You’re invited to take the SWOT analysis challenge—see if you can complete all five steps in five days or fewer! Then invite your network to do it too. Share this article on LinkedIn, Facebook, or Twitter and use the #SWOT hashtag.
If you’re looking for the rest of the steps in the SWOT analysis series, find them here:
Small business owners are notoriously busy people. We understand that you have a lot of items on your daily to do list, but we’re about to suggest one more. Every business owner should sit down and conduct a SWOT analysis, which gives you an inside look at the strengths, weaknesses, opportunities, and threats that can impact your business.
If you’ve been working through each step along the way, you’re already up to speed on the finer points on why companies, whether they’re brand new or they’ve been around for 100 years, should make SWOT analyses part of their regular planning and review process.
But here’s something you might not know about yet—the history of SWOT, or where it came from and why. Then we’ll jump down to how to assess threats.
The history of SWOT analysis
We know you’re anxious to complete your SWOT matrix, but before you start brainstorming, we thought we’d look at how this process came to be.
Here’s the quick history:
While there is some debate over who came up with it, most research suggests that Stanford professor Albert Humphrey was the father of this process.
How did the strategy come about?
Humphrey led a research project at Stanford University in the 1960s and 1970s that tried to figure out why corporate planning failed within several big companies. The team started breaking the data into categories like opportunities and threats.
Eventually, other strategists tweaked Humphrey’s categories into the SWOT matrix that we know today.
How to define your company’s threats
A threat to your company is an external factor, something that you can’t control, that could negatively impact your business. A threat is different than a weakness, which is internal, or part of your company as it exists right now.
Identifying threats to your business is a powerful first step to reducing their risk, or at least mitigating them enough that they won’t shut down your business. It’s all about being prepared and taking proactive steps to minimize the hurt.
Coming up with a list of threats can be difficult—you just don’t know what you don’t know. They might not spring to mind as easily as your strengths, but there are certain categories that most external threats fall into.
You can use these categories to brainstorm possible threats to your business:
- Economic trends: Examine the economic conditions that impact your business.
- Market trends: Think about changing or shrinking market trends.
- Funding changes: Think of donations, grants, or other shifting revenue streams that aren’t within your control.
- Political support: If political support is shifting, you’ll want to analyze its impact.
- Government regulations: Think of regulations that are changing that might hurt your business.
- Changing relationships: Consider shifting relationships with vendors, partners, or suppliers.
- Target audience shift: Your target market might be shrinking, aging, or shifting.
Questions to ask to find threats
These categories should get your wheels turning. By thinking through each category, outside threats should come to mind. If you identify weaknesses, or internal challenges as you go, just add them to your SWOT matrix. And if you’re just getting started, download a free SWOT analysis template here.
We’ve also created a list of questions that coincide with the categories above to help you think critically about the threats that could be out there.
- Is the economy in your area in a recession?
- Will the economy negatively impact your customers’ ability to make purchases?
- Are economic shifts happening that impact your target audience?
- How is your market changing?
- What new trends could hurt your company?
- Is there more competition in your market that’s pushing you out?
Funding or cash flow changes
- Do you expect to have any changes in your cash flow that might have a negative impact? Delays in payment, seasonal issues, etc.
- Will funding changes hurt your business? If so, how?
- Do you expect a decrease in grant funding or donations this year?
- Do you anticipate a shift in political support this year?
- Is there reason to be concerned over political shifts?
- What does your business stand to lose because of political changes?
- Are any regulations shifting that could cost more money or hurt production?
- What kind of damage could new regulations have?
- Are any outside business relationships changing?
- Is there any turmoil with partners or vendors?
Target audience shift
- How is your demographic shifting?
- What threats accompany these changing demographics?
- Is your audience changing in a way that you can’t accommodate?
Tips to find threats
- Do market research. As you’re looking into possible threats, you’ll want to conduct market research to see how your target audience is shifting.
- List every threat you can think of. If you think of a threat, list it. Even if that threat has consequences that won’t be felt immediately, it’s still better to have it on your radar.
- Threats exist, don’t panic. Listing threats may cause some anxiety, but remember that all businesses have threats. It’s better to know about threats than it is to turn a blind eye to them. Plus, we’ll give you some strategies in step 5 of this series on how to minimize these threats.
Once you’ve listed your threats, your SWOT template should be filled in. You’re almost done! The last step, number 5, is turning what you found in your SWOT analysis into actionable strategies.
Editor’s note: This article was originally published in 2015. It was updated in 2019.