Ced earned a bachelor's degree in communication studies in 1999. His interests include history, traveling, and mythology.
SWOT Analysis in Entrepreneurship
If you're considering starting your own business, SWOT analysis is an important part of the process—and your success as an entrepreneur. This SWOT example specifically examines entrepreneurship, and it should help get you started.
Self-Assessment Is Key
This example features all the usual comparisons of Strengths, Weaknesses, Opportunities, and Threats—but instead of examining a specific business idea, this example assesses both the business plan and yourself.
Apart from competitive advantages, do you also have the personal qualities required for entrepreneurial success? To help you stay objective, the details in this example are phrased as questions—but you must honestly answer each question. The more genuine your answer, the more helpful the SWOT analysis is.
What Is a SWOT Analysis?
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Correspondingly, a SWOT analysis is an objective assessment of a business idea, plan, or operation. Some businesspeople also use this technique to assess or predict competition.
Most analyses begin by drawing up a matrix comprising four squares too, one that's similar to the diagram below. Any such diagram, however, is but a visual template. What's far more important is to understand what each area represents:
- Strengths: Internal advantages that enhance operations.
- Weaknesses: Internal disadvantages that compromise, or hampers, operations.
- Opportunities: External factors or situations that are beneficial.
- Threats: External threats or situations that are detrimental.
- Does your intended startup enjoy a competitive advantage over industry competitors?
- If you have an advantage, is it sustainable in the long run?
- Do you have the relevant knowledge or skills necessary for managing your intended startup? (To begin with, do you know what these skills are?)
- Do you have the funds, or the access to funds, to weather the initial low-revenue period of all new businesses?
- Are you able to attract ideal manpower?
- Do you have competitive access to external parties necessary for your startup to operate i.e. suppliers?
- Do you have access to technology that would enhance your operations?
- Do you have access to reliable AND continuous data inflow, i.e., information necessary for your business to develop? For example, customer demographics, industry trends, etc.
- Can you benefit from the typical advantages of new companies? For example, flexibility?
- Do you have the contacts needed to fuel AND grow your business?
- What personal trait of yours would enhance your startup?
Summary: Strengths are the weapons you have on hand to sharpen your business edge. They are also the weapons you are able to utilize.
Also, potential advantages arising from favorable circumstances in the future are not strengths. These are vague opportunities at best. It is crucial to acknowledge the difference.
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- If you are operating on borrowed funds, what burdens would those impose on your startup?
- Are you affected by any industrial barriers of entry? Legitimately, or not?
- What competitive disadvantages would you suffer from?
- Is your business model aligned with the current economic or industry climate?
- Do you need to rely on others to run your startup? Be it technically, for marketing, or for daily operations?
- Are you able to secure appropriate manpower quickly and cost-effectively?
- Are you able to efficiently manage your costs of sale?
- Are you handicapped by the disadvantages of new companies? For example, lack of portfolio?
- Are you personally able to devote the kind of hours and attention necessary to sustain a startup for at least three years?
- Are you ready to forgo your personal pastimes, passions, and recreations, to devote your best efforts to your startup?
- Do you have existing financial obligations that would weaken your ability to weather a period of low or no income?
- What personal trait of yours would make you an unappealing leader?
- Is your health able to weather the stress of being the owner of a struggling startup?
Summary: The above questions examine the inherent shortcomings of your business model, and of yourself.
Realistically, it is also impossible to be completely free of weaknesses—I am highly skeptical of plans that have a "remedy" for every weakness. My personal opinion is therefore that the crux should be on acknowledging weaknesses and knowing how to contain the damage. Obviously, downplaying weaknesses helps in no way at all.
- What economic or industry trends could you benefit from?
- Are there any existing industry schemes, grants, or loans that would be of help?
- What sort of synergy could you achieve with other companies? Both competitors and suppliers?
- What developing social trends could your intended business benefit from?
- Are there any manpower talents or technological benefits that you could utilize?
- Are there any significant reasons for your targeted clientele to switch to using you?
- Are there any industry gaps to fill?
- Are there other parties willing to partner with or invest in your intended business?
- Do you possess any personal credentials or experience that might attract industry cooperation?
- Are your existing social circles beneficial to your aspirations to be an entrepreneur? As in, friends who would readily buy from you?
- Is the current socio-political environment beneficial to your aspirations to be an entrepreneur?
Summary: Opportunities are the empowerments offered to you by the environment you choose to operate in.
By that definition itself, it is implied that opportunities are neutral and available to everybody. Because of that, it is detrimental to consider opportunities as strengths; just because the pie is there doesn't mean you will eat it or get to eat it alone. This brutal reality is often overlooked in SWOT analyses.
- What industry regulations would negatively affect your startup?
- Is there any public or industry perception that might hamper your overall growth?
- How would competitors retaliate?
- How easy would it be to poach your staff?
- Are there any projected industry downturns that could severely impact you?
- Would any form of technological development, or advancement, severely impact you?
- Do you have personal commitments that might compete with your startup for your time and attention?
- Are your existing social circles detrimental to your aspirations to be an entrepreneur? For example, friends already operating a similar setup.
- Is your current socio-political environment detrimental to your aspirations to be an entrepreneur?
Summary: Threats are the dangers arising from the environment you choose to operate in. Threats are also very much outside of anybody's control, and so you shouldn't lose too much sleep over them.
The important thing is thus to anticipate them and to have strategies on hand to limit harm when they hit hard.
Important Notes About This Example
- I've merged two SWOT analyses here—one that examines the overall business idea and another one that reviews the potential for entrepreneurship.
- I acknowledge that doing so possibly muddles things. However, most if not all startups readily blur the line between work life and personal life in the early days. I've also seen way too many new companies fold because of some unconsidered personal traits of the owner. This is despite the startup having strong market advantages.
- An often-overlooked flaw of SWOT analysis is also the inclination toward numerical advantage. For example, if you have ten strengths but only five weaknesses, does it mean that your analysis is skewed? Or does it mean that your plan is a winner? There is no clear answer, and I can only caution you not to be misled in this way.
- For this example, or template, I aim to be as expansive as possible. There is, however, no stipulation that all questions must be answered. You also shouldn't be too concerned about having too many strengths or weaknesses, or otherwise. The important thing is to understand the implications.
- Lastly, and I admit I was once guilty of this myself, the inability to differentiate between Strengths and Opportunities, and between Weaknesses and Threats, is a huge challenge in SWOT analyses. To repeat, Ss and Ts, i.e., the upper quadrants refer to the "Self," these being the plan or the idea in the discussion. The lower quadrants refer to external factors. In other words, the lower quadrants are also the factors that an entrepreneur has little or no influence over.
© 2016 Ced Yong