SWOT Analysis

A SWOT analysis is an analytical tool that can help you work through all the information you have about your business. "SWOT" stands for strengths, weaknesses, opportunities, and threats. This type of analysis represents an effort to examine the interaction between the particular characteristics of your business and the external marketplace in which you compete. Many of the conclusions that you draw as a result of the SWOT analysis will be incorporated into the market analysis and market strategy sections of the business plan.

The internal portion of a SWOT analysis looks at the individual strengths and weaknesses of your specific business. For example, you may have a favorable geographic location that makes you more accessible to customers than your competitors. You may have invested in state-of-the-art equipment that only recently became available. On the other hand, you may have problems managing your inventory, or you may have employees who just aren't up to the tasks that will be required to implement your plan.

Similarly, the external analysis looks at the opportunities presented by the marketplace and the threats that you face in your chosen market. To the extent that you can, be as accurate as possible in assessing the market environment in which you do business. Identify those areas in which your competitors pose a threat. The SWOT analysis is discussed more fully in the context of marketing.