When Bruce Butterfield came on as CEO of Ambassador Home Improvements, he immediately did a SWOT analysis. Now, he relies on his department heads to help assess strengths, weaknesses, opportunities, and threats at the Harrisburg, Pa., firm.
Jim Mirando of Excel Interior Concepts amp; Construction began doing SWOT analyses during M.B.A. school four years ago. He now does one every year at the Lemoyne, Pa., company.Using SWOT analyses, other remodelers, too, have acted on opportunities to open new business lines, often a gutsy move in down economies but made less stomach-churning by these analyses.
These owners understand that steering a business isn't a static event. Conditions change -- constantly. A SWOT analysis takes a snapshot of internal and external conditions and provides a platform to retrench or launch into another position.
Successful SWOT analysis is like good psychoanalysis: If you truly seek to "know thyself," you'll succeed. A good SWOT assessment allows you to step outside pride-of-ownership biases to reflect on the strengths and weaknesses inherent in your company.
SWOT analysis is especially valuable in helping a company differentiate itself, says Stephen Wilson, of Biz-comm, a Reston, Va., marketing communications firm, and a Remodeling contributor. "It's an information- and fact-gathering tool in the decision-making process," he says. "It's important all the time, in boom or bust economies."
As Butterfield has learned, SWOT helps refine business systems and can be the underpinning of business planning.
"It wasn't new information," says Mirando of his first SWOT, "but it wasn't information I had pondered and put on paper before. It was like lifting a curtain. I learned there are strengths we have that others don't have and that our own staff didn't think about or realize."
Part of SWOT involves competitive analysis. That term doesn't sit well with those on friendly terms with competitors, but "the idea is not to put the other guy out of business," Wilson says, "but to learn what they do, then do what you do best."
So what do you need to know? How do you find out? Then, what do you do with your newfound "intelligence" to spur change?
Finding out what you need to know
Mirando believes the internal components of SWOT planning are the most important. "I don't see a lot of what the competition is doing as a benchmark," he says. "A lot of the standards are too low."
Assessing strengths is one of the easier aspects. In Mirando's recent SWOT, he listed "raving fan" clients, low employee turnover, the largest showroom in his area, and effective systems. Strengths can be determined from employees and customer surveys.
Butterfield, who says SWOT analysis is 75% internal and 25% external, quarterly gauges his department heads -- in marketing, sales, production, administration, finance, and information technology.
Business owners don't think much about weaknesses, and Butterfield feels that unless owners give employees a way to confidently convey weaknesses to their boss, owners will never root out their problems. His internal assessments have led to a better company Web site, better compliance with state regulations, and the discovery that some employees didn't believe the company would reach its annual revenue goal. From that, he found out why they felt that way, then "went to work on building their belief systems."
External analysis requires information obtained from a variety of sources. And you don't have to be sneaky to get that information. Wilson advises against "red herrings" -- asking a neighbor to call up a competitor, for instance. The easiest method may be asking competitors to lunch.
Here are some suggestions from Mirando and Wilson about what you need to know about the "other guys":
* Niches and specialties.
* Annual volume.
* Market share (determined from building permits).
* Price (from permits).
* Strategy (from permits, client surveys, marketing materials).
* Financial strength (more below).
* Customers (age, income, location).
* Levels of quality, service, salesmanship, and professionalism.
* Staff makeup.
* Reputation and service features. (What do their brochures say? What do their trucks advertise?)
Obtaining this information takes time and investment. One of Wilson's clients paid an intern to research permits in a five-county area to determine who was getting work, the job sizes, and who was contracting it. Then, competitors' past clients could be called and asked about the quality of service. Wilson suggests that a third party do this. All this information helps you learn how you can sell against your competitors.
You can determine your competitors' financial strength by checking with the Better Business Bureau or suppliers and subcontractors. Do they pay on time? It's easy, too, to look up a company on Dun amp; Bradstreet ( www.dnb.com). For about $112, you can get a profile of owners, possible hidden owners, a range of volume, and how financially strong they are, including any reserves.
Mirando keeps files on competitors, filled with newspaper and magazine articles, ads, brochures, and mailings. He listens when prospects or clients talk about their experience with other remodelers. And he takes notes after conversations with competitors. He also visits their Web sites and their home-show booths.
Wilson says Web sites give clues to how companies are doing financially, or if they're hiring, as many sites have an employment page. If the form hasn't been updated in some time, they're not hiring or don't have a large turnover. Vendors and subcontractors are also good sources of information.
"I don't worry too much what the competition is doing," Butterfield says. "I look for trends, like if all of a sudden I notice a company concentrating on sunrooms vs. windows. Why are they doing that? Is something happening with market saturation on windows?"
The more worthy the competition, the more you should learn about them, says Wilson. Tracking all competitors in your market doesn't make sense. Tracking those plying your niche does.
From information to action
There are several ways to boil down the information you collect to make it useful. Wilson uses several forms and formats, among them the one on page 78, which lists strengths, weaknesses, opportunities, and threats and then prompts the person completing the form to exploit the positives and neutralize the negatives. Wilson also uses a form like the one at right to assess how a remodeler stands up against the competition and to find differentiation points. "The differentiation tells you what you do well, so you can spend more time doing those jobs that make the most profit," says Wilson.
Collecting and analyzing this kind of information is ineffective if you don't act on it. Often, business owners take each strength, weakness, opportunity, and threat and turn them into "initiatives" on spreadsheets. This way, each initiative states the problem and mission and can be assigned to a person with due dates, "deliverables," and named participants.
Remodelers doing SWOTs say energy is often high at the start but that the tendency is to lose momentum after that point. Converting the analysis into a format such as a spreadsheet helps maintain the momentum.
Wilson says his clients often fail to act on their results, partly because of cost. For a consultant like him to do an analysis and client survey, it could cost as much as $10,000. To act on findings from that SWOT means more investment. But if a summer intern does the legwork, you could cut costs by half, leaving money to fund new marketing or internal initiatives.
Those companies that do act change internally, developing plans to further define themselves in their neighborhoods. When they do, they gain a market edge.