A SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats. This is a way to evaluate whether or not a new business or product will be successful. These four items are usually divided in to two groups: internal and external. An internal factor is something you can control. An external factor is something outside of your control. Additionally, these factors are considered positive or negative. A strength is an internal positive. A weakness is an internal negative. An opportunity is an external positive and a threat is an external negative.
Items appearing on a SWOT analysis will different for each business. Let's say I want to open a new restaurant. Here's my SWOT analysis.
Strengths (positive factors I can control): Let's say that I am a really good chef. Everyone I talk to loves my food. That's a strength. I also have a top-secret recipe for Lobster Crab Cakes. If it's a really good recipe, that would be a strength.
Weaknesses (negative factors I can control): I don't have any formal training as a chef or any training in how to run a business. I don't have any money to invest. I don't know anything about cooking steak. That may nor may not be a weakness, but since it could limit my business, I'll put it down here for now.
Opportunities (positive factors I cannot control): In my town, there aren't any seafood restaurants. This could be an opportunity to start a very successful business. I also know that there is a perfect building that can be used as a restaurant without too much construction. That could be an opportunity. I also have a brother that wants to invest $100,000 in a business.
Threats (negative factors I cannot control): Since I live in Ohio, getting fresh lobster for my recipe may be difficult. The lobster may not be fresh or I may run out too fast. People in my town may not like seafood. The owner of the building may not want to lease it to me. These are all threats.
Once you've identified all of your items and written them down, you can start to prepare strategies. Start with strengths and opportunities. Anything that is both a strength and an opportunity, may represent a good decision. The fact that there are no seafood restaurants in my town and I have a wonderful recipe for Lobster Crab Cakes may indicate that my business may be successful.
Next, take a look at strengths and threats. You may be able to overcome a threat if you have enough strengths. For example, what happens if people in your town don't like seafood? Well, if you are a good chef, you may be able to come up with other recipes that you customers may like. You may still have a good business idea, but you may have to adapt it a little bit to make it work.
Now look at weaknesses and opportunities. I don't have any money to invest in my own business, but my brother may want to become my partner and invest his $100,000 in my restaurant.
One thing about weaknesses. Sometimes you can overcome weaknesses by improving yourself. If I don't know anything about running a business, I can take classes at my local community college. That may help me be more successful.
Finally, look carefully at threats and weaknesses. If you have an item that presents both a threat and a weakness, you may want to look long and hard before you start your business. For example, what happens if I have problems with my seafood suppliers and I can never get fresh lobster. That may be a threat, but if I also don't know how to cook steak, I'm going to have a very serious problem. If the fish is bad and I can't cook anything else, I don't have much of a restaurant.
The goal of a SWOT analysis is to identify factors that may contribute to the success or failure of your business. You need to develop strategies to overcome both weaknesses and threats. For every item that appears on one of these two lists, come up with a "what if" plan in case that happens in your business. What if you can't get fresh fish? You need to come up with a different menu item. What if you don't know anything about cooking? You need to take classes before you open you restaurant or hire a chef to do all your cooking.
You should also have a plan to take advantage of your strengths and opportunities. Maybe your brother doesn't want to invest his money in a restaurant but wants to open a bar. Can you take advantage of the opportunity? What if you are a better photographer than you are a chef? Should you start a photography business instead?
Come up with a plan to take advantage of strengths and opportunities while minimizing threats and weaknesses. That's all that business planning really is.
Hope that helps a little.