Ever try to assemble your child’s new bike without using the instructions? Inevitably, you end up with an extra bolt. That’s what comes from not looking at the parts before you start.

The same thing can happen if you build a business plan without looking at all of the parts. Smart business owners know to call in the SWOT team first.

A SWOT analysis helps you to identify internal and external factors that affect your business. It stands for “Strengths, Weaknesses, Opportunities and Threats.”

Ask yourself these four questions.

Here’s an example using Java Judy’s Coffee Shop:

Internal Environment (you control these factors)

1. What are My Business’ Strengths?

• Good location near city center
• Reputation for great coffee at a fair price
• Environmentally friendly cups used

2. What are My Business’ Weakness?

• Staffing is hit-and-miss on weekends
• Brewing equipment getting old
• Don’t offer non-dairy alternatives

External Environment (you do NOT control these factors)

3. What Opportunities Are Out There?

• Community college offering job training program
• Study published that identifies the health benefits of drinking coffee
• Rates for business loans decreased

4. What Threats Are Out There?

• Competitor offers coffee truck service right outside business’ front door
• New government regulation on coffee imports
• Price of coffee beans expected to rise

As a result of this analysis, you’ll often find complementary factors that will guide your business planning. For Java Judy, her staffing weakness could be offset by taking advantage of the opportunity offered by the community college for job training. In addition, the favorable loan rates might make this a good time to upgrade her brewing equipment.

Knowing what environmental factors you have to work with will help you make better decisions and, ultimately, better business plans.  So before you start your planning, call out the SWOT team and see what you have to work with first.