There are signs that things are getting better. Some have even suggested that the recession is over. Let’s hope so. For many businesses like yours, it’s been a tough year. Who knew when you put together such an aggressive growth plan back in the fall of 2008 that things would go so wrong so fast. That doesn’t mean that planning “doesn’t work.” But it might mean you need a little refinement in the process.
Before you tie a ribbon around your strategic plan for 2010, make sure you’ve done a thorough assessment of your strengths, weaknesses, opportunities and threats.
S W O T
Another aspect of the planning process is to create a baseline for where you are today compared to where you could be in the future. Often referred to as a SWOT analysis (Don’t you just love those acronyms?), your baseline provides both a retrospective and a prospective view of your business.
There are a few simple rules.
SWOT is subjective. Some of the information you look at to complete the SWOT analysis are fact based, but understanding whether the facts create threats or opportunities requires judgment. Is the fact that you have X number of carriers writing an average of $YYY,YYY create opportunity or does it mean that you do not have as much capacity as your competition?
- Be realistic about the strengths and weaknesses of your organization.
- Be specific. Avoid grey areas.
- Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
- Keep it simple. Avoid complexity and over analysis
Strengths and weaknesses are generally internal to the company. Opportunities and threats are usually external forces that may impact the company. Strengths are to be built upon. Weaknesses are to be minimized or eliminated. Opportunities are to be capitalized upon and threats are to be overcome.
Sometimes the lines can become blurred between strengths, weaknesses, opportunities and threats. For example, in one agency, an analysis of the current personal book of business indicates it is aging rapidly. Most would consider this a weakness, or even a threat. Attrition usually accelerates with the age of the book. The agency could address that weakness by targeting a younger clientele and/or targeting the older book for sales of long term care coverage.
Strengths are clear capabilities of the firm that you can rely on to compete and succeed. Be sure to identify your company’s key capabilities so that you can use them to help you develop and meet your goals. For example, “Our educational commitment has made us more knowledgeable about coverages and better able to act as risk managers to our small commercial clients than our competitors.”
Weaknesses are current characteristics that could cause trouble now or in the future. Ideally, you make plans to eliminate weaknesses. However, if you cannot eliminate them, you need to compensate for them or at the very least avoid the most negative effects. For example, “We recently expanded the agency and bought new automation equipment which has had a negative impact on our cash flow.
Opportunities are realistic options to exploit or capitalize on a situation, to strike out on a new path, or to move out of your comfort zone and change something. For example, “ABC Agency has a good book of business and the principal wants to retire. This may be a good acquisition for us.
Threats are things that could hurt your business in a substantial way. They can come from inside or outside your business. They are things for which you need a game plan to take them head on. For example, “The market continues to be soft/competitive while the economy is weak.”
We suggest you involve your staff in determining your company’s strengths and weaknesses and the threats and opportunities that will affect your company in the future. Ask employees to provide their input through formal or informal surveys. You’ll also want to have
- Fact based information and the ability to compare it to Industry benchmarks or your own standards and goals.
- Results of Customer surveys or other feedback mechanisms.
If this seems daunting, it need not be. There are tools available to help you organize the effort – enter SWOT into your Internet search engine if you want a really long list. If you want tools specifically designed to support independent agents/brokers, send an email to firstname.lastname@example.org or check out this page on our website. Or give me a call.
But definitely, do not skip this part of the planning process. The strengths, weaknesses, opportunities and threats you identify will form the basis of developing your goals and game plan. With a solid SWOT you can plan to…
- Match strengths to opportunities to create competitive advantage
- Convert threats and weaknesses into strengths and opportunities
- Maximize strengths and opportunities
- Minimize or mitigate weaknesses and threats
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