SWOT Analysis

A tool for making better business decisions

United States Department of Agriculture

Risk Management Agency
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Strength

What’s a SWOT analysis?

A SWOT analysis is a tool that helps you evaluate the Strengths, Weaknesses, Opportunities,

and Threats (SWOT) involved in any business enterprise — including farms and ranches.

A SWOT analysis can help you gain insights into the past and think of possible solutions

to existing or potential problems — either for an existing business or new venture. For a

SWOT analysis to work well, every member of your team (your family and/or employees,

lawyer, accountant, and insurance agent) should be involved in the process.

After you read this overview, you will find a description of a sample farm and have a

chance to go through a SWOT analysis for it. This exercise should help prepare you for

doing your own SWOT analysis.

Strengths are considered mostly internal.

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 or an employee or family

member may have previous experience in

that industry. If not, this may be viewed as

a weakness. If you already know where to

go to find the help you need, this would be

considered a strength for this analysis.

Weaknesses

Weaknesses are also generally considered

internal and are the factors you will need

to address to run a successful business.

For a start-up business, an example might

be a lack of experience in the selected

industry. Another example may be that your

family members do not completely support

you in this venture. You may lack qualified

employees, or perhaps your business will

not support full-time employees. If you

identify these as weaknesses, don’t worry

because existing businesses may have

similar weaknesses.

Opportunities

Opportunities are considered mostly external.

What opportunities are available for your

business? You may be able to take advantage

of low interest loan packages for start-ups

or grants for feasibility studies. You may

have an idea that has not been tried in your

area and know there is a demand for the

product you plan to produce. Be aware that

people with potential businesses tend to be

much more optimistic than those with

existing operations.

Threats

Threats are also considered mostly external.

Threats from outside of your business will

directly affect you, but you may have very

little control over them. If you are starting a

new business, there may be local regulations

that negatively impact your business.

Unforeseen competition (local or foreign),

dissolution of markets, and adverse weather

may also have a negative effect on your

new business. Many of these threats will

also negatively affect an existing business.

Rising interest rates may have a greater impact

on existing businesses than on start-ups.
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When conducting your SWOT analysis,

keep in mind that one item can offset

another. For example, your strengths may

counterbalance your weaknesses and your

opportunities can offset your threats. If this

does not happen, this exercise will help you

to understand the issues you need to address.

Some things to consider.

Human Resources

Hiring employees who have the skills you

deem necessary is one way to combat a

weakness. For example, if you need someone

to drive a large truck, hiring someone with

a commercial driver’s license will eliminate

that weakness. Or, you could learn how to

drive the truck yourself — but can you

spare the time away from the business?

Adding to your management team is another

way to eliminate a potential weakness.

If your business is growing and you are

handling the bookkeeping tasks yourself,

hiring a bookkeeper will free up your time

to focus on other parts of the business.

If you do, be sure to hire someone you trust

or do an extensive background check —

especially if they will have check-signing

capabilities. Having that person bonded will

also create a level of security.
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Insurance

For many agricultural businesses, insuranc

isa way to eliminate possible weaknesses,

threats, or risks. If your analysis shows tha

you are undercapitalized to handle a major

emergency (as are most agricultural

businesses), insurance coverage will help

eliminate this issue. Threats from liability,

fire, automobile accidents, and crop failure

can all be reduced with proper insurance.

Liability insurance

Liability insurance covers anyone who is

injured on your farm. This coverage is

included on your farm owner’s policy, but

the coverage is only for the dollar amount

listed on the policy. For example, if your

liability limit is $500,000 and someone sues

you for $1 million, you will only be covered

for the $500,000. The remainder of the

judgment award is your responsibility.

You should review your risk level with

your insurance agent.

Fire insurance

Fire insurance is

also included on

your farm

owner’s policy.

You may choose

to insure some

buildings, but not

all. The level at

which you will

be reimbursed is written in your policy.

