaccurate information and/or conclusions because of unforeseen changes
So how exactly do I apply this kind of thinking? Where do I start?
For some, upgrading critical thinking skills is a must. The process of strategic planning integrates all the parts of effective strategic thinking into a results oriented plan. Whether you’ve been in business for a number of years, just started your business, or thinking about starting one, it is a good idea when it comes to any kind of strategic planning to do a SWOT analysis. A SWOT what? That’s right SWOT: Strengths, Weaknesses, Opportunities and Threats. The acronym helps us to use business logic to sort through all of the influential (known and perhaps hidden) issues relating to your business.
Before we get started though, let’s explore the components that you are going to look at and measure as you apply the analysis. Let’s get clear on the facts and look at all the facets of your business. We’ll want to conduct a comprehensive business analysis to begin the strategic planning process.
Before you determine where you want to go,
You need to determine where you are!
Conducting a SWOT analysis to objectively evaluate your current business at any stage means putting some attention on areas that you might not have actually given much attention or time to. A SWOT analysis recognizes that there are both internal and external factors that can affect the ability of the business to be successful. Internal factors are those that can be addressed and that you have control over. This would include conditions that might be addressed by operating procedures and/or management decisions. When I work with business owners and leaders, we really take a critical look at those personal internal factors.
External factors are those over which you have little influence, or are not in a position to change, but which have a direct influence on the success of your business. It is important for you take a look at the external factors and driving forces that may be affecting your business, like the economy, your local business environment, as well as political or social factors.
Whether you are identifying critical success factors as part of a SWOT analysis, here are a few areas to look at:
- Your Knowledge and Expertise
- Processes: procedures and policies
- Products or Services
- Relationships: with customers, vendors, colleagues and partners, your community
- Intellectual Property
- Assets or resources
Remember you are looking for strengths within these areas that you can leverage into a competitive advantage that can be sustained over time. You can use these same areas in a "weaknesses" analysis, too.
The SWOT Matrix Explained
The SWOT matrix is usually segmented into four distinct quadrants (see the end of this article for a SWOT matrix); you use each of the four quadrants as a guide to analyze where you are now, where you want to be, and then to make an action plan to get there. Strengths and weaknesses are internal factors that affect your business. Opportunities and threats are the external factors.
Regardless of whether you are future planning for specific products and services, work, personal or any other area, the SWOT analysis process is the same. If you are inclined, go ahead and use the Mind-Map method to do this exercise. To begin a basic SWOT analysis you will create a four-cell grid or four lists, one for each SWOT components like the one shown at the end of this article. Now just fill in each quadrant accordingly.
Let's review the steps:
Step 1 – In the here and now…
List all strengths that exist now. Then in turn, list all weaknesses that exist now. Be realistic don’t be modest!
Step 2 – What might be…
List all opportunities that exist in the future. Opportunities are potential future strengths. Then in turn, list all threats that exist in the future. Threats are potential future weaknesses.
Step 3 – Plan of action…
Review your SWOT matrix with a view to creating an action plan to address each of the four areas.
Strengths are those things that make your business stronger. Strengths might include: a product or service that sells well; an established customer base; a good reputation in the marketplace; a good track history; a high traffic location; strong management; qualified employees; ownership of patents and trademarks; and any other aspect that adds value to your business and makes it stand out from the competition. Strengths should always be gauged by the strengths of your competitors. If your business does something well just to keep up with the competition, it is not a just a strength. It is a necessity.
Weaknesses are the antitheses of strengths. Weaknesses are those areas in which your company does not perform well or could stand improvement. These are the areas of your business that make you susceptible to negative market forces and aggressive competitors. Weaknesses might include: poor management; employee problems; lack of marketing and sales expertise; lack of capital; bad location; poor products or services; damaged reputation; or just not having a working plan in place.
Opportunities are those things that have the potential to make your business stronger, more enduring, and more profitable. Opportunities might include: new markets becoming available or old markets that are expanding; possible mergers, acquisitions, or strategic alliances; a competitor going out of business or leaving the marketplace, making their customers open to you; and the potential availability of a desired employee.
Threats are those things that have the potential to adversely affect your business. Threats might include: changing marketplace conditions; rising company debt; cash flow problems; a strong competitor entering your market; competitors with lower prices; possible laws or taxes that may negatively impact your profits; and strategic partners going out of business.
Once you have filled in all four quadrants, you can use this information to create strategies that will help you make the best of the information learned. For example, once you have identified your strengths you can better use them to determine which opportunities to pursue and to help reduce your vulnerability to potential threats.
Now that you know your weaknesses you can apply some good strategic thinking to formulate strategies to overcome them so you can pursue opportunities. Knowing your weaknesses can also help you establish a defensive plan to prevent your weaknesses from making your business particularly susceptible to external threats.
Whether you do the SWOT Analysis or on your own or use an outside source like a consultant, it is important to remember that a SWOT Analysis is a subjective analysis tool that can be strongly influenced by the opinions of those performing the analysis. For small businesses especially, it is imperative to keep the analysis simple and to the point. Don't overanalyze and don't immediately take the results as gospel. It is also a good idea to run this by a business savvy professional who is objective.
- Strengths need to be maintained, built upon or leveraged.
- Weaknesses need to be remedied or stopped.
- Opportunities need to be prioritized and optimized.
- Threats need to be countered or minimized.
The completion of this process is reason for celebration, so be sure to reward or express appreciation to each of the team members for their participation in this process. Once you identify these components, you can then work to develop a strategy so that your business is in the best position to benefit from or overcome these issues. Remember that a major business function is to create a sustainable (something that works long-term) means of creating revenue so you can pay the bills and really plan to live the life you dreamed!