SWOT analysis · Strategy · Small business
How to do a SWOT analysis, with a worked example
By T. Krause
A SWOT analysis helps when it starts from one decision and ends in actions with owners. Here is how to do one in about an hour, followed through a made-up coffee shop from twelve notes to three actions and one dropped plan.
To do a SWOT analysis, write down the decision it has to help with. List your strengths and weaknesses, which sit inside the business, and your opportunities and threats, which come from outside it. Cut every note that doesn't touch the decision, then pair notes across the lists until you have actions with owners. Allow about an hour with three to six people.
The pairing is what turns the lists into a plan. Wikipedia's article on SWOT analysis reports a 1997 critique by Terry Hill and Roy Westbrook, "SWOT Analysis: It's Time for a Product Recall", which complained that "no-one subsequently used the outputs" in the later stages of the strategy. So this guide spends more time on what happens after the four boxes than on the boxes themselves.
We make Prompt Board, and our SWOT analysis template opens on the first draft of the coffee shop you'll meet below. A sheet of paper folded into four works too.
Write the decision first
A SWOT about "our company" gives you a long list and no way to shorten it. A SWOT about one choice gives you a test for every note, because you can ask whether the note changes that choice.
Mind Tools' guide to SWOT says to use the analysis "before you decide on any new strategy", and to apply it at "a product or product-line level, rather than at the much vaguer whole-company level". We'd go one step further and write the choice itself at the top of the board:
- Too broad: "SWOT of our business"
- Better: "SWOT of our online shop"
- Best: "Should the online shop start selling in Austria next year?"
If nobody can name the decision, ask why the group is meeting. You may need a different exercise.
Inside or outside: one test
Wikipedia puts the usual split like this: "Strengths and weaknesses are usually considered internal, while opportunities and threats are usually considered external." The boxes are easy to define and harder to apply. Most arguments about a note go away with one question.
Would this still be true if your business didn't exist? If yes, it's outside, so it's an opportunity or a threat. If no, it's inside, so it's a strength or a weakness.
"A new office park opens in May" stays true without you. "We have 14 seats" doesn't. A rise in milk prices stays true, and how much of it you can absorb doesn't.
The same test catches a plan written down as an opportunity. "Open for brunch" isn't true or false about the outside world. It's something you could choose to do. The opportunity is the outside fact that makes it attractive, and the plan belongs in the last step.
One coffee shop, from draft to actions
Everything in this section is invented: the shop, its owner, her staff, the notes and the figures.
Ines owns a coffee shop on Lindenstrasse and has saved enough for one project this year. She could add seats, open on Sundays or start selling her beans in other shops. She writes that choice at the top of a board and sits down with her two baristas, Tom and Lea, before opening time.
The first draft
After ten silent minutes they have twelve notes. These are the twelve on the sample board in our template.
| Box | Notes |
|---|---|
| Strengths | Roast our own beans. Regulars know the staff. Corner spot near the tram. |
| Weaknesses | Only 14 seats. No card-only checkout. Closed on Sundays. |
| Opportunities | Office park opens in May. Beans in the supermarket. Weekend brunch. |
| Threats | Chain café across the road. Milk prices up 18%. Roadworks in summer. |
Three changes before any pairing
The draft is a fair first pass, and it has three problems.
- Two opportunities are plans. "Weekend brunch" and "Beans in the supermarket" are things Ines could do. She asks what outside fact sits behind each. No café nearby opens on Sundays, and the supermarket two streets away has started a shelf for local roasters. Those two facts replace the notes, and the plans come back later as possible actions.
- One note doesn't touch the decision. "No card-only checkout" has no bearing on seats, Sundays or beans, so it comes off the board.
- One note can't be checked. Mind Tools says to accept only "precise, verifiable statements". Tom looks up the city's notice, and "Roadworks in summer" becomes "Tram stop closed June to August".
That leaves eleven notes, and every one of them bears on what Ines spends her money on.
Four kinds of pair
Now the lists work against each other. In 1982 Heinz Weihrich published a matrix he called TOWS, which, as Wikipedia describes it, pairs the factor types to give four kinds of strategy. Ines goes through each kind once.
| Pair | Notes | Possible action |
|---|---|---|
| Strength with opportunity | Corner spot near the tram, office park opens in May | Pre-ordered takeaway for office staff, collected at the corner door |
| Strength with threat | Roast our own beans, chain café across the road | Sell bags of the house roast at the counter, which the chain doesn't offer |
| Weakness with opportunity | Closed on Sundays, no café nearby opens on Sundays | Open on four Sundays as a trial and count the customers |
| Weakness with threat | Only 14 seats, chain café across the road | Don't buy seats. The chain will always have more |
The last row is the one she didn't expect. One of her three options has gone.
