SWOT's the Matter with Your Business Planning
How to use the SWOT Analysis to prepare for business planning
What’s one thing the best real estate agents, companies and associations have in common? They all have written business plans. Some are short, some are long. But all of them spell out in clear, concise terms what needs to get done to delight customers, grow business, and create the success everyone deserves.
And what’s the one thing all great business plans have in common? They focus on strengths and weaknesses that can be used to pursue opportunities for growth. Sound familiar? If not, then let’s find out “SWOT’s the matter” with the best business planning techniques!
Seven Things All Plans Must Include
Effective business plans have many parts, so let’s begin with the end in mind. Whether you’re planning for one person or a massive organization, every plan must cover these seven things:
A clear, short list of values to guide the people who will implement the plan
A description of the vision the plan will achieve, answering “Who/what will we look like when we achieve success?”
A situational analysis that describes the conditions in which the person or organization operates, including LOTS OF DATA.
A set of potential and specific growth priorities to be pursued
An action plan with the steps to be taken, timeline, and resources needed.
A set of performance indicators to be measured and used to adjust performance
A plan to communicate and celebrate progress, especially at the finish line
That’s a lot of pieces, and a good plan will take time to gather, analyze and organize them. But without these seven pieces, you won’t create the clarity and commitment necessary to get the job done.
In this post, I’ll cover one piece - the situational analysis - by explaining the most powerful tool I’ve used for thirty years with clients: The SWOT Analysis.
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What’s a SWOT?
It’s one of the most effective and versatile situational analysis tools in business. SWOT is an acronym that stands for:
Strengths
Weaknesses
Opportunities
Threats
We use these four areas to “collect data and analyze” about a person or organization and understand their “current performance situation.” SWOT is a framework for collecting intuition, insights and evidence about internal abilities and extreme; markets. In a classic SWOT analysis, you divide a piece of paper into four quadrants (or flip chart or spreadsheet) and collect responses in each quadrant, like this:
Internal and External Insights
As you can see from the diagram, a SWOT collects input from two areas: internal and external circumstances.
It’s important to recognize that Strengths and Weaknesses are about the person or organization doing the planning. They’re internal because they correspond to actions, resources, tools, or traits you have complete control over. Opportunities and threats, on the other hand, are external factors. They’re factors happening “in the marketplace, out there, beyond your door” that you potentially pursue, leverage, capture, or if necessary, avoid.
How to perform a SWOT analysis
When conducting your analysis, here are the basic steps:
First, complete a round of “immediate responses” for each quadrant. Go through each section and get your immediate thoughts on paper. List whatever comes to mind from your direct knowledge of the person, firm and marketplace. Don’t worry about deep details. Get a “dump” of information onto paper (or your spreadsheet).
Next, go back and conduct a “proof round.” ADD DATA to each statement you wrote in the quadrants. For example, if you said, “One of our strengths is our salesforce,” during the “proof round” you’ll answer the question How can you prove it?
Look at company reports, financial data, productivity metrics, and any other data that can quantify your initial insights. Rewrite or add to each statement, something like, “Our salespeople sell 15% more units than our nearest competitor,” or “We achieve 20% higher commissions than industry averages,” or “We held 10% of market share for the last three years.”
The proof round adds measurable, objective data to as many claims as possible.For every strength, identify some measurable metric to “prove it.”
For every weakness, quantify the degree, amount or extent to which something undermines results, inhibits efficiency, or lowers profit/production
For every opportunity, find industry data, consumer research, productivity metrics, or insights. You might need to talk to subject matter experts, or generate new reports, or purchase data to quantify the opportunity you “see” in the marketplace.
For example, if you wrote “There are more first-time buyers in the market” under Opportunities, during the proof round, you would add data that describes how many more first-time buyers are in the market, what the annual trend is like, what their sales volume is worth, and so on. Quantify each claim into a measurable statement with data/proof.Get more input. The first round of SWOT might be done by you alone, but a good analysis enlists multiple perspectives. Gather your people and have them do a SWOT round with you (or just do one quadrant). Don’t tell them your initial answers. Let them provide fresh perspectives; you can merge them later. Don’t worry about data for their input, either. You can go back later if it seems important.
If you’re working on a larger organization, expand further, with a round of trusted colleagues, partners, or even clients. More input broadens your data points and reveals greater insights.
Take your time. Sometimes it takes two, three, or four rounds to get a deep enough analysis to proceed to planning. Remember, the SWOT is just the analysis phase. Take your time until you have enough data and insights to begin seeing informed connections of possible growth.
Remember: Prescription before diagnosis is malpractice! So don’t come up with ideas for what you “should do” until you’re sure you have the best diagnosis of capabilities and opportunities.
Seeing Connections in Your SWOT Analysis
After you conduct a few rounds of data and analysis, you can take the next step identifying “connections” between the quadrants. These connections suggest potential growth opportunities. You may not like them all, or choose them all, but the data needs to lead you (don’t reverse engineer!)
Here are some important steps in generating potential growth priorities:
Connect the dots between the MOST IMPORTANT quadrants by asking:
Which opportunities could we pursue given our strengths?
Which strengths can we easily turn up the volume/use more?
Which opportunities would minimize weaknesses if we pursued them?
Which opportunities give us growth in the shortest amount of time?
Aim to generate 7-10 potential priorities. You won’t do them all, but find as many as possible.
Don’t judge or prequalify any potential opportunities. Let the data tell you what you see before you make any decisions.
Don’t reverse engineer by taking “pre-conceived notions” of what you should do and back them into the SWOT analysis.
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What happens after your SWOT?
After you generate a set of 7-10 potential growth opportunities, you will evaluate them and decide which ones are the best for your next chapter of growth. Most individuals and firms pursue 3-5 priorities at most during any given plan, If you get some done, you can add more later. However successfully pursuing more than a handful of priorities is unlikely to be effective, even for the well-resourced firms.
Once you identify the best priorities for you, you’ll develop an action plan, budget, timeline and KPIs to drive results. I’ve put together a quick checklist below for that, as well as the most important strategic growth formula to focus your efforts and achieve any plan.
How to Write Powerful Growth Priorities and Turn them into Action plans
Here’s the final piece of the puzzle. With your analysis and list of potential growth priorities, it’s time to get them into shape to evaluate, choose and use to design a business plan. To do that, follow these steps: