Why now is a good time to conduct a SWOT analysis

LNK Chartered Accountants are on a mission to provide valuable services to small businesses and sole traders to help them grow and maintain sustainable businesses. To do this, we proactively seek to understand the issues that existing and prospective clients are currently facing and those on the near horizon. A SWOT analysis is one tool businesses can you analyse strengths, weaknesses, opportunities and threats. The ‘weaknesses’ and ‘threats’ are where the risks lie.

For example, in light of the deteriorating economic forecast and the end of government support schemes to cover employee costs, many small enterprises will be concerned about sustaining adequate cash flow to cover expenses in the coming months. This is known as liquidity risk and too much of it can result in insolvency, which happens when a business does not have enough cash to pay its debts.

Covid has led to some large, well known enterprises declaring insolvency — STA Travel, Laura Ashley, Debenhams have all gone out of business this year due to significant falls in income that ultimately led to them becoming insolvent.

If your business is waiting on too many payments from your clients or you don’t have enough money to pay your bills, you might have too much of what accountants call liquidity risk.

Now is the time to analyse the mix of fixed vs variable cost and timing of cash inflows vs. outflows in order to make changes where you can. For example you can seek to re-negotiate payment terms with suppliers to allow you more time to pay, and source cheaper inputs used in finished goods.

Ask yourself if you know your SWOT and whether it reflects your current business and the forecast economic horizon. With solid analysis, you can take steps to bolster your strengths, manage your weaknesses, pivot towards opportunities and tackle your threats.

LNK Chartered Accountants can assist you with this analysis. Get in touch with us at www.lnkca.co.uk via our detailed enquiry form.