Evaluating the Potential of a Business Idea: Conducting a SWOT Analysis
by Pablo Arroyo | November 21, 2024
Entrepreneurs and existing business owners are constantly scouting the market for opportunities that have the potential to turn into successful businesses or new revenue streams. As entrepreneurs, we might hear from colleagues and friends about opportunities in certain industries or products/services. As existing business owners, we are always focused on optimizing the revenue potential of our business, either with existing products and services or designing completely new products and services. Some questions that come up in this evaluating process include:
- How should we go about evaluating these opportunities in the marketplace?
- Is there a suggested method to follow?
- How can we make sure we invest our limited resources efficiently?
- Would there be a demand for my products or services?
- How can I market my product?
- Would I be able to generate a profit given the competitive environment?
- What other factors should I consider before embarking in a venture and making sure that I will be successful?
- What resources are available to small business owners?
SWOT Analysis
Some analysis techniques, such as the PESTEL Analysis, pertain to the external environment, however, we should not lose sight of the internal environment, which involves analyzing the strengths and weaknesses of both ourselves as business owners and entrepreneurs as well as the firm in which we are operating. A widely used tool is the SWOT analysis, a traditional analytical tool that identifies a firm’s strengths, weaknesses, opportunities, and threats. It is useful for conducting a quick look at the internal capabilities (strengths and weaknesses) and external events and situations (opportunities and threats) a firm is facing.
Real-life Example
By utilizing this tool, for our auto shop, as an example, we might find out that as a business we may have great experience and technical expertise in the auto industry, brand recognition, and established reputation. Meanwhile, our weaknesses might include, not being up to par with the latest technology, having a high employee turnover, and deficient cash flow. This analysis helps our auto shop determine the areas we need to work on while continuing to uphold the same quality in our strengths, making it easier to focus on optimizing the revenue potential of our business.
Using the SWOT Analysis Before the Business
A SWOT analysis can also be a great tool for personal growth and development after performing this assessment as an individual or a family. After all, starting and managing a business is a lifestyle that requires commitment, dedication and long hours. A suggestion is to sit down by yourself, or with your spouse, partner, or even the members of your family and one-by-one consider the SWOT components and how they relate more specifically to your scope of analysis. Starting and managing a business requires a self-starter person who is organized, perseverant, passionate, energetic, optimistic, with a high need for achievement and who can lead a team to success, willing to work around the clock, 24 hours. Therefore, it is a good thing to run this analysis by yourself first to determine whether you are up to the task of running a business.
As we continue in the process of evaluating a business idea, there are additional questions we mentioned at the beginning that we need to answer. These relate to the potential demand for our product/service, marketing, profitability, the investment necessary, business planning and innovative tools. We are going to address all these topics in subsequent articles, click here to go to the next article.
Pablo Arroyo, MBA, CGBP, CME
Arroyo, Consultants, International Consultants 2, International Trade, TampaSpecialties: International Trade, Marketing, Business Planning, Startup Assistance Pablo Arroyo has 17 years of experience in business development as an owner and business consultant in the public and private sectors. He is a Certified Global Business Professional (CGBP) and a Certified Marketing Executive (CME). He holds a bachelor’s degree in animal science, concentrating on international agriculture and agriculture economics, from the University of Missouri, and an MBA from the University of South Florida in marketing and international business. Arroyo was involved in strategic market expansion for companies from diverse sectors with emphasis on manufacturing, technology, agribusiness, food, tourism, hospitality, entrepreneurship and value-added enterprise development. Originally from Puerto Rico, he is fluent in Spanish and English.