A series of sound decisions is the basis of any successful business. The term SWOT is an anagram for strengths, weaknesses, opportunities and threats. A SWOT analysis is a useful instrument for identifying key factors that directly influence how your company is performing. It details any current challenges the company faces and any new leads worth pursuing to enable your company to fulfill its potential.

SWOT: What It Is

A SWOT analysis evaluates internal and external elements that influence your business. Strengths and weaknesses fall in the internal category, and most of these are within your control. Opportunities and threats are external factors that are, for the most part, out of your control. Corporations and large businesses may visually present this as a square grid comprised of four sections, one for each category. But small businesses owners doing this for their own information can complete this in basic list form.

SWOT: What It Does

A SWOT analysis is a flexible tool that you can use to analyze your business overall or to analyze a specific segment of it, such as production, marketing or sales. When used properly, a SWOT analysis can generate new ideas that you can use to improve upon what is already working, spark effective strategies to overcome obstacles, and create synergy among staff members who feel as if their contributions are making a difference.

Another four-letter acronym sometimes mentioned is: USED. Think of it as how your strengths can be used, weaknesses stopped, opportunities exploited and threats defended against.

S Is for Strengths

Determine the strengths — what your business has going for it — and then continue to use these strengths. This could be your coffee shop's location at a major intersection or its location in a power center. If your carpet-cleaning company uses the latest equipment; if the building that houses your salon is brand new; or if employee morale is high at your burger joint — these are also strengths. Of course, the quality of services and products themselves are also powerful tools.

W Is for Weaknesses 

Take an honest, hard look at what is not working, and figure out what you can control. This could be your location on a little-traveled stretch of highway, or having outdated equipment that often breaks, or being located in an old facility that has zero curb appeal. Or if you have unreliable, unmotivated staff who exude negativity that carries over into your customers' experience, this is a huge weakness. Whatever makes this list, find a way to stop the negatives, whether it means investing in new machinery, doing a remodel or creating a strategy to boost morale.

O Is for Opportunities

Apply your strengths to positively exploit any untapped possibilities. If your nonprofit is respected within the community, ask school teachers, families or healthcare patients who have benefited from its efforts to contribute video or written testimonials that can be used in marketing materials. The same can be done with virtually any industry, ranging from service to retail. Harness an enthusiastic employee attitude by encouraging your employees to remember regulars' names and orders, or to engage in brief conversations with their regulars while they wait for their coffee or as they pay for their facial.

T Is for Threats

Some variables are beyond your control. You can not do a thing when a big-box grocer opens a block away from your family-run market, or when coffee trends suddenly shift toward bottled, ready-to-drink varieties, which renders your espresso machine less useful.

You can, however, examine how your marketing and social media options could increase your visibility or you could ask your beverage distributor as to which products are starting to pick up steam elsewhere so that you can stay abreast of the current popular rage. Developing strategies in advance which minimize the impact of industry changes will help you defend against competing forces, if or when that need arises.