How to do a Financial SWOT Analysis

November 1, 2017 by Gordon Advisors

The last blog post in our profit planning series focused on defining a SWOT analysis and explaining its function. This post will explain how to execute a financial SWOT analysis that will empower you to strategically position your business for success. An intelligent SWOT analysis will begin by listing factors under each category.

Strengths

Strengths will include those things that provide a competitive advantage. To list your strategies, start by asking:

• What are our unique skills?
• What does our business do well?
• What unique knowledge do we possess?
• Do we have any special financial or other resources?
• Do we have any areas of low financial leverage or low debt-to equity ratio?
• What types of products or services are the most profitable?
• What do we do better than our competitors?

Weaknesses

Weaknesses will include those things that detract from the company’s ability to compete. To identify weaknesses, start by asking:

• What resources do we lack?
• Are there any operating practices creating financial leaks?
• Do we have any skills deficit?
• Do we have areas of high overhead?
• What types of products or services are the least profitable?
• Are we having continual cost overruns?
• Is there a backlog of uncompleted work?
• Are profits too low?
• Are we having trouble paying suppliers?

Opportunities

Opportunities are the positive options the company could pursue to achieve its goals and objectives. To identify opportunities, start by asking:

• What goals are we currently working towards?
• How can we utilize new technology?
• Can we expand our target market?
• Can we expand into related products or services?
• How can we do more for our clients or customers?
• How is the industry/community/culture shifting?
• Are there regulatory changes on the horizon?

Threats

Threats pose negative consequences to the company which may somehow inhibit the company’s ability to achieve its objectives. To identify threats, start by asking:

• What advantages do our competitors have?
• What are our potential loan barriers?
• Are we at risk for violating OSHA regulations?
• What new technology are we behind on?
• What is happening in the national economy?
• What is the legal climate in the industry?

Analyze

Now, you should have a long list of the company’s strengths, weaknesses, opportunities, and threats.  These should be culled and reviewed with various levels of management and grouped into categories.  The different types of SWOTs should be segregated as to priority, ease of completion and length of time that would be required for implementation or correction.

After separating and prioritizing, financial targets and goals can be established to capitalize on strengths and opportunities and overcome or minimize the weaknesses and threats.  Use a goal worksheet to summarize goals that your company will be using as the focus of all management efforts to improve your profitability and financial strength during the coming year or two.

To see more about how a completed SWOT analysis fits in to the overall profit plan, download our Owner’s Guide to Profit Planning and subscribe to our blog.

If you don’t know where to start or if you’d like to have a third party person assist you with the process – give me a call at 248-952-0269 or email me and jeff.farrington@gordoncpa.com, I have decades of experience in management and improving operational performance.