When you’re considering starting your own business, one of the most important first steps is considering your interests, passions, and experiences. The next step is to evaluate whether or not those indicators point to a viable, profitable business idea. There are countless ideas out there; some win, others tank. Running yourself, your company, or your ideas through a basic SWOT analysis can help you understand where the biggest potential is and how to take advantage of it.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. The first two represent internal factors for you or your business. The last two, external factors in the market and economy. Knowing how they all fit together can save you from spinning your wheels in a business that has little potential. Let’s take it step by step:
Strengths – What are you good at? Better yet, what are you the best at or at least better than most. Take a closer look at the interests, passions, and experiences and look for the ones that make you stand out from the crowd.
Weaknesses – Being honest with yourself about weaknesses doesn’t always come naturally but it can be a lot less painful than fooling yourself. If you start a business venture that relies heavily on something you suck at, you may be in for a long, painful learning curve that ends in only average results. You gotta know when to hold ‘em and know when to fold ‘em so be real with yourself about areas that aren’t your strong suit.
Opportunities – The environment surrounding your new business – your market – is where you look for opportunities. Business is all about solving people’s problems and relieving their pain points. What can you see that can be solved using your strengths? What problems are faced by enough people to constitute a market that could support your business. I was once involved in an after-school program for students. Opportunity came in the form of many families who needed something for the kids to do during those hours and wanted them to learn and build character. (Caution: there was a threat there too)
Threats – External threats can come from many places. Recognizing as many as possible in advance puts you in a much better position to protect yourself from them or avoid the market entirely. Competitors are an obvious threat. Certain types of businesses may be threatened by government regulations or policies that make the business too expensive to be feasible. Changes in technology that make a business model obsolete are also a type of external threat. In the after-school program mentioned above, we had a great success for the first two semesters. Things were off to a great start and growing fast. Then the school district launched its own program, very (very) similar to ours. The presence of a competitor who charged less, had free use of a larger facility, and didn’t require any transportation changed everything.
As I mentioned earlier, SWOT analysis can be used to evaluate your overall business idea, one product or service, or just taking your product into a new market. Taking the time to evaluate these four factors can make a world of difference in how you plan and execute your successful business.