In many ways an entrepreneur is not unlike that of the gymnast. The act of balance is critical to the performance of each individual. The gymnast needs to counteract the forces of weight and motion; while the entrepreneur needs to distribute their time and resources between risk and reward. Without the ability to adequately balance the elements of weight, motion, time, and resources the entrepreneur and the gymnast would be hard-pressed to succeed in their particular endeavors.
The entrepreneur needs to seize opportunities and to minimize risk. To accomplish these tasks the entrepreneur must clearly specify the objective of his/her business venture or project. And identify the internal and external factors that are favorable and unfavorable to achieve that objective.
An effective tool to assess and identify opportunities and risks is a SWOT analysis. SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats involved in a business venture or project. If a clear objective has been identified, SWOT analysis can be used to help in the pursuit of the objective.
SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. It’s an assessment technique that paints a vivid picture of how your business stacks up when you consider these four factors. SWOT is a simple, popular way to gather and use information in preparing or amending your business plan. It’s also useful in solving problems, making decisions, and educating staff when change is necessary.
In brief, SWOT means identifying:
- Strengths—internal factors such as expertise, innovation, and resources.
- Weaknesses—internal factors such as a high level of debt, labor shortage, etc.
- Opportunities—external advantages such as a rapidly growing market where demand outstrips supply.
- Threats—potential external risks such as competitors undercutting your pricing, natural disasters, changes in the general business environment.