Call in the... SWOT?

While small businesses have many tools at their disposal, one of the most important ones that I stress is a SWOT analysis. A SWOT analysis, when done in an unbiased manner, can reveal a lot of intimate information about the inner workings of a business and where it is to go. Allow me to first explain SWOT, then, in my next post, I will use a fictitious small ecommerce business, Ecommerce Inc., as our example.

What is SWOT? SWOT is an Acronym that means Strength.Weakness.Opportunity.Threat. What does each of those mean?

Strength: The points of your business that are strong. Do you have a very unique product? Do you have a lot of finances to fund your business? Do you have a really good marketing campaign? What differentiates you from your competition? Are you able to deliver worldwide while your competition can only fulfill the local demand? Or maybe your strength is that you ARE a small business and you can provide the personalized solution that your customers may require.

Weakness: This is where you must truly be honest with yourself. Are your prices to high? Do you use cheap product that people may not want? Do you offer a service that too many others offer? Is there TRULY a market for your product? Is your product the same old thing with a different company selling it? How is your exposure? Do people know your business exists? Do you have little operating finances? Do you adequately market your company? Do you provide a professional image? Would any person take your business seriously?

Opportunity: Where are your opportunities to make your business work? Is there a local demand for a product with scarce supply? Is it a new innovative product that people will want and the competition doesn't have (If competition exists.)? Were new laws just recently passed that makes your product or service legal that the competition, or potential competition, hasn't capitalized on?

Threat: Is there a snake in the grass? Are there any threats that could potentially harm or dismantle your business? Is a prohibition going into effect? Better not start a liquor store. Is there a huge company that could easily run you out of business (The proverbial Wal-Mart of your industry.)? Are you your threat? Do you have little operating capital? Will you be able to sustain your business for 6 months to a year without making a dime? Are you mentally capable of handling a year of being in business without making a dime (This is very common, especially in e-commerce)?