SWOT analysis and the family business

12 Sep 2016

By Michael Burton

In my career as an accountant and Private Client Adviser, I am astounded by how little priority is given to the SWOT analysis by both individuals and businesses.

SWOT is an acronym for strengths, weaknesses, opportunities and threats. It ensures that objectives are clearly defined and all relative factors are properly identified. A SWOT analysis can be applied to any situation and can be a measure of success.

For example, a sports coach will advise to work to strengths but understand weaknesses. The game plan is to capitalise on opportunities whilst taking out the threats that may prevent the achievement of goals.

In service industries, the loss of a client or prospect conversion can drive even the best adviser or consultant to consider what they did wrong rather than appraise engaged clients, ask what they enjoy about the relationship and apply this positive attitude across all clients and prospects. Threats are not learning from mistakes or competitors with positive attitudes, confidence and ability. The opportunities are to achieve these qualities and more.

Family businesses face the same issues. But family businesses are also about passing on a legacy. The first generation might encounter difficulties, but the next can use lessons learned from such experiences to help them.

Many successful family businesses have combined hard work and courage with being in the right place at the right time with theright idea. Many started with a gut feel, no business plan and just enough money to buy that first truck or dive vessel. By adding tangible ‘value’ to a customer, one truck turned into three and one vessel into a dive operation.

The founders of these businesses understood value. They knew they had something special to offer customers that would improve their lives. This led to the referral of more customers and so on.

Then a second generation comes along, and a third and all of a sudden the ‘right place, right time’ theory is challenged as market forces and competition force a change in mindset from family business to family in business.

Business planning then becomes essential. I have a favourite saying, ‘If you can’t measure, how can you manage?’

This leads me to SWOT analysis, one of the most favoured analytical business tools to aid in decision making.

In practice, the order of SWOT should be revised to WSTO, as the end game is to turn weaknesses into strengths and threats into opportunities. Once the analysis is complete, the course of action required to meet objectives and address obstacles can be determined.

The components of SWOT are:

  1. Strengths. What makes the business what it is? These are attributes that have created financial and personal success for both the owners and the staff and can be used to create a competitive advantage. Examples include:
    • location
    • values
    • respect and reputation
    • management skills
    • industry knowledge
  2. Weaknesses. What factors could prevent the business from achieving successful results? These are generally internal issues and may relate to both family and industry matters such as rivalry, capital funding and communication. If unaddressed, they could delay a project or even bring a business to its knees. Examples are:
    • poor leadership
    • lack of training
    • no measurement metrics
    • poor quality work
    • ‘mates rates’ or freebies
    • lack of role back-up.
  3. Opportunities. Opportunities are external factors that, if capitalised on, can help a business or project achieve its goals, for example working with a marketing consultant to introduce a new product line to the target market or enhance the company profile. Opportunities include:
    • rental of unutilised capital equipment
    • enhanced technology interface for customers
    • joint ventures
    • utilisation of staff
    • training courses
    • staff selection
    • management reporting.
  4. Threats. Threats are external factors that could jeopardise the business or the success of a project. For example, the departure of a staff member who has become indispensable could affect client relationships and revenue. Other threats include bad company reputation, legal cases against the company and no market for the product, as well as:
  • regulatory change
  • competition
  • family disputes
  • increased material cost
  • poor staff morale
  • loss of contracts.

It is the role of a facilitator to introduce SWOT to organisation owners, being mindful that it’s not just owners who have ideas. In fact, it’s often employees at line level and below who provide answers.

As an example, I recently introduced SWOT analysis to a family business. Having had a monopolistic offering since 1978, the business is now under threat for the reasons mentioned above.

To do nothing would be to invite the eventual demise of the business. A well-known example is Eastman Kodak, who introduced the first automatic snapshot camera more than 110 years ago, making photography an integral part of peoples’ lives. However management failed to grasp that the world was becoming ‘instant and disposable’ not ‘wait and store.’ Kodak missed the technology boat along with many other once household names.

So when working with this family business, I asked the owners to allow me to introduce staff to SWOT analysis. White boards were used to identify key points for each category.

I then excused the staff and invited stakeholders to perform the same exercise. The answers were then cross referenced to determine what the staff and management agreed on and, more importantly, where differences existed.

Stakeholders were astounded at the results and, on some points, dismayed they had not seen the strengths, weaknesses, opportunities and threats their staff had clearly identified. Business owners often become too close to micro-matters and in the process disregard the macro.

Introducing SWOT to your business, sporting or personal life will open up a whole new world of achievement and success.

If you wish to know more about how to introduce SWOT analysis to your business, contact me through Family Business Australia, call me directly on 03 9605 9702 or email michael.burton@sfg.com.au

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