Using a SWOT to review business performance

What exactly is a ‘review’ and when should I do it?

Back in my corporate days working for high street retailers, the process of setting the strategy for the future seasons started with compiling a list of 'lessons learnt' and conducting a SWOT analysis of the previous trading season. These documents and their outputs were so important that they'd be reviewed in strategy and range sign off meetings with directors.

Do you already look back to see what worked and what didn't? How often and in how much detail?

There isn’t actually a one-size-fits-all answer when it comes to the question of frequency, without wanting to sound like a cop-out, it really is a case of finding what’s right for your business. If you have a very seasonal business then you will likely benefit from reviewing the most recent trading period every 3-6 months. If your business is relatively unaffected by trends or seasonal fluctuations then running a review every 12 months would be perfectly appropriate.

There’s also no stipulation on how big or small your review should be. For many small retailers a one page summary is completely sufficient, others with multiple departments or revenue streams may need to conduct reviews for each section and create an overarching summary of those separate reviews.

Great, but…what on Earth is a SWOT?

The SWOT Analysis is a really useful tool for any business. The goal is to identify the Strengths, Weaknesses, Opportunities and Threats around your business so that you can use these to plan your upcoming year (and beyond).

When conducting a SWOT analysis, consider both internal and external factors. For example, in retail, an internal strength might be a strong sales team but an external threat may be an increase to the minimum/living wage making it too expensive for you to continue employing as many staff. Think about all areas of your business; from sourcing the product to getting it to the customer, from managing your invoices to your customer facing staff.

STRENGTHS

Document all of the things that have worked well for you, that add something positive to your business and that set you apart from the competition (or that keep you in the game with your competitors). I always recommend my clients to recognise and celebrate their own successes by starting off with their top 3 achievements before starting their list of Strengths, it’s a great way to get the mind flowing! Here are some examples that may (or may not!) apply to your business:

• Customer facing - e.g. social media content planned and scheduled 1 month in advance, hosted 3 pop up events showcasing other local businesses

• Product, promotion & pricing - e.g. addition of lower price points attracting new customers, successful clearance of old stock

• Operational (how you do business) - e.g. fully resourced and all team members trained, new courier company improved delivery times to customers

• Key metric performance - e.g. 10% sales growth in category abc, faster stock turn than last year, 1% pt profit margin % growth, website traffic conversion improvement to 3%

WEAKNESSES

Capture all the things you know need some work, that are preventing you from ‘winning the day’ and getting the financial results you are targeting. Examples for this section include:

• Customer facing - e.g. PR and visibility, customer shipping costs

• Product, promotion & pricing - e.g. too much plastic in the range!

• Operational - e.g. limited functionality website, no dedicated resource to manage stock and orders

• Key metric performance - e.g. Christmas period traded 3% down vs LY, website traffic behind target by 5%

OPPORTUNITIES

Think broadly here. Include opportunities that are within your business but also about the big trends, the things that are important to your customers beyond their shopping experience with you, the issues that your local community are facing. Opportunities might include:

• Personalisation trend

• Local community events

• Website upgrade

THREATS

This section should be used to capture potential risks to the performance of your business in the upcoming months - both the ones that are in your control and the ones that aren’t! Possible threats include:

• Decline of high street footfall

• New online competitors

• Black Friday and industry promotional activity

OK, so I have my SWOT, what next?

Now you can use your SWOT to inform your business strategy. When presenting our SWOTs to directors, we needed to carefully assess the threats and weaknesses to ensure we always had a plan to overcome them in the forward strategy (which may or may not have influenced which threats and weaknesses were included!). When you are doing this for your own business you can be less 'selective' about what's included and, even if you don't yet have a plan for everything you capture, you can begin to look for ways to reduce the risks of threats and to overcome the weaknesses. The most important thing is that you don't just bury your head in the sand about those threats and weaknesses!

Once you have documented your strengths and opportunities, your plan for this year should include ways to build on and optimise them - they will underpin your future success!