Financial SWOT Analysis: What It Is and How to Use It

Ad Blocker Detected

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by disabling your ad blocker.

SWOT analysis is a strategic planning tool used to identify the Strengths, Weaknesses, Opportunities, and Threats affecting a business. An interesting variation on SWOT analysis is the financial SWOT analysis, which provides insight into those same four areas, but with a financial focus. In this article, we’ll look at the basics of financial SWOT analysis, including what it is, when to use it, and how to use it!

What Is Financial SWOT Analysis?

Financial SWOT analysis is a business analysis tool that helps to identify the financial Strengths, Weaknesses, Opportunities, and Threats of an organization. It’s an adaptation of SWOT analysis — which analyzes those same traits without a financial focus — commonly used in financial planning.

Let’s look at the four areas of SWOT analysis in depth:

  • Strengths: These are things that play to a business’ benefit. In the case of financial SWOT analysis, this may include large cash reserves or positive monthly cash flow.
  • Weaknesses: These are things that play to a business’ detriment. For financial SWOT analysis, examples include lots of debt or negative monthly cash flow.
  • Opportunities: These are things which could benefit the business, but do not currently. Financial examples include possible cash investments or new revenue streams.
  • Threats: These are things which could disadvantage the business, but do not currently. Examples of financial SWOT analysis include non-paying customers or interest rate hikes.

Financial SWOT analysis is designed to give an overall picture of an organization’s current and potential financial standings. It helps to understand how an organization is faring financially at present (thanks to the Strengths and Weaknesses identified), and offers insight into potential events that might dramatically change its finances (the Opportunities and Threats). This can help an organization to plan both financially in accordance to international tax laws, by knowing what revenues and expenses to expect, and strategically, in knowing how to pivot to optimize its financial standings.

When to Use Financial SWOT Analysis

Like other business analysis tools, financial SWOT analysis can be used at any stage before or during a business venture. For example, companies might use financial SWOT analysis to evaluate a new business opportunity, with the goal of identifying what the associated benefits and risks are from a financial perspective. On the other hand, companies could use financial SWOT analysis to evaluate their current financial standings and any eminent Opportunities and Threats, so as to optimize their business plan for the future.

How to Use Financial SWOT Analysis

Conducting a financial SWOT analysis is just like conducting any other SWOT analysis. This means the bulk of the work lies in identifying relevant Strengths, Weaknesses, Opportunities, and Threats.

Identifying Strengths, Weaknesses, Opportunities, and Threats

It’s usually easiest to start with the Strengths and Weaknesses, since these represent the current standings of the business. For a financial SWOT analysis, Strengths and Weaknesses can often be found by looking at balance sheets, which show revenues and expenses. This will allow you to determine whether the business has a positive or negative cash flow, which can be a major Strength or Weakness.

Other financial Strengths and Weaknesses to look at include assets, liabilities, and the availability of borrowed money. In particular, it is useful to identify whether the business can easily borrow money, and at what interest rates.

Next, financial SWOT analysis involves identifying the Opportunities and Threats that could affect the business. This requires more creativity, since it involves looking at the surrounding business environment and visualizing a practically infinite number of ways the business could be affected (whereas Strengths and Weaknesses can be identified by working inside-out).

In financial SWOT analyses, the major Opportunities are new revenue streams. The Ansoff Matrix can be a useful tool to identify new revenue streams, as it breaks them down into four different types, based on the level of market and/or product development required.

Major Threats might be the loss of existing revenue streams. To identify these, it can help to use business analysis tools that identify external variables, such as PESTLE analysis. PESTLE analysis looks at Political, Economic, Sociocultural, Technological, Legal, and Environmental factors that might affect a business. This comprehensive framework makes it much easier to spot ways in which the business could be harmed.

Piecing Together the Puzzle

Once you’ve identified the factors that could affect the business, it’s time to compile, and subsequently interpret the SWOT analysis. In compiling a SWOT analysis, review the Strengths, Weaknesses, Opportunities, and Threats identified and ensure they are sufficiently significant. It’s impossible to cover everything in a single analysis, so aim to focus on the most important issues.

After laying out and reviewing factors from these four areas, decide whether a report is necessary. If the SWOT analysis is to be shared with others, it may be worth compiling all the findings into a single document. If not, whatever notes made will be sufficient.

Finally, begin interpreting the SWOT analysis in order to develop actionable strategies. For example, look at the Strengths identified and determine whether additional work is necessary to maintain them. Then, consider how any Weaknesses might be resolved or worked around. Similarly, look at how Opportunities can be grasped and Threats avoided.

While SWOT analysis is useful in its own right — as a framework to identify current standings and potential future scenarios — its true value is in enabling you to find these actionable insights. As a result, conduct a SWOT analysis, but be sure to leave adequate time to pick out these insights and create actionable strategies. Knowing certainly is half the battle, but acting on that knowledge is the crucial second half!


As you can see, financial SWOT analysis is a powerful tool for evaluating the financial standings of a business. By combining the SWOT framework of Strengths, Weaknesses, Opportunities, and Threats with a financial focus, this tool uncovers both current financial standings and potential changes. As a result, it’s an invaluable tool for analyzing business operations for both financial and strategic reasons.

Image by Steve Buissinne