Part of preparing a well laid out business plan is to understand how to do a SWOT analysis. This method of business analysis does not have to be as complex as it may seem. If you understand the basics behind the context, you will learn how to do a SWOT analysis efficiently. The acronym SWOT basically stands for Strengths, Weaknesses, Opportunities, and Threats. Where strengths and weaknesses refer to that which are internal issues for your company, your opportunities and threats represent external issues.

When learning how to do a SWOT analysis, the purpose is generally for strategic planning. Hence, when assessing any strategy there are 3 key questions that you are looking to answer.

1. Where are you now?
2. Where do you want to be in the future?
3. How will you get there?

A SWOT analysis will help you to clearly think about the positives and negatives of your business, both for the present and for the future. In effect, you will come up with the answers for the first two questions and then plan implementation steps to answer the final question.

Strengths

Assessing your company’s strengths will focus on what you currently do well from within. By identifying the management decisions and processes that you currently have in place, you can identify the things you will need to continue to maintain, leverage, and build upon moving forward. For example, your company may be recognized as having outstanding customer service, like that of Zappos.com. It would only make sense to maintain the culture you’ve created with your customers and continue to find ways of improving.

Weaknesses

It is important to be honest with yourself when assessing your weaknesses. None of us are perfect, and neither are the businesses we operate. Only by identifying the areas where your company and team fall short can you prepare to make the appropriate changes. Similar to your strengths, you will want to assess the current situation here. Some examples may be poor teamwork between employees, or a lack in effective management. In order to move ahead, these examples will need course correction and a plan to implement changes.

Opportunities

Now that you’ve assessed your current circumstances, it’s time to take a look at the opportunities that lay in front of you. Opportunities represent the areas of strength that you have yet to take on. It does not involve a weakness that needs to be corrected; rather it is a point of leverage you have not yet investigated and is outside of your current sphere of influence. The point of looking at these opportunities is to develop an implementation strategy for venturing into new territory or examine ways to expand the current business. For example, you may identify a new supplier for your product which could help to control your costs. Or you may explore expanding your product line into a niche you are currently not serving, yet still fits well with your brand.

Threats

Similar to investigating your opportunities, there will be external influences which can come up and threaten the growth of your company. None of us can tell the future, however your best defense is to be as prepared as you possibly can. You’ve set your goals with the intention of achieving them, and putting yourself in the action mode. Being adaptable and ready for change is a large part of good leadership, so anticipating scenarios which may require you to change direction will assist you and your associates in making swift and concrete decisions. When considering your potential threats think of the conditions where a weakness may develop. Some external threats could take the form of volatile market conditions, or even good market conditions which encourage more competitors to get involved in your market space. Looking ahead will give you insight on how you can mitigate losses or the formation of a weakness.

No two people think exactly the same, so it is also a good idea to have your key decision makers get involved in the SWOT analysis. Having multiple heads thinking about all areas of the analysis will encourage a robust list to consider. If your team does not know how to do a SWOT analysis, then it’s a good idea to share your knowledge and experience with them. Where you may want to conduct a SWOT dealing with the larger picture of your organization, your managers may have smaller issues to assess within their individual departments. Of course, all of the analysis is worthless without the last step. Once you have brainstormed all areas of your SWOT, the most important step you can take is to come up with a plan based on the information at hand. Strive to improve your areas of strength and explore your opportunities. Then manage your weaknesses and anticipate your threats. For each of the four strategies, identify ten clear actionable steps for implementing those strategies.