Creating a great plan for the coming year requires a clear understanding of the foundations of your practice, both positive and negative.
To set tangible objectives and test the rationale, you need to understand the factors that most influence your firm’s results. The best way to do that is to complete a simple SWOT analysis.
In this article, I will cover the following topics:
- What is a SWOT analysis
- The purpose of a SWOT analysis
- Questions to answer to identify your strengths and weaknesses
Understanding the present, preparing for the future
What is a SWOT analysis?
SWOT stands for Strengths, Weaknesses, Opportunities and Threats. In most cases the strengths and weaknesses you will be identifying are internal—things like streamlined operations or lack of expertise in a product area. Opportunities and threats, on the other hand, are external factors affecting your practice—such as regulatory or market changes.
A SWOT analysis is a tool for understanding the state of your practice today, and what it could become tomorrow. The strengths and weaknesses describe how you see the positives and negatives about your practice today. The opportunities and threats reveal what might be possible in the future.
The purpose of a SWOT analysis
The whole point of completing a SWOT analysis is to improve your business plan for the coming year. Your review of your own practice and what your competitors are doing will help you complete the biggest part of that plan—which is defining your unique competitive advantage.
Here’s how to do a simple analysis that will help you to create the best possible plan for growing your practice over the next twelve months.
The strengths of your practice are those things that give you an advantage over your competitors. Keep in mind that if you do a great job at something (say onboarding new clients) but your competitors are equally good in that area, then that is more of a necessity than a strength that differentiates you.
Try to evaluate your strengths and weaknesses from two points of view. First, what do you and your staff consider to be your current strong points? Then, consider what prospects and clients think are the things you are best/worst at.
To identify your strengths ask questions such as:
- What do you do better than other advisors/practices in your market?
- Consider your efficiencies, ability to communicate, planning and execution, reliability, ability to make introductions and referrals to other advisors, expertise, marketing)
- What is your organization's value proposition that sets you apart from your competitors?
The weaknesses inherent in how your practice runs today are those things that you don’t consistently do as well as your competitors.
To identify your firm’s current weaknesses consider issues like:
- What are the primary reasons you sometimes are unable to close a sale?
- What do your competitors do better than your firm?
- What activities do you avoid performing?
- If you do not meet your yearly objectives what reasons contribute to the shortfall?
The opportunities that potentially exist for your firm in the future are those things in your market that you could exploit to your advantage. They include things like:
- Technology change—new solutions that will make you more efficient and enable you to offer even better customer experiences
- Regulation change—beneficial changes to rules governing how you can work in your market
- Decreased competition
- Changes in your current market or the opening of a new one
- The introduction of new products
The threats which may threaten your business in the future also come from external market factors. They are related to the negative aspects of many of the same types of things that you looked at when reviewing your opportunities.
- Tech change that makes your approach less efficient than others, or even obsolete
- Regulation change—increased transparency or compliance requirements
- Increased competition
- Shrinking markets or a change in needs away from your services
- New products that threaten your current approach
Turning Weaknesses Into Opportunities
Improving on weaknesses by taking advantage of opportunities is important in order to remain competitive.
In this case study, life insurance advisor Susan Lee recognizes the challenges her company is facing and leverages technological improvements to transform her business.
Her story is a great example of how external factors, such as technology change, can be viewed as either an opportunity or a threat. When leveraged as an opportunity, external market factors can be utilized to turn weaknesses into strengths and improve your overall business strategy.
What to do with your SWOT analysis
As part of your planning process, use the SWOT to help you decide on the key priorities you will focus on over the next twelve months. And use the analysis as a check against the strategies you want to put in place.
Compare each of your strategies against your current strengths and weaknesses to make sure you are capitalizing on the things you do well. And make sure you have strategies in place to take advantage of each of the opportunities you have identified, as well as strategies that will offset the potential threats you may face.
Finally, use your SWOT analysis to define what makes you different than your competitors. This unique advantage could be the biggest driver of your success in the coming year.