How do YOU use it?

You know how, when you get a song in your mind, it keeps coming back and back.  One such song for me comes from an old black and white film I saw many years ago.  It’s set in Scotland, and the song is used as background for much of the film.

I know where I'm goin'
And I know who's goin' with me

It’s an old Scottish or Irish folk song, but it always comes to mind when I think about business planning, and its importance.  I’ve written about planning a couple of times recently:

In those blogs I emphasised the importance of the planning process in knowing where you’re going.

“Plans are useless in the sense that the year ahead will always have some unexpected twists and turns, an X-factor that neither you nor anyone else was able to predict.  Products change, prospects change, market environments change.”

“Planning is indispensable because in formulating your plans, in looking at what was completed in the year gone (and why and why not), and what you need to create and change in the coming year you will have examined and analysed all the information you have on your business.  Hopefully you will also have looked at what is happening in your marketplace, your local economy, and with your competitors.”

Part of the planning process is aided by various planning tools such as SWOT and Scenario Planning.  It is the former I would like to discuss.  There’s a good reason for that; I’ve seen SWOT used poorly, and so it doesn't give the results it should.

I’ll get to that shortly, but first let’s have a look the individual components of SWOT; Strengths, Weaknesses, Opportunities and Threats.

The first thing to get clear is that Opportunities and Threats are external to your business.  You don’t have control over them, whereas you do, or should have, control what happens in your business - that makes up your Strengths and Weaknesses.

So what constitutes an Opportunity or Threat in business?

Opportunities are created by events, trends or possibilities for action that promise to:

  • Expand the size of your customer base – e. g. natural growth, demographic shifts, rising incomes, economic conditions.
  • Give new avenues for customer access - new ways of ‘packaging’ your product, new opportunities for promotion, alliances & networks.
  • Increase the customer appeal of your value package - compared to those of the competitor.
  • Exploit a weakness or blunder by a competitor - inability to respond to your initiatives.

Threats are created mostly by events, trends or competitor actions that can:

  • Reduce the size of your customer base - demographic shifts, falling incomes, changes to lifestyles, economic conditions.
  • Make customer access more difficult or costly - changes in customer buying practices.
  • Reduce the customer appeal of your value package - compared to those of the competitor.
  • Surpass or eclipse your value package - greatly improved offering on the part of a competing provider

Strengths are those competencies of your business which allow you to take advantage of opportunities or counter threats.   They may come from:

  • Services provided
  • Resources of the business – people, finances, facilities, equipment
  • Performance of the business – systems, processes and procedures.
  • Strategies and planning – the ability to look ahead
  • Ability to implement plans - execution

Weaknesses are those things your business does not do well which prevent you taking advantage of opportunities or make it vulnerable to threats.

  • Services provided
  • Resources of the business – people, finances, facilities, equipment
  • Performance of the business – systems, processes and procedures.
  • Strategies and planning - ability to look ahead
  • Ability to implement plans – there’s always something that stops you

Now I get to the problem I see so often when people prepare business plans – They identify all possible Strengths and Weaknesses of their business, and the Opportunities and Threats facing them, and neatly list them in four boxes.

And there they sit.  They usually discuss how they might resolve any of the points, but do so only in consideration of each of those four boxes, in isolation.  But of course, in reality, they are not four individual boxes.  They impact on each other.

Organisational Strengths can be applied to take advantage of Opportunities and counter Threats, the other part of SWOT analysis.  Organisational Weaknesses might prevent taking up the Opportunity or prevent an effective counter to a Threat.

Think of it in terms of this diagram:

Set your goals for your planning period:

  • More Likely – What opportunities can you best take advantage of using your key strengths?
    robable – What opportunities can you take advantage of by fixing key weaknesses?
  • Possible – How can you minimise threats by countering them using your strengths?
  • Unlikely – this is the danger area for a business; risk.  You have to consider “Likelihood and Consequences” of the risks this analysis identifies, and develop a strategy to prevent, mitigate or minimise the threat arising.  See “How to expect the Unexpected”.

There is one final step to take arising from your SWOT analysis.  You will no doubt end up with a longish list of goals, but you can’t achieve them all at once, so you have to prioritise them; to identify the most important.

I feel another Matrix coming on – a “Critical Goals Priority Matrix”, which looks at the Urgency and Impact of achieving each goal.

Actual client example

Now you will know where you’re going, and who is going with you!

Have you clearly defined your Goals for the next 3 – 5 years?

When clients approach me for coaching, clients with businesses that are underperforming despite the crippling hours and effort the owner is putting into them, they are sometimes held back by lack of knowledge of what is possible.  A lack of focus of potential improvements leads to a lack of control over their business, and eight times out of ten that lack of control comes down to a lack of knowledge of what is happening in the business, and what their peers are achieving.

For more than 29 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand where and how they may change their business to be a leader in profitability, productivity, and competitive advantage.  I assist you analyse:

•    The strengths, weaknesses opportunities and threats of your business

•    Determine where you want to be – clear, achievable goals, and

•    How you are going to get there – strategies to achieve your goals

This is sometimes known as the NOW – WHERE – HOW model.

If you would like to discuss with me how you might do that, book a Strategy Consult here

© Copyright 2017 Adam Gordon, The Profits Leak Detective 

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