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Do a SWOT Analysis on Your Farm

Brainstorming new farm enterprises or deciding upon changes in existing ones often spawns a scattering of seemingly unrelated ideas offering no clear pathway to right choices. Charting a direction from the diverse thoughts can be helped by conducting a SWOT analysis of a potential or an existing business.

The process is a way of analyzing an enterprise’s strengths, weaknesses, opportunities, and threats. These can be evaluated and compared against each other to determine how one area may or may not cancel out the other, suggesting success or failure of the new idea or proposed change in direction. The analysis may also point to managerial issues requiring modification.

“A SWOT analysis is a process that can help you and your team get insights into the past and think of possible solutions to existing or potential problems for your business,” says Lynn Kime, senior Extension associate at Pennsylvania State University.

“Participants in our SWOT workshops have told us the process opened their eyes to possibilities and drawbacks of new or existing ventures,” he says. “Some have reported that valuable ideas came to light as a result of going through the process.”

Kime suggests the following steps for conducting a SWOT analysis of a new or existing business.

Get everyone involved. “For a SWOT analysis to work well, every member of your team must be involved in the process,” he says. “Team members might include your family and employees, your lawyer, accountant, and insurance agent.”

Let the ideas flow. Before delving into the nuts and bolts of the analysis, first lay out ideas relating to goals and direction of the existing or envisioned enterprise. In intergenerational groups, this open exchange may borrow from the benefits of experience, which are often cautionary. Yet, it also encourages the optimistic and more freewheeling vantage of youth.

“Encourage a frank discussion and an understanding that there are no bad ideas and anything is possible,” says Kime. “This is a time for ideas to flow freely. When done in the right spirit, this discussion offers all team members a chance to express their opinions.”

Define goals and objectives. From this freewheeling discussion, then craft the goals and objectives for your farm or ranch. Later, the four points of the actual SWOT analysis can be evaluated against the backdrop of these goals and objectives.

Identify strengths. Listing strengths is the first step in the four steps of the actual SWOT analysis of a new or an existing enterprise.

“Strengths are considered mostly internal,” says Kime. “For example, what do you and your family, employees, and management team bring to the business? If you are planning to start a business, you may have previous experience in the industry you are considering. If not, this may be viewed as a weakness. Although, you may have an employee or member of your management team who has prior experience in the industry you are planning to enter.”

Examples of strengths for existing businesses could include years of expertise, an understanding of your business history, and your pathway to present success. Perhaps your family is supportive or you have loyal employees and a skilled management team.

Ferret out weaknesses. “Weaknesses are also considered mostly internal and are the items you will need to address for success of your business,” says Kime. “If you are a start-up business, an example of a weakness may be a lack of experience in the selected industry. Or, you may lack qualified employees or the full support of family members.”

Additional weaknesses could be the lingering effects of previous poor decisions, a high turnover in employees, insufficient capital for equipment, or a high short-term debt load.

“The weaknesses will need to be addressed so your business can be successful,” says Kime.

Pinpoint opportunities. These are mostly external. For example, potential start-up businesses may have access to grants or low-interest loans. Opportunities might  include local consumers seeking products you hope to produce.

Take stock of threats. “These are threats from outside of your business that will directly impact you, things over which you may have very little control,” says Kime. “If you are starting a new business, you may have the threat of local regulations negatively impacting your business. Unforeseen local or foreign competition, dissolution of markets, and adverse weather may also have a negative effect on your new business.”

Review the four points. After going through the process, it’s time to discuss. “Let the ideas flow,” says Kime. “Evaluate ideas for how they impact business in the short term as well as the long term.

“Keep in mind that one point of the analysis may offset another,” he says. “For example, your strengths may combat your weaknesses, and your opportunities can offset your threats. If this does not happen, you will need to find ways to correct the imbalance.”

Find ways to strengthen weaknesses. If weaknesses arise from a lack of skill in certain areas or shortages in management, hiring qualified employees could be a way to transform these weaknesses into strengths. Or, purchasing equipment to perform some type of disliked hand labor could be strengthening, as could the transfer of certain field operations to custom operators.

Discuss offsets for threats. Insurance coverages can downsize threats from liability, fire, vehicle accidents, and crop failures. Marketing threats, for example, require creative brainstorming in order to find ways to reduce risk from unforeseen competition and downturns in price or demand. Creating contingency plans could provide an orderly response to unexpected adverse events such as equipment breakdowns or even deaths in the family.

Review annually. Conducting an annual review of the SWOT analysis helps the goals and activities of an enterprise stay abreast of changes in markets, production conditions, and status of team members’ involvement.

In sum, conducting the analysis offers the far-reaching benefit of strengthening relationships between members of the family and with employees, as well.

“The biggest benefit of the SWOT analysis is the communication that results between family members and other members of the business team,” says Kime. “When people talk things out, a lot of problems can be eliminated or made much smaller.”

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