I’m about to wrap up the SWOT analysis series. While you may not realize it, you are doing a SWOT analysis every time you make a big decision. You’re just doing it in your head.
Weakness, Opportunity & Threat analysis – a real world example
I was chatting with my friend Shuna the other day and the topic of SWOT analysis came up. She wasn’t clear on what that was or how it would apply to her, which completely astonished me. “But, you just went through this a couple of weeks ago, don’t you remember?” was my shocked response. To her amazement, I explained how she had done this and she kindly agreed to let me document this here so you could learn from it.
SWOT Case Study #1 – South Sound Massage Education – Business Expansion
You’ve read before as I’ve made the case for continuing education classes in smaller communities. This came about because a few of my friends and I all teach continuing ed classes, one of whom has a great space for this purpose. As we were all trying to come up with ways to get the word out that we teach here in Olympia, Shuna decided to put together an advertising brochure that features massage CE courses offered in the cities south of Seattle, namely Olympia and Tacoma. She calls it South Sound Massage Education.
Here is a SWOT analysis of the business I did:
The advantages Shuna could take advantage of are:
- Affordable, large classroom space suitable for massage therapy
- Several instructors in the area eager to teach in the local community
- Contacts with other people who have done a similar listing who were open to advise her
- Lots of experience teaching at several massage schools
- Lots of experience teaching CEs
Here are the things that could limit her ability to expand into this business
- Cash flow
- There are a large number of MTs located in the southwest region of WA state
- The target mailing list could be doubled by adding the southern half of Pierce County, which would include Tacoma
- There are MTs and instructors who would like to avoid travelling to Seattle to take a class
- If there aren’t enough students to sign up for classes, instructors won’t advertise, and the project will whither
A successful launch in July
Covering just the southwest region of WA, the SSME publication launched. Shuna covered the initial launch with her current cash reserves and initial advertisers (instructors placing course listings). Students have been signing up for classes. She has steadily gained more advertisers as other local instructors have seen the mailing arrive at their door.
But let’s look at that Threat again. In order to keep her current advertisers and get new ones, classes need to be filling up. She could increase that possibility by expanding her distribution to the Tacoma area.
Threat + Weakness = Dilemma
Expanding to Tacoma would double the readership of the listing but would also double her cost for printing and postage. With limited capital and cash flow at this point, it would be difficult to expand without running at a loss for a few months.
Possible strategies for her are:
- Wait until the listing generates enough revenue to expand
- Take out a loan to cover the first several months of expansion
- Spread out the expansion one zip code at a time
Wait until the listing generates enough revenue to expand
This has the advantage that it never generates debt. The disadvantage is that the project may die a slow death because there aren’t quite enough available students in the mailing list to keep all of the instructors’ classes full. This wouldn’t be the first business to suffer this fate for want of a little cash infusion.
Take out a loan to cover the first several months of expansion
Business loans are how many small businesses raise money for expansion. The disadvantages are: it takes time to apply and be approved for the loan, there are interest payments to be made, and banks are not in a lending mood right now.
Spread out the expansion one zip code at a time
Since the mailing distribution is done by zip code (postal code), by strategically adding to the distribution a few zip codes at a time, Shuna can limit her spending increases. By expanding to the nearest zip codes to the area, she can measure the response to the new market and see if classes fill up sooner. If classes fill up, she can also approach CE instructors in the Tacoma area for advertising in the class listing, which would increase her revenues and allow her to expand to another zip code.
The Big Decision
Shuna ultimately decided to expand her distribution by adding zip codes. She made this decision after having a couple of conversations with some trusted advisors. These conversations were an informal SWOT analysis.
Here, she has taken a weakness, lack of capital, and found a way to make it work for her or to work around it. That’s how you handle a weakness that could get in the way of an opportunity. Not dealing with a weakness that contributes to a threat would ultimately cause harm to the business.
How to apply this to your practice
At some point, your business is going to reach a crossroads. Whether you are looking at a potential loss of business, like me, or an opportunity to expand your business, like Shuna, you will be faced with a big decision to make.
When the decision isn’t obvious, walk yourself through the SWOT process. Have you considered all of the possibilities for funding and the pros/cons? Have you considered what would happen if you put off making the decision? Would you be able to double your revenues by getting a small loan to equip a second room and hire another therapist? Would you be able to increase your personal income by striking out on your own instead of working for someone else?
SWOT Analysis can help add clarity when a big decision needs to be made
Think back on the last few years of your business or practice and all of the decisions you’ve made. Now look back on the SWOT analysis.
Have you already done a SWOT analysis of some sort? Would the decision have been different if you had done a SWOT analysis? Leave a comment and let me know.