What is a SWOT analysis in business?
A SWOT analysis is a strategic planning tool that helps businesses evaluate their current position and plan for the future. The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It’s a simple yet powerful framework that enables small businesses to understand what they’re doing well, where they can improve, and how to adapt to external changes.
Whether you’re launching a new venture or refining an existing strategy, conducting a SWOT analysis gives you a structured way to assess your business environment and supports informed decision-making.
Why is a SWOT analysis important?
A SWOT analysis for small businesses examines both internal and external factors:
- Internal factors include your strengths and weaknesses — areas you have direct control over, such as your products, operations, and team.
- External factors include opportunities and threats — things happening outside your business in the external environment, like market trends, regulations, or competitor moves.
By identifying these elements, you can develop a more informed business strategy:
- Leverage your company’s strengths to your advantage
- Improve on weaknesses
- Prepare for risks
- Spot areas for growth
- Create a focused action-plan
Ultimately, a business SWOT analysis helps you focus your energy and resources where they’ll have the most impact.
The 4 key elements of a SWOT analysis
Here’s a breakdown of the four essential categories in any SWOT analysis for strategic planning you could apply to your business:
1. Strengths (Internal)
A business’s strengths are a sign of its main advantages in the marketplace. Strengths can include a one-of-a-kind product, or excellent service and aftercare. These business strengths help maintain customer loyalty.
Examples of strengths:
- A loyal customer base
- A standout product or service
- Strong brand reputation
- Efficient internal processes
For example, a small retailer might thrive because of its knowledgeable staff and excellent aftercare service, which builds long-term loyalty.
2. Weaknesses (Internal)
These are the elements of a business that are not operating as efficiently as they could. Internal factors can hold them back from competing effectively. They might lack experience in design, or they might be using outdated systems that don’t talk to each other. A business’s weaknesses are a sign of what it needs to do better to operate at peak efficiency. For example, a company might be failing to generate repeat purchases due to poor after-sales communication and a sub-optimal customer journey. Improve this by increasing staff training, or by automating certain processes.
Examples of weaknesses:
- Outdated technology
- Skills gaps within the team
- Inefficient customer service
- Lack of online presence
Addressing weaknesses might involve upgrading systems, investing in training, or improving your website experience to reduce friction in the customer journey.
3. Opportunities (External)
Opportunities can present themselves at any time, and can sometimes come out of the blue. Small businesses can ensure they are ready to take advantage of them whenever they arise. Having identified their strengths and weaknesses through SWOT analysis, businesses can understand how to capitalise on opportunities – and where they need improvements.
Examples of opportunities:
- Changes in regulation or funding
- Local events or partnerships
- New technologies or market trends
Understanding your internal strengths and weaknesses makes it easier to spot and capitalise on these external chances when they arise.
4. Threats (External)
We live in an unpredictable world, and threats can come at any time. From changing regulations, rising materials costs and shifts in customer priorities. Threats are external factors, as they are things that businesses can’t influence. But businesses can try to future-proof themselves in key areas. Automating processes can make it easier to adapt to a changing climate. Making contingency plans using digital solutions can help operations to run smoothly in times of crisis.
Examples of threats:
- Rising supply chain costs
- New or aggressive competition
- Shifting customer behaviour
- Regulatory changes
A strong SWOT analysis can take your business planning to the next level.
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How to conduct a SWOT analysis for your business
A SWOT analysis is flexible and can be tailored to businesses of all shapes and sizes. Here’s how to get started:
1. Bring together a diverse team
Only talking to customer services or business analytics teams will give a skewed perspective. Involve people from across departments in the brainstorming process. This ensures you get a balanced perspective across operations, marketing, leadership, and beyond.
2. Gather ideas and input
Encourage open discussion and make it safe for people to share honest feedback. This can be done through group workshops or anonymous online tools. The goal is to uncover insights you might otherwise miss.
3. Identify themes and prioritise
Once you’ve collected input, group similar ideas and identify priority areas. Decide how detailed your analysis needs to be, set timelines, and assign ownership of the process.
4. Visualise the results
A simple four-quadrant grid (Strengths | Weaknesses | Opportunities | Threats) works well. It’s easy to understand and share across the business.
SWOT analysis example: Clara’s Cake Kitchen
To bring the concept to life, here’s a SWOT analysis example for a small business bakery:
| Strengths | Weaknesses |
| Location: Suburban location near a train station that draws in foot traffic during rush hour. Product: The owner produces high-quality artisanal cakes that customers come back for again and again. Marketing: The owner successfully uses social media channels to generate buzz about the business. | Unpredictable customer flow: Although the bakery is very busy at several points during the day, and at weekends, there are lots of quiet times during the day. No online ordering: The owner has not invested in click-and-collect or online services, as she doesn’t know if it will be worth it in the long run. Equipment: Some of the kitchen equipment is second-hand, and is prone to break, needing expensive repairs and causing delays to orders. |
| Opportunities | Threats |
Stimulus packages: The EU’s €2 trillion+ economic stimulus could help Clara’s Cake Kitchen to expand, upgrade its equipment and capitalise on new opportunities, potentially creating jobs in the process. External events: There are some new food festivals and markets starting up in the nearby city. Having a presence at these events could help to expand the brand’s reach. | Cost of raw materials: The cost of the raw materials that the owner uses to bake the cakes is likely to increase. It’s becoming harder to find some key ingredients without a long lead time. Competition: More local bakeries are offering custom cakes from home kitchens, without the same overheads. |
Key takeaway: Clara’s Cake Kitchen can build on its location and reputation to expand reach, upgrade equipment, and stay competitive — despite challenges like rising costs and new competitors.
What’s next for your small business?
In an unpredictable and fast-moving market, small businesses need tools that help them stay focused and adaptable. A SWOT analysis is one of those tools — helping you:
- Build on your strengths
- Improve operations
- Anticipate change
- Identify new opportunities
And once you’ve got clarity on where your business stands, the next step is choosing the right technology to support your goals.
Need help turning SWOT insights into an action plan?
Download our free eBook, The Entrepreneurs Guide to Finding the Right CRM, to see how small businesses can discover the digital platform that’s right for them.
