In past articles we have recommended that agencies perform a SWOT Analysis on themselves as part of the firm’s yearly business planning. SWOT Analysis is a very effective way of identifying a business’ Strengths and Weaknesses as well as examining the Opportunities and Threats that the firm might face.
The best way to do a SWOT analysis is to take a single piece of paper and divided it into four quadrants using a single vertical and horizontal line. The top two quadrants are Strengths and Weaknesses. The bottom two quadrants are Opportunities and Threats.
List all the firm’s strengths in the top left box. The strength must be unique. If most competitors offer quality service, then that is a necessity not a strength. One of the strengths that a business owner may take for granted might be something that customers would value and that the competition doesn’t have or do. Brainstorm first and edit later. Write down words that characterize the business.
In the top right box list weaknesses—things the firm does not have, cannot do at all or does poorly. This is the time for brutal honesty, but also a time for realism. Consider this from an internal and external basis. Do outsiders perceive weaknesses that the firm does not see? Are competitors doing anything better? It is best to be realistic now, and face any unpleasant truths as soon as possible.
The lower left box is for opportunities. Look at the strengths and weakness, and evaluate if they can be leveraged into opportunities. List what the marketplace is not doing. Add items that the marketplace seems to need, and which the business could perhaps provide. Think in terms of what would benefit clients—cheaper, easier, more convenient, faster.
No organization is immune to threats. These could be internal, such as falling productivity. Or they could be external, such as changes in the direction of the insurance companies. What obstacles currently exist? Is changing technology threatening the firm’s position? Carrying out this analysis will often be illuminating—both in terms of pointing out what needs to be done, and in putting problems into perspective. List the items that could make the business obsolete, or wipe it out, in the lower right box.
With the above synapses in mind we would like to apply a SWOT Analysis to the insurance industry for an example. Keep in mind that this will be written from the agency’s perspective.
• Premium rates are increasing and so are commissions.
• The variety of products is increasing.
• Prospects expect more services from their brokers.
• Insurance companies are often slow to respond to changing needs.
• There is an increasing trend of financial weakness among the companies.
• There are more competitors for agencies to compete with banks and Internet players.
• The ability to cross sell financial services is barely being tapped.
• Technology is improving to the point that paperless transactions are available.
• The client’s increasing need for an “insurance consultant” can open new ways to service the client and generate income.
• The increasing cost and need for insurance might hit a point where a backlash will occur.
• Government regulations on issues like health care, mold and terrorism can quickly change the direction of insurance. Increasing expenses and lower profit margins will hit hard on the smaller agencies and insurance companies.
• Increasing expenses and lower profit margins will hit hard on the smaller agencies and insurance companies.
Just remember since a SWOT Analysis is a snapshot, stick to the big picture. There will be some items that will warrant deeper study after the initial analysis. Beware of paralysis by analysis—just jump in and start. Also, keep it simple and stick to what is easily known or understood. Finally, apply a SWOT Analysis to your main competitors—this may produce some interesting insights!
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