There are several methods of coverage,

including actual cash value, replacement

value, and functional replacement value.

Automobile insurance

Your automobile insurance is separate from

your farm owner’s insurance. Any licensed

over-the-road vehicle you own should be

insured. If you have multiple vehicles

on the road, you may be eligible for fleet

insurance, which may save you some

expense. Check with your State’s

Department of Transportation and your

insurance agent to determine the coverage

that is right for you.

Crop insurance

You may insure your crops with several

types of policies, such as Multiple Peril

Crop Insurance (MPCI) and Crop Revenue

Coverage (CRC), among others. You may

insure your revenue with Adjusted Gross

Revenue coverage (AGR) or Adjusted Gross

Revenue-Lite coverage (AGR-Lite). To learn

more about crop insurance and determine

the best coverage for your operation,

contact your local crop insurance provider.

To locatea crop insurance agent, visit The 

Risk Management Agency’s online locator at

www.rma.usda.gov/tools/agent.html.
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Exercise: Sample SWOT Analysis

Here is an example of a small farm that needs to diversify in order to remain sustainable.

This farm family needs to conduct a SWOT analysis. Read the example and conduct your

own SWOT analysis for the Ryan family. When you are done, you can check your answers

against the answers prepared by experienced users of the SWOT analysis tool. Those answers

are on the page after your fill-in-the-blanks page. If your answers are close to the experts’

answers, you are ready to do your own SWOT analysis.

Meet the Ryan Family

The Ryan family has operated a dairy farm

for over 50 years. Paul Ryan, age 48, took

over the dairy from his father 20 years ago.

The dairy is average-sized for the area: the

Ryans milk 60 cows, grow most of their

own forage and grain, and raise their own

heifers. The family withdraws about

$30,000 from the farm business each year

for living expenses. The dairy is located in

a rural area, but urban and suburban areas

are close by. The nearest city has a

population of 100,000.

Margaret Ryan, 42, is Paul’s wife. They

have three children: Jane, Hal, and Susan.

Margaret used to work on the farm, but

for the last 8 years she has been working

full-time as a clerk-typist in the school

district office. Take-home pay from this job

is $18,000, plus health, dental, and other

benefits that extend to the whole family.

At this point, Margaret oversees the

finances with Paul, occasionally milks,

and manages the household.

Jane Ryan, 21, has just received her

bachelor’s degree in culinary arts from the

local community college. During the

summers, Jane works full-time on the farm

with the milking. She is considering farmin

as an occupation, but would like to continu

her work in value-added food production.

Hal Ryan, 16, is in high school and works

with his father part-time during the school

year, and full-time during the summer.

He is not interested in the dairy or in any

type of farming and would rather attend a

university and study science, engineering,

or economics.

Susan Ryan, 12, is a middle school student

who really enjoys the farm. She takes care

of the calves after school, belongs to 4-H,

and has just begun to show an interest in

helping with the crops, although she is too

young to drive the tractor.

Jean Miller, 64, is Margaret’s mother.

Since the death of her husband 5 years ago,

Jean has lived with the Ryans. She shares

an interest in cooking with her

granddaughter, Jane.
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Alternative ventures

The Ryans are considering an alternative

farm enterprise because they need additional

income to send their younger children to

college and to save for retirement. Paul and

Margaret feel strongly that they would like

Jane or Susan to take over the farm.

This means that, until they retire, the farm

may have to support two families (Jane

currently has no plans for marriage). The

Ryans are thinking about expanding the

dairy to generate additional income, but

Jane would rather be involved in a valueadded (food product) enterprise. Paul and

Margaret realize that changes in the farm

may have to occur to satisfy the desires

of the next generation and are willing to

explore alternative farm enterprises.

