SWOT your business

Karl Palachuk

I’m sure you’ve heard of a SWOT analysis. But have you done one on your own business? You can, and you should.

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It’s a simple concept, but you should take it very seriously. If you were to hire a business coach, one of the first tasks you’d be given is a SWOT analysis. In addition, many of the peer groups out there perform SWOT analyses on their members.

Let’s take a look at what’s involved in a SWOT. After all, the end of one year and the beginning of another is a perfect time to be thinking about fine-tuning your business.

Note: Please don’t go through this exercise only “in your head” instead of actually executing a SWOT. It’s too easy to tick off strengths and weaknesses without taking them seriously. Take the time to go through this exercise and you won’t need a coach to go through it with you.

A good SWOT will include three primary components:

1) An assessment of the owner’s goals, mission, and vision

2) A financial profile of your business

3) An operational overview of your organization

Those might seem totally unrelated to each other, but they are definitely not. Even a little analysis of each of these can go a long way. Let’s look at them in order.

The Owner’s Perspective

Every small business should exist to help the owners reach their personal goals. That can’t happen very well in a large business, but it really is the best thing about owning a small business. And the owners can’t simply say, “We want to make a bunch of money.” You can make money doing anything. Why are you interested in making money with this business?

There are many books and white papers on creating mission statements, defining your vision, and articulating goals. You should take this very seriously. Why do you do what you do? And how could your business help you do that more or do that better?

When I first started coaching, I was amazed at two types of owners I came across. First, a large number of business owners have some great goals that I would never have guessed. For example, one gentleman uses his business to fund a non-profit organization. His business is a funding source for his “bigger” picture goal.

Second, I found that many business owners have no real long-terms goals at all. Even after being in the business for 15 or 20 years, they didn’t have a clear sense of why they were doing any of this. The most amazing part of this is the transformation that takes place once they start defining a vision. In every single case, those who adopted bigger picture goals saw a quick turn-around for their business and a dramatic improvement in their income – and they enjoyed their jobs more.

The reason for this turn-around is very simple. Once you begin to focus on a bigger vision, that vision guides your decisions. Most people without a vision plan have spent years (or decades) working hard with very little to show for it. They don’t have large fortunes amassed. They don’t have a retirement nest egg. They don’t have anything that might be confused with an “empire” to show for their work.

Once they adopt a bigger vision for their future, they find it easier to drop bad clients, screen new clients more thoroughly, raise their rates, invest in good tools, etc. In other words, they begin to do all the things that we all know we should do. They might have heard the advice a hundred times over the years, but it didn’t mean anything to them. They saw no connection between the advice and their personal lives. Now, with a vision in place, everything’s connected to the bigger picture.

There’s a reason for the business to exist and every action within the business should support that. The most obvious example of this is when the owner asks (or someone asks the owner), “How does this decision promote our vision as a company?”

Next, the owner needs to evaluate how well the company is working in service of these larger goals. If your goals are to be profitable, create a good work-life balance for employees, and provide best-in-class technical support, then how are you doing with each of those? Very often, these goals conflict with one another. How are you doing with the balancing process, and what can you do to improve each goal while improving the balance over the next 12 months?

Money, Money, Money

The second major component of the SWOT analysis is a financial profile. Basically, that means a nice overview of you operation. How does money get into your system, out of your system, and move around inside your system?

Think about it this way: If you were going to sell me your business, what would I ask you? This includes things like:

  • How many clients do you have under contract?
  • How do you acquire new clients?
  • How often do you acquire new clients?
  • What do your clients look like (how many servers, workstations, cloud services)?

It also includes simple financial metrics:

  • What’s your total revenue?
  • How much of your revenue comes from managed services and recurring monthly payments?
  • How much of your revenue comes from cloud services, hardware, software, etc.?
  • How large is your “Accounts Receivable” (money owed to you)?
  • What’s your payroll, broken down for tech, admin, and sales?
  • What’s your Cost of Goods Sold for each category above?
  • How many FTEs – Full Time Equivalent employees – do you have?

Here’s a real test of how you’re doing: So far, all of this information should be at your fingertips. You should be able to generate reports in QuickBooks or your PSA and answer every one of these questions. Every coach will have different advice about what these numbers should look like in an ideal business. But at a minimum, these are numbers you should know pretty well.

At the end of the day, money is the ultimate measure of the health of your business. It’s what allows you to keep the lights on and the employees paid. But, more importantly, it’s what allows you to reach all those other goals. Every bullet point above can lead to a rich conversation about how money flows into and through your organization. Don’t ignore it: Have those conversations with someone!

Operational Overview

Finally, we need to look at how your business actually works. How do you deliver services, with high quality and reasonable profit while keeping your employees and clients happy?

Defining your business operation can be very simple or very complicated, depending on how much time you want to spend on it. At a minimum, you need to go back to the question of how you define your company for a potential buyer. Which PSA do you use? Do you have standard operating procedures for service delivery and internal administration? A “big” SWOT analysis will go into a lot of detail here. You don’t need to do that. You need just enough detail to get a sense of whether you have the documentation and SOPs you need in place. You know whether the answer is Yes, No, or “We’re working on it.”

One key element of this process is to ask everyone in the company (or, if you’re a large organization, the core management team), what the pain points are within your company. Are you disorganized? Are engineers working in real time? Maybe all of your clients have different terms of service. You’re not using your remote management tools effectively. And so forth.

Whatever pain anyone in your company is feeling needs to be taken seriously. If you want a team where everyone is pulling in the same direction, they need to feel like their concerns are taken seriously. A good SWOT analysis will always ask employees to evaluate their managers. And the managers need to openly and honestly listen to employee concerns.

You might also do the same evaluation with clients. It doesn’t have to be a full-fledged evaluation of your company. It could be as simple as a net promoter score (see http://www.netpromoter.com/why-net-promoter/know/).

The Final Analysis

This seems a little complicated, but it doesn’t have to be. Start slow. Start simple. After you do this a few times, it becomes easier. In particular, everything becomes easier once you have the goals, vision, and mission ironed out. Those won’t change much over time. And then you do the financial profile. Once that’s done, it’s much easier the next time.

Most people have a general sense of how their business is doing. But it all comes back to the big picture. Are you reaching YOUR goals? If your business is not effectively serving your goals, then you need to change something. Nothing happens by itself.

Good luck. Have Fun! And make 2015 an amazing year for yourself and your business.