SWOT Your Business Finances

Have you ever carried out a SWOT analysis on your business finances?

Let’s start with what this means before we talk about why you should do it.

A SWOT analysis is a strategic planning method used to help a person or business identify strengths, weaknesses, opportunities, and threats. It is a highly effective way of improving many areas of your business, particularly your finances. I’ve recently done one for my own business as part of my annual review process and it’s highlighted some really important things that I will take action on in early 2022.

While a traditional SWOT analysis includes many areas of your business (HR, Operations, Marketing etc), completing a SWOT analysis for your business finances gives you a clear, easy to understand and logical overview of the current financial situation.

It will help you identify those things that are going right in the business and those things that might need changing. Either way, it will assist you in building out your goals for the next year by helping you identify those areas to focus your time, energy and resources on.

 
 

So, how should you do a SWOT analysis of your business finances? You want to break each section down and look at what’s working and what’s not working right now in your business. No two businesses are the same, so there is no set formula for this. However, below I’ve included some examples that might get you started:

Strengths

  • Monthly recurring revenue - clients on a retainer basis

  • Regular launch cycle that makes revenue more predictable

  • Solid processes and routines: eg. Monthly money day, regular bookkeeping, up to date financial information

  • Cash Reserves: you may have cash pots for vat bills, income tax, expenses etc

  • Consistent and growing paycheck: as the owner you are the first person that should be getting paid from your business

  • A budget: your roadmap for the coming year, use it as a tool that you regularly check in on (see Money day above!)

  • Cash plan: you have a clear idea of what you are doing with the funds that come into your business every month

Weaknesses

  • You have no financial information to help you make decisions in your business

  • Backlog of bookkeeping

  • Tax filings (P30/VAT/income tax) are not up to date

  • No budget or cash plan- you are reactive rather than proactive

  • Not measuring staff performance- is this costing you in terms of productivity and hours paid?

  • No sales plan in place which makes forecasting income very difficult

  • Your knowledge around your business finances- do you have a knowledge gap that you need to close?

Opportunities

  • Potential upselling for existing clients

  • Introduction of a referral scheme for existing clients to bring in new business

  • Bundling of offers to bring in new clients

  • New offerings that can be launched during low income months

  • Digital products

  • New supplier arrangements to might help reduce costs

Threats

  • Competitors- we all have them! What are you doing to differentiate yourself?

  • Cost of entry- particularly if you are a service based business, new competitors might not need a lot of upfront capital to start in your sector.

  • Length of term in your contracts- are you creating a threat that clients can walk away after you’ve invested in each other? Should your contract terms be longer?

  • Cash reserve- how long can your existing cash reserve hold if you have a low or no income month?


Look at your strengths and opportunities lists and identify ways that you can use existing strengths to leverage those opportunities as best as you can. Is there an opportunity that can be quickly capitalised on because you already have the capability or resources to do so?

Review your weakness and threats together and think of those things that need action immediately. Where is the business most exposed and why? What things are on those lists that can be dealt with by simply changing your practices and routines? How can you rank the rest of the items in order of importance and urgency?

You can see how this review can quickly create actionable steps that can be built into goals for your business.

For example, a strength might be that you have a group of monthly retainer clients. What if you created a referral system (opportunity) targeted at this group of people which could then bring in similar clients to your business over time? The goal here might be to create a referral scheme with a bonus for recommendations if the person signs up as a new client, then communicating this new scheme to your existing client base.

Likewise, a weakness in your business might be your knowledge of what you need to be doing in this area as the business owner. An associated threat could be related to your cash reserves. Do you know how much you need to have in place in the bank to have a reserve for 3 months of business expenses, or how you will be affected by a low income month? The goal based on this might be to upskill around business finances, whether that’s through a course or book.

I hope you find this information helpful! As business owners we can get so caught up in the day to day running of the business, that taking a step back to review how things are gets pushed to the side.

If you are interested in my annual Review and Reflect checklist, click on the link here to get a copy to your inbox!

Edel Hayes