The family met to determine how each

person felt about developing a new

enterprise on the farm, and found that Jane

and her grandmother are most excited abou

this idea. After they did an inventory of

resources, they concluded that their main,

underutilized, physical resources are a smal

piece of land — about 5 acres currently

used to grow extra hay for sale — and a

concrete block shed used to store bicycles

and patio furniture. Their main, underutilized, marketing resource is the city 38

miles away. The Ryans also have good road

frontage along a fairly well-traveled highway.

Management and labor resources available

year-round would come from Jane and Jean.

High school students would be available

primarily in the summer, as would Susan.

The family decided that Jane would

generate enterprise ideas, and the others

would offer opinions on suitability. Jane

and Jean discussed possible food products

that could be made using farm resources.

She also spoke to some former professors

and classmates, a farming neighbor she

respected, and the Extension economic

development educator. She reviewed back

issues of culinary and country magazines

and spent an entire day walking through

the city, visiting stores, restaurants, the

downtown area, and malls.

Out of 6 ideas that Jane came up with

(fruit pies, salsa, strawberry jelly, cheese,

ice cream, and yogurt), the idea that most

family members liked was cheese, which

Jane and Jean thought could be sold at a

farm-market stand or to the many hotels

and restaurants in the city.

Your Task

Help the Ryans become more confident

about this idea by doing a SWOT analysis

for this project. Use the first SWOT

worksheet to record your thoughts and

those of others. You may copy the second

worksheet as often as you want to do a

SWOT analysis for any enterprise you are

considering. Worksheets are also available

at Farm-Risk-Plans.USDA.gov.
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Exercise SWOT Analysis Sheet 

For the Ryan family, brainstorm about ideas related to the four areas below.

Use this sheet to determine whether the Ryans should explore an enterprise idea further.

For answers, see the inside back cover.

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

Additional copies of this worksheet are available at Farm-Risk-Plans.USDA.gov
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Exercise SWOT Analysis

Answers

STRENGTHS

• Longevity — the Ryans have been

farming for 50 years.

• They raise their own replacements 

and feedstuffs.

• Family’s insurance is paid from an

off-farm job.

• They have off-farm income.

• They use family for labor.

• There are multiple generations living 

on the farm.

• They are willing to explore alternatives.

• They have good family communication.

• They have available land and a building

to use for an alternative business.

WEAKNESSES

• They still need to withdraw $30,000 

per year for family living expenses.

• They are located in a rural area.

• The son is not interested in continuing

the farming operation. 

• They need to set money aside for

children’s college expenses. 

• They will need to support multiple 

families in the near future.

• They may need to hire some outside

labor for the alternative enterprise. 

• No one has cheesemaking experience.

OPPORTUNITIES

• They are located close to a 

suburban area.

• They have good road frontage.

• The nearest city has 100,000 people.

• Jane has a bachelor’s degree 

from college. 

• Jane wants to return to the farming

operation. 

• They are located on a well-traveled

rural highway.

THREATS

• There may be other cheesemakers

in the area with the same

marketing ideas.

• They have a 76-mile round trip to 

the city.

• This does not say if they have a 

vehicle to transport the cheese. 

• Need a steady workforce from a 

rural area.

• Government regulations may dictate

many aspects of the operation. 

These answers are meant to be a guide and may not be the same as your answers.

Every person sees a business from his or her own perspective and may read the information

differently. You can apply these principles to your business and analyze your operation.

By Lynn F. Kime, senior extension associate - Penn State University and

Winifred W. McGee, county extension director in Lebanon County - Penn State University.
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Your SWOTAnalysis Sheet

For your own possible enterprises, brainstorm about ideas related to the four areas below.

Use this sheet to determine whether you should explore an enterprise idea further.

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

Additional copies of this worksheet are available at Farm-Risk-Plans.USDA.gov
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Design your own safety net.

Log on and fill out a risk management checklist.

Identify your own strengths, weaknesses, opportunities,

and threats. Explore new enterprise options.

Do it all with a wealth of risk management information

at your fingertips — at a Web site created just for you.

United States Department of Agriculture

Risk Management Agency

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