A well established best practice in business planning is the SWOT analysis.  It stands for strengths, weaknesses, opportunities and threats, and is a relatively quick and fairly informative way to assess your business in the marketplace. 

Each industry will have its own unique factors, yet the general guidelines are the same.  How frequently a comapany needs to do a SWOT analysis depends on their industry and kind of business, for example a trendy or technologically based business may need frequent analysis.

A SWOT is best done by simply drawing one line down the center of a page or white board, and one line across the middle, to make four boxes.  Next, write the four headings on the top of each box, and then list the factors that fit under each heading.  A sample SWOT worksheet is included at the end of the article.

The analysis may include much of what you already know, but  since it organizes the information systematically it often brings out more opportunities.  It also keeps a record of the business in the market place at a given time, that may be conveniently referred back to and used as an aid to contrast and compare for future planning.

Example factors that may fit under strengths include technology, management, distribution, sales, profitability in a certain area, and capacity.  Other strengths may be proprietary assets such as patents, trademarks or copyrights.  Strong reputation or good brand name, premium pricing, and exclusive access to resources are other possible strengths.

Weaknesses may include high cost structure, lower than desired profitability in a certain area, and particular competitor activity.   The absence of some of the strengths previously listed may also be construed as weaknesses. 

Opportunities and threats may include loosening or strengthening conditions of the regulatory environment, trends, new products, and unfulfilled customer needs along with the competitors’ ability to meet those needs.

Four types of strategies that emerge from the analysis are those in which the company:

S-O:  pursues opportunities that correspond to its strengths
W-O: sets out to overcome weaknesses to pursue opportunities
S-T: uses its strengths to shield against threats
W-T: defends its weaknesses against threats

The company needs to go with the strategy that best fits its particular needs within its unique contextual situation, which may not be the big money-making route in the short run.  For example, the company may be launching a new product or service in an industry where there are established competitors that will likely respond strongly. The company may decide that it is in its best interests to prepare to defend its weaknesses against the particularly intense looming external threat.  An example could be a company deciding to take small steps to build consumer loyalty as they launch a new product into an already established market.

A SWOT is also a good way of getting the management team to work together to analyze the market place.  It gets everyone on the same page, so to speak. The one simple chart is a convenient and easy to use summary of the position of the business in the market place and promotes focused, informed planning.

It has proven to be an excellent basis for enabling the identification of possibilities for growth, areas to hold back or possibly even divest, and suitable trends, topics, and regulations to stay informed about.  

To learn more about the SWOT analysis, see Simplified Strategic Planning, A No-Nonsense Guide for Busy People Who Want Results Fast!  (Bradford et al., Chandler House Press, 1999).  Also, see e-books by Harvard Business School Press: SWOT I, Looking Outside for Threats and Opportunities, and SWOT II, Looking Inside for Weaknesses and Strengths.