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A SWOT analysis is a common tool for creating a business plan. It’s a way to evaluate your business’s strengths and weaknesses and discover how to leverage them to your advantage.
But you don’t have to be a business owner to benefit from a SWOT analysis. If you’re a big-picture thinker, you can apply this strategy to your personal finances to check in on your goals and prepare for your next big life event.
What Is a SWOT Analysis?
Here’s a simple definition of a SWOT analysis: It’s a four-part analysis that looks at your Strengths, Weaknesses, Opportunities, and Threats (ie, your SWOT).
Using this model allows you to analyze internal and external factors to see what you’re best at, what your competitor is best at, where you can improve, and what you need to guard yourself against.
You can conduct a SWOT analysis to evaluate your small-business ideas and look for strengths and weaknesses before you make any change to your long-term strategy.
It’s also great when tracking large money goals to see what areas you need to improve in. And it highlights the best aspects of big-picture thinking — especially since its primary objective is to help organizations or individuals develop a full awareness of all the factors involved in making a decision.
It also makes you self-aware of who you are in relation to your work and your money goals.
How Does a SWOT Analysis Work?
Conducting a SWOT analysis is easy.
First, create a SWOT diagram. Take a piece of paper and divide it into four equal sections, each labeled with a different part of the SWOT analysis.
Let’s break those down for you.
The first part of the analysis is to determine what works well in your work or organization. This is key to strategic planning. Think about what you have to offer that’s better than your competitors’ offerings or skills.
You want to ask questions like:
- What do you excel at?
- What do you do better than anyone else?
- What unique resources do you draw on?
- What do other people see as your strengths?
- What values drive your business or work?
- What- lowest cost resources can you draw upon that others can’t?
You really want to focus only on things that give you the edge against everybody else.
If you’re applying a SWOT analysis to your personal finance, you’ll want to retool the questions a bit. The idea is to pen down all of the internal strengths that you have that might give you a competitive advantage.
During this part of the analysis, you really want to focus on the internal weakness of your organization or self in relation to those surrounding you.
So make sure the way you’re answering the following questions is the following that framework:
- What could you improve?
- Where do you have fewer resources than others?
- What are things others are likely to see as weaknesses?
- What do you and your company lack?
- What characteristics do you have that might make you or your company disadvantageous to pursue in the market?
- Are there things that your business needs to be competitive?
Really focus on your weaknesses in relation to some external point.
For example, if your restaurant doesn’t serve brownies — but your competitors don’t, either — that’s not really a weakness.
But if you don’t know how to code and someone who is up for the same promotion does, that is a weakness.
If you’re using a SWOT analysis as a way to check in with your money, this is a great time to pull out that budget. See which areas of your budget you tend to blow through.
It’s OK to mark your page up and be honest with yourself. Now is the time to get real. And if you need to, pour yourself a glass of wine to help you suffer through this step.
Opportunities are external chances that contribute to your success. Things like network meetings, new government grants, or conferences all count as opportunities.
This also includes promotions you’re up for and any money-making opportunities you may have.
Your opportunities don’t need to be game-changers to make it into your SWOT analysis. Just list anything that can propel you or your company toward success.
You want to ask questions like:
- What changing regulations might affect you positively?
- What is the market doing, and what trends might be encouraging people to buy your product?
- What industry events are coming up that you should be taking advantage of?
- Do your customers or coworkers think highly of you?
- Are there ways you can use your network to expand a project?
Think about good things that are in the immediate future. Checking out classes or certification programs or attending an industry event are some great ways to find opportunities.
You want to highlight a path to growth. Employers especially like to see employees take a vested interest in making sure the company is succeeding in the long term. And you also want to see a path forward.
You might consider taking a freelancing course to up your game, or learn about investing to help your money do the work for you. Even asking friends what they think you should do will give you some external perspective.
Anything that contributes to you being your best self goes in this category.
Threats are another important thing to consider. Threats are anything that could harm your position or affect your growth.
It’s important to plan for these types of hurdles in order to have a good business or financial plan and to utilize big-picture thinking.
Here are some questions to consider when creating your list of threats:
- What new regulations threaten operations?
- What do your competitors do well?
- What consumer trends threaten your business?
- How do you self-sabotage your work and set yourself up for failure, instead of success?
Overall, looking at your threats, you want to have both an internal and an external meter. Look at outside circumstances that could be affecting your success, and also look for internal ways that you’re threatening your own chances of succeeding.
How to Use the SWOT Analysis
Once you’ve put together a rubric for your SWOT analysis, it’s important not to stop there. Collect the data you need and then ask yourself, “How can I use the information I’ve collected to set myself up for success?”
It’s great to use a strengths-based approach in your strategic planning process. Start by stacking up your strengths. Maybe you’re great at side hustling and using that extra money wisely. Build your game plan based off of that.
But if a weakness is that you have trouble saying no, it’s important to plan “No” into your schedule so you don’t burn out and overwhelm yourself.
In a nutshell, your personal SWOT analysis gives you the structure you need to create a road map for your success plan. It’s a strategic planning tool you can use to forese the bumps along the road.
Using a SWOT analysis to avoid pitfalls and to carve out wins will allow you to achieve your goals, whether they’re personal or business-related.
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