SWOT Analysis for Construction Companies

Behold the mighty hammer, the trusty vise grip, the handy box cutter and the versatile duct tape — they’ve stood the test of time. Neither lithium-ion batteries nor lasers have displaced them from the Pro toolbox. Even the smartphone has failed to diminish their indispensability.

You can’t say that about many tools in the building trades these days, but there is another that contractors have used for decades to improve their profitability. It is the SWOT Analysis for construction companies.

In many ways the SWOT analysis for construction companies is as simple, powerful and versatile as the hammer. You use it to ask four basic questions about your organization:

• What are our Strengths?
• What are our Weaknesses?
• What are our Opportunities?
• What Threats do we face?

Any astute business person is likely to ask these questions on his or her own, but the visual nature of a SWOT analysis and the framework it provides for a meaningful and systematic analysis has won many adherents.

To be or not to be?

It remains as effective today as it did in the 1960s, when it gained popularity as a way to assess the pros and cons of launching new products, ventures, marketing campaigns, technology, research projects and cost-cutting programs, as well as other initiatives. Today, it’s widely used by investors to assess stocks.

Below we show how a young carpenter we described in an article on target marketing might fill in a SWOT chart. Our fictional carpenter is thinking of starting a remodeling company to help empty nesters in an affluent suburb of Charlotte, NC convert extra bedrooms into apartments for their aging parents, boomerang kids or rental income.

Even this simple chart helps provide insight into how our carpenter can build on his strengths to offset his weaknesses.

For instance, one of his weaknesses is a lack of resources. He has little to no money to spend on marketing, which means he will have to rely on word of mouth, his website and social media, which happen to play to his strengths. He already has more than 1,000 followers on social media and enjoys blogging, so why not focus on building his brand online? There he can look just as big and sophisticated and professional as much larger, more established competitors.

Not so fast

Of course, there is a lot more to conducting an effective SWOT analysis for construction companies than filling in a table.

“Generic SWOT templates . . . are easily found and downloaded from the internet,” says SCORE, a nonprofit that pairs entrepreneurs with retired business executives for mentoring. “But without expert guidance in researching and completing a SWOT analysis, it may lead to dismal strategic decisions and planning.”

There are also a lot more ways to use SWOT analyses than evaluating whether to launch a company. The process is widely used by existing businesses to analyze and improve their operations, according to a free one-hour SWOT webinar presented by SCORE mentor John Harmon.

How to a SWOT analysis for construction companies right

Here are some tips from the webinar, which includes a SWOT analysis of a high-end residential remodeling contractor eager to break into commercial projects 29 minutes in:

• Leverage your size:

  Understand that what you lack in size you gain in focus and nimbleness. Sole proprietors can seize opportunities much faster than companies with multiple levels of management.

• Solicit input from others:

  Be sure to get input from employees, customers, suppliers and colleagues (such as architects and fellow subcontractors) when filling out the form. Don’t rely on your own perceptions. See if a SCORE mentor is willing to help you set up and moderate a SWOT panel.

• Avoid generalizations:

  Don’t list customer service or quality craftsmanship as a strength unless you can cite specific examples to back up your claim. For instance, what specific skills, tools and technologies have you mastered that separate you from the pack: installing coped molding joints, using the latest substrates to build tile floors that don’t crack, creating the most precise templates to install granite countertops that will never sag or separate at the seam, ? Do you use a 15-point checklist to make sure you leave job sites safe and clean at the end of the day?

• Rank your entries:

  Rank every entry in each quadrant of the chart in terms of priority so you can determine which to focus on first.

• Create an action plan:

  Translate your findings into a one-year action plan with quarterly goals.

Following this list, our carpenter might draw up a plan. In the first quarter of operations, he could focus on listing in a half dozen online directories and gathering testimonials and before-and-after photos from former customers. In the second, he could refine his value proposition. In the third, he could optimize his website for search engines. In the fourth, he could evaluate customer reviews and lead generation sites.

He might also want to focus on boosting his credit score by at least 10 points. This will help him qualify for better interest rates on business credit cards and prepare for the day he will need to apply for a loan if he decides to add a new Ram 3500 Chassis Cab with custom upfitting to his toolbox.