SWOT Analysis for 3 Squares Senior Meal Delivery

Introduction to the SWOT Framework

A SWOT analysis is a means of understanding both the internal and external environments in which an organization operates (MindTools, 2017). It is commonly used as a means of strategy formulation, helping firms understand how they can use their strengths to take advantage of opportunities in the market and shore up their weaknesses to defend against external threats. To that end, it is worth analyzing the internal and external environments of 3 Squares, the meal delivery service for seniors, in order to see where the best market opportunities lie and what challenges the company is going to face.

Strengths

There are a few different strengths that the company has internally. 3 Squares has a strong business plan. It has researched the market and identified that there is an opportunity in providing food delivery for seniors. This is a growing market, and one that has only limited competition. It is believed that there is room not only for more competitors but that the market will continue to grow due to demographic shifts. The business plan takes into account the cost structure of the proposed business and has identified that this venture can be pursued profitably. Furthermore, the business plan provides the structure needed for the company to prepare for launch and offers the principals a means by which to approach potential sources of financing and demonstrate that a viable business exists here (Root, 2017).

The second strength is that the people behind the company have the necessary skills to execute the plan. The principals have acquired business skills through their education, which helps inform their approach to accounting, production management, marketing, and other aspects of the business. Having these foundational skills serves two main purposes. First, they allow the principals to pay attention to all aspects of the business, whereas some small business owners might neglect areas with which they are unfamiliar. The other benefit is that the company can pay less in salary costs, which will be essential during the start-up phase. Business owners can get by with minimal withdrawals from the business because they are receiving equity. It is important to minimize salaried staff costs, especially in technical roles, in order to preserve cash flow during the initial start-up and rapid growth stages.

The third strength is that the start-up has financing in place. This is an essential strength for a couple of reasons. First, a lack of capital undermines many start-ups — owners often underestimate costs and attempt to launch with minimal funding, creating a constant cycle of cash shortfalls that leaves the business vulnerable from day one. Having ample start-up capital is necessary to avoid that trap. Second, having internal financing reduces the downsides associated with external capital. Equity capital from outside investors can dilute control over the company, and debt capital represents a drag on cash flow that reduces the amount of money that can be reinvested in the business.

These strengths combine to give 3 Squares a solid starting point. The company has several foundational elements in place that will smooth both the launch and growth phases. These strengths by no means guarantee success, but the company is more likely to succeed with them in place than if any one of them were absent.

Weaknesses

There are some internal weaknesses worth discussing. The principals, while talented in terms of their business education, are relatively inexperienced in actually running this type of business. There are no veterans of food service among them, nor anyone with direct experience in seniors' services. The implication is straightforward: there will be a steep learning curve for everyone involved, and success will depend on how quickly these individuals can climb that curve. Bringing on more experienced veterans will likely be necessary if the company wishes to expand rapidly.

Another key weakness that 3 Squares faces, closely related to its inexperience, is a lack of direct contacts in the seniors' market. Ideally, the company would have connections either with seniors directly or with institutions and medical providers who could recommend the service. Without these relationships in place, the company is starting from scratch in building its marketing funnel. In a start-up, developing a proper funnel is one of the biggest challenges. Many start-ups rely heavily on direct sales, but effective sales depend on having a pipeline of qualified leads rather than cold-calling, an activity that historically yields low returns.

The third major weakness is common to all start-ups: the company's brand is completely unknown. When a company launches, consumers have never heard of it, and much of the initial marketing effort revolves around creating brand awareness and establishing a coherent message. It is reasonable to expect that 3 Squares will need word-of-mouth referrals from early clients. However, the target market is often geographically dispersed, which is why it is recommended to initially focus on areas with unusually high concentrations of seniors. Success in those areas can generate word-of-mouth that extends to nearby geographies, while also building a stable book of business and the cash flow needed to facilitate future growth.

All told, the company's weaknesses relate primarily to inexperience and the challenges of early-stage marketing. Overcoming them will rest largely on the principals' ability to learn quickly and adapt. These limitations will make the initial stages of marketing and brand-building more difficult, and 3 Squares must consider how swiftly it can address them to put the company in the best position to succeed.

References

MindTools (2017). SWOT analysis. MindTools.com. Retrieved April 30, 2017, from https://www.mindtools.com/pages/article/newTMC_05.htm

Root, G. (2017). What are the main purposes of a business plan? Houston Chronicle. Retrieved April 30, 2017, from http://smallbusiness.chron.com/main-purposes-business-plan-2599.html