What Ines decides
Four possible actions are still more than one small shop can start at once, so each one gets the same two questions. Does it answer the decision? Does the date matter? The office park opens in May and its staff can walk over, so pre-orders come first. The Sunday trial needs footfall, and the tram stop is closed all summer, so it waits. The supermarket stays on the board, for Ines to approach once the counter bags have shown whether people buy them.
| Action | Owner | By when |
|---|---|---|
| Pre-orders for the office park | Ines | Live by 1 May |
| Bags of house roast at the counter | Tom | End of March |
| Four-Sunday trial, then decide | Lea | Starts in September |
Twelve notes became three actions and one dropped plan. The extra seats would have looked like the obvious purchase on the first draft.
An hour, in order
The timings are our suggestion. Shift them to suit your group, and protect the last two rows.
| Minutes | What happens |
|---|---|
| 5 | Agree the decision and write it at the top |
| 10 | Everyone writes notes in silence, in all four boxes |
| 15 | Read the notes out, merge duplicates, move anything on the wrong side of the inside or outside test |
| 10 | Cut what doesn't touch the decision and make the rest checkable |
| 15 | Work through the four kinds of pair and write one possible action for each pair worth having |
| 5 | Pick the actions you will do, each with one owner and a date |
Writing in silence first matters most when the boss is in the room. Once a senior person has said what the main weakness is, it's harder for anyone to add a different one.
Where a SWOT runs out
A SWOT gives every note the same size. "Chain café across the road" and "Milk prices up 18%" are one sticky each, though one may cost far more than the other. You have to do the weighing yourself, which is why the action step asks about dates and the decision.
It's also only as good as what the people in the room know. The outside boxes can come out thin, because the people in the room may know their own business better than their market. If yours do, spend twenty minutes on a PESTLE analysis first, which asks about political, economic, social, technological, legal and environmental factors in turn. If one rival dominates the Threats box, a competitor analysis tells you more than one sticky can.
Where SWOT came from
You may read that SWOT came from Harvard Business School. Puyt, Lie and Wilderom's 2023 paper The origins of SWOT analysis in Long Range Planning disagrees, and Wikipedia reports that the authors call that claim an "academic urban legend".
Their reconstruction starts with a process called SOFT. Managers wrote down 8 to 10 key planning issues and graded each one, "with evidence", as safeguarding the Satisfactory, opening Opportunities, fixing Faults or thwarting Threats. The label was "later merely relabeled" to SWOT. An earlier conference paper by the same group names Robert Franklin Stewart of the Stanford Research Institute, who published the SOFT approach in 1965, and dates the change to SWOT to 1967.
Notice what that original version asked for. Managers supplied evidence for each issue, and they fed proposals into the company's planning. The four words survived better than those two habits, and those are the habits this guide tries to restore.
Frequently asked questions
What does SWOT stand for?
Strengths, weaknesses, opportunities and threats. Strengths and weaknesses are usually about your own business, and opportunities and threats usually come from outside it.
How many notes should each box have?
There is no fixed number. The original process asked each manager for 8 to 10 issues in total, which is a useful guide to scale. Keep only the notes that bear on the decision you wrote at the top.
What is the difference between SWOT and TOWS?
A SWOT lists the four kinds of factor. TOWS, the matrix Heinz Weihrich introduced in 1982, pairs them to produce strategies, such as using a strength to take an opportunity. The pairing step in this guide is the TOWS idea in its simplest form.
Can you do a SWOT analysis on yourself?
Yes, and the method is the same. Start from one decision, such as whether to apply for a particular job. Your skills and habits go inside, and the job market and your employer's plans go outside. Ask someone who knows your work to add notes, because the Weaknesses box is hard to fill alone.
Should you fill in the outside boxes first?
You can. Wikipedia notes that some authors recommend assessing external factors before internal ones. It matters less than writing the decision first, because the decision is what tells you which notes to keep.
Do your own
Write your decision at the top and give everyone ten quiet minutes. Open the SWOT analysis template to start from the coffee shop's first draft, replace the notes with your own, and share the board link with the people who should add to it. Before the session ends, make sure every action has one name and one date beside it.