How to do a SWOT analysis, step by step

A SWOT analysis sorts what you know about a business, project or decision into four boxes: strengths and weaknesses, which are internal and within your control, and opportunities and threats, which come from outside. Done well, it takes an hour and ends with a short list of actions. Done badly, it is four lists of adjectives that nobody reads again. The SWOT analysis tool gives you the grid plus strategy prompts, and this guide walks through doing one properly.

What a SWOT analysis is

The four boxes split along two lines. Internal versus external: strengths and weaknesses are things about you, such as skills, reputation, costs and capacity; opportunities and threats are things about the world, such as customers, competitors, regulation and trends. Helpful versus harmful: strengths and opportunities help, weaknesses and threats hurt. The technique is usually traced to planning work at the Stanford Research Institute in the 1960s, where an early version used the letters SOFT, and the SWOT acronym was in common use by the early 1970s. Its staying power comes from being simple enough to do on a whiteboard.

How to do one

• Set the scope. A SWOT for "the company" is too vague. Pick a question: should we open a second site, launch this product, enter this market?
• Gather evidence first. Reviews, sales figures, customer complaints, competitor prices. A SWOT built from opinions repeats what the room already believed.
• Fill the internal boxes, then the external ones. Keep each point specific and, where possible, measurable.
• Cut to three to five points per box. Ranking forces you to decide what actually matters.
• Turn it into actions using the pairings below, then give each action an owner.

A worked example

Take an invented one-person mobile bike repair service that visits customers at home and is deciding whether to take on an employee and a second van.

• Strengths: qualified mechanic with 140 five-star reviews; comes to the customer, so no shop rent; regular contracts with two offices.
• Weaknesses: capacity tops out at about six jobs a day; no online booking, so evenings go on phone calls; no income if the owner is ill.
• Opportunities: new cycle lanes being built across the city; more e-bikes, which need specialist servicing; employers offering cycle-to-work schemes.
• Threats: a national retailer piloting at-home servicing; parts prices rising; a reliable winter dip in demand.

Laid out like that, the question changes. The biggest weakness is capacity and the biggest opportunity is growing demand, which argues for the hire. But the winter dip is a threat to a second salary, which argues for timing it in spring and signing more office contracts first.

Turning it into strategy

The TOWS matrix, published by Heinz Weihrich in 1982, pairs the boxes to generate strategies:

• SO: use strengths to seize opportunities. Use the reviews to win e-bike servicing contracts.
• WO: use opportunities to fix weaknesses. Bookings from cycle-to-work schemes could justify online booking software.
• ST: use strengths to counter threats. Office contracts give steady winter income the retailer cannot easily take.
• WT: reduce weaknesses that threats could exploit. Insurance or a trusted relief mechanic for sickness.

The tool writes these prompts from the first item in each box, so put your most important point first. To compare the options that come out, a decision matrix weighs them against criteria such as cost, risk and speed.

Common mistakes and limits

• Mixing internal and external. "The market is growing" is an opportunity, not a strength. "Our prices are higher than competitors" is a weakness, even though it is about the market.
• Vague entries. "Good service" tells you nothing; "4.8 average rating from 300 reviews" does.
• Treating every point as equal. One threat can outweigh five strengths.
• Stopping at the grid. A SWOT with no actions is a description, not an analysis.

A SWOT is a snapshot and a conversation starter, not a model. It will not tell you whether a plan makes money; for that, the break-even calculator and the business model canvas go further, as covered in The business model canvas explained, block by block. Revisit a SWOT when something significant changes rather than filing it after one workshop.