Before you enter a business, you must first understand several things. Running a business is easier said than done. The mere fact that you have the capital cannot guarantee success or even a modest profit. The tasks are endless and it might be overwhelming for a starter. Most businesses fail for the first 3 years. And very few can survive for 10 years or more. What can you do to overcome these?
How do you know if a business venture is profitable or not? Are there any available tools that an ordinary starter can use to help him arrive in to the right decision?
The most basic way of evaluating your business is thru SWOT ANALYSIS. It is the analysis of Strengths, Weaknesses, Opportunities, and Threats of a business.
Strengths and Weaknesses are generally the things that you have control of. Meaning, these are the things that are manageable and the success of your business will depend on your actions. Factors such as your skills, talents, family, background, employees, passion, attitude, and traits are some of these. These are the things that should be analyzed to determine which of these could help you to propel your business.
For example, if you are planning to open an auto detailing business, you begin to analyze your strengths and weaknesses. Your passion of cars might be your strength as you have the technical expertise on it. Your previous background as a manager can also be your strength as you know how to manage people. However, several weaknesses that can come along your way might be poor network with raw material suppliers and the lack of available financing resources.
Some strengths can also become weaknesses and vice versa. For example, you have a large extended family. It might be a strength since your family members might join forces to help you run your business. In contrast, it might also be a weakness since having a large family involves huge living expenses. Being blind may be a handicap and definitely a weakness but it can be strength if you put up a massage services that target Non-Government Organizations for handicapped persons as your customers.
On the other hand, Opportunities and Threats are generally the things that you don’t have control of. These are external factors that you cannot manage. Factors such as social, legal, and political influences, economic and financial aspects, and technology can be some of these.
For instance, having a lot of networks with politicians and decision makers can be an advantage to you. The passage of a law that gives tax incentives to asset management companies is a legal opportunity that you can tap. In contrast, having a computer business requires continues upgrading of software and hardware and might be too costly for your business. Economic factors such as an economic slowdown due to rising oil prices may be the wrong time to start a new business venture and can be considered as a threat. However, economic indicators such as rise in employment rate and increase in volume of car sales might be an opportunity.
So before you start your business, you might want to do the SWOT Business Analysis. List down your strengths, weaknesses, opportunities, and threats.
Moreover, you can also use the SWOT Analysis in yourself. What are your strengths, weaknesses, opportunities, and threats as a person? Or a SWOT Analysis of a company, say Google SWOT Analysis. Or a SWOT Analysis of election.
The SWOT Analysis is truly a remarkable strategy to reach a particular goal.