Introduction
I think we all know the SWOT analysis. Maybe you heard about it in school, or maybe while doing groceries. Personally, I learned about it when I was a toddler. That’s how popular it is.
All jokes aside, this tool helps businesses list their strengths and weaknesses while identifying opportunities and threats in the surrounding market. Sounds like a good tool to use for your business, doesn’t it?
To be fair, I’ve never been particularly good at listing my own strengths and weaknesses. And when it comes to identifying opportunities and threats, I sometimes lose track of what I was doing in the first place. But still, I see a lot of value in using SWOT as a self-awareness tool for small businesses and startups.
That being said, asking critical questions is one of my favorite hobbies. So let’s get into it.
The Basics
The SWOT analysis is a widely used tool, and for good reason. It can provide clarity in a chaotic business environment. Especially for startups, where resources are limited and uncertainty is high, SWOT offers a structured framework to help define their current position. It forces entrepreneurs to critically assess their company’s internal capabilities and external environment, potentially preventing impulsive, intuition-driven decisions.
The self-awareness gained from a SWOT analysis helps entrepreneurs narrow down their strengths and acknowledge their weaknesses. Many startups fail due to overconfidence and a lack of risk assessment. It’s also valuable to research external opportunities and threats because, as Dess, Lumpkin, Eisner, and McNamara (2012) mention, a strength doesn’t necessarily lead to a competitive advantage. A company may excel in something, but if it doesn’t align with market demands, it’s useless.
Startups and small businesses benefit from tools that help them focus on key elements of their business. Unlike complex strategic models that require extensive data collection and market research, SWOT is relatively simple and accessible, which makes it a suitable tool for beginners.
But I promised to ask critical questions, so I will.
The Limitations of SWOT Analysis
While SWOT has its strengths (no pun intended), it is far from a perfect tool.
First, it is static rather than dynamic. No matter how well it is filled out, SWOT provides only a snapshot in time rather than an evolving analysis. As Dess et al. (2012) highlight, SWOT is a one-shot assessment of a moving target. The external business environment changes constantly. Which means that today’s identified opportunities and threats may be irrelevant in just a few months. This is especially problematic for startups, which often pivot rapidly based on new market insights.
Another major concern is subjectivity. As Hill and Westbrook (1997) argue, SWOT is often influenced by personal biases and assumptions rather than objective data. Startups, especially those without the resources for in-depth market research, may misjudge external threats and opportunities. This leads to misguided strategies that either overestimate their position or underestimate risks.
Finally, a lack of specificity weakens SWOT’s effectiveness. The tool only adds value when used strategically. If a startup fills in a SWOT analysis with vague opportunities and threats, the exercise becomes meaningless. Without clear prioritization, it turns into an overwhelming list rather than a focused strategy. This could leave entrepreneurs feeling even more unclear than before.
I like SWOT. I really do. But I also know it’s not a magical solution to the challenge of starting a company. Like every other tool, it should complement a business, not force businesses to fit within its structure.
And yes, I know it feels a bit criminal to suggest changing a tool that was developed in 1965 (then called SOFT) by Robert Franklin Stewart. But a tool should adapt to serve the business, not the other way around.
Should Startups Use SWOT at All?
Given these limitations, should startups and small businesses even use SWOT?
The answer depends on how it is used. SWOT should not be treated as a rigid or definitive roadmap. Instead, as Dess et al. (2012) argue, it should be a temporary awareness-raising exercise. Like a starting point rather than a final strategy.
If used correctly and supplemented with deeper analysis and concrete action plans, SWOT can be valuable. But it needs to be approached with the right mindset.
How to Use SWOT Effectively as a Startup
For startups that decide to use SWOT, these best practices can maximize its effectiveness:
- Start with External Factors
Instead of beginning with strengths and weaknesses, startups may benefit from analyzing opportunities and threats first. As mentioned earlier, strengths don’t necessarily lead to a competitive advantage. It depends on external factors. By starting with the external market, startups avoid a narrow, self-focused strategy and ensure their internal planning aligns with real-world conditions.
- Prioritize Key Insights
Instead of listing dozens of vague items, startups should focus on the top one or two most critical strengths, weaknesses, opportunities, and threats. This keeps the analysis actionable rather than overwhelming. (I know… this will be hard.)
- Combine SWOT with Other Tools
SWOT has limitations. To compensate for it, it should be used alongside other frameworks, such as:
- PESTEL Analysis (examining political, economic, social, technological, environmental, and legal factors)
- Porter’s Five Forces (assessing industry competition)
That being said, this isn’t school. You don’t need to use frameworks just for the sake of it. They should complement your business, not complicate it.
- Translate SWOT into Actionable Strategies
A SWOT matrix alone doesn’t provide a strategy. Startups should ask:
- How can strengths be leveraged to capitalize on opportunities?
- How can weaknesses be mitigated to counter threats?
- What specific actions should be taken in response to these insights?
Without these follow-up steps, SWOT remains a theoretical exercise rather than a practical tool. And let’s be honest, startups don’t have time for theoretical exercises.
- Keep SWOT Dynamic
Instead of treating SWOT as a one-time exercise, startups should revisit and update it regularly. This ensures that strategic thinking evolves as the business grows. It also removes the pressure of trying to create a perfect SWOT from the start.
- Know When to Stop
Have I mentioned I’m not great at filling in SWOT tools? It’s because I get sucked into the process and lose sight of its true purpose: clarity. Knowing when to stop is just as important as filling it in.
Conclusion
I’ve used SWOT for years, and I know it’s not perfect, but it’s not useless either. Its effectiveness depends entirely on how it is used.
Ultimately, SWOT should be a tool that serves the business, not a framework that dictates its decisions. (That sounded pretty, didn’t it?)
If treated as a flexible, evolving tool rather than a rigid strategic plan, SWOT can provide valuable insights. However, relying solely on SWOT is insufficient. To build real competitive advantage, startups must supplement SWOT with deeper research and concrete action steps.
When used correctly, it can provide clarity, but it should never replace market validation, proactive experimentation, and adaptability.
Besides, making some intuitive decisions is what makes startups and small businesses fun. Make sure to leave some room for following your gut.
