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How to Create an Effective SWOT Analysis

By: Chris Barnes

 

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What is SWOT Analysis? It stands for Strengths, Weaknesses, Opportunities, and Threats. Many business plans will not include this kind of analysis, but that’s a mistake.

The idea behind a SWOT analysis is to show the difference between an ordinary business plan and a strategic business plan. A strategic plan will include a SWOT Analysis as one of its key ingredients. It is an opportunity to show that you have really researched what you’re doing, and understand all the angles confronting your business.
First you will want to highlight the real strengths of your company. Be sure to be specific and answer the right questions. Focus on your management team, explaining why your team has the knowledge and skills to execute the business plan and create a profitable business by taking advantage of the opportunities you see. Human capital is an essential strength for a successful business. Also look at what you anticipate as your sustainable competitive advantage, whether it is price, marketing, automation, or anything else.
Next up are your weaknesses. You should be candid here, addressing your weaknesses. You are establishing the reasons why you are raising money, because you want to address these risks, and it should be clear that the first thing you are going to do any investor’s money is to mitigate some of these risks.
Because of this, it’s important to be proactive about identifying and explaining those weaknesses. If you don’t admit or acknowledge your weaknesses, an investor is likely to assume that you don’t know about them. You need to be the expert on this, demonstrating that you do know what your weaknesses are.
After weaknesses, you want to know what your opportunities are. The data and research you used to analyze your market and come up with your target market will help you identify your opportunities. Simply telling the story of the market, where it is headed, and what specific customers are willing pay for this pain point will give the potential investor a clear picture of the opportunity.
Finally, there are threats. There are always going to be threats. There could be a market disaster, or there are the threats of a competitor or even a technological threat. You should acknowledge that you understand what is currently threatening your business ideas, as well as any anticipated future threats. It’s best to be upfront and acknowledge these threats so that you can strategically work around them and against them. If you don’t acknowledge these threats, the potential investor will think of you as very vulnerable—or just not having a deep knowledge or understanding of the market.
Published: December 17, 2012
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Chris Barnes

Chris Barnes is the Director of Business Development at Tarkenton Companies, with a sales and marketing background in a wide range of industries, from sports information to insurance marketing. A jack-of-all-trades, Chris has experience in many aspects of daily and strategic operations for small business.

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