The last column dealing with strategic planning for small businesses brought in a number of comments and questions. Number one on the list of questions and requests was for a more in-depth explanation of the SWOT analysis. It seems that while many are familiar with the term, fewer are familiar with putting the tool to good use.

The acronym SWOT stands for Strengths, Weaknesses, Opportunities and Threats. In a nutshell, this tool is a simple format that allows the user to perform an analysis of the situation at hand and determine a course for future successes. It provides a snapshot that defines where a business or individual is currently positioned (Strengths and Weaknesses) along with a somewhat fuzzier picture of a future destination (Opportunities and Threats).

There really is nothing magic here as long as a consistent discipline is applied to the terms. This discipline insists that everything that is listed as a strength or weakness must be internal to the business or individual. Conversely, everything that is listed as an opportunity or a threat must be in the external environment.

To be truly effective for a company, this tool needs to be applied to each and every functional unit. From R&D to logistics to manufacturing to sales and marketing to service, each functional unit should perform this internal audit.

Given the parallel dangers of self-deception and conflict avoidance, many companies will engage the services of outside professionals who do not carry around the baggage of preconceived notions.

Obviously many small companies might feel that they cannot afford this service and certainly anyone can perform such an audit. But the real issue is to generate results that are credible.

If your company cannot afford such an investment, at least make sure that you have someone outside the company who also knows the company and have them review the findings.

Just like any audit, the purpose is not to find fault or lay blame, rather it is to present an honest picture of the current situation. This is important for any business leader to remember.

Once completed, the next part of the exercise is to allow the creative juices to conjure up possibilities that might never be considered. From simple product line extensions to quantum jumps into entirely new markets, this is where future financial success coexists with those uncontrollables that can derail success.

For many entrepreneurial business leaders, it is this component of the tool that is the most difficult, yet I contend that this is the most important. It seems that most of us are pretty adept at listing what we do or do not do well.

Retrospection is very easy compared to forecasting. Yet the ability to discern areas where competitive advantages can be secured is key to the financial survivability of any company (and individual for that matter.)

Again, this skill set may very well need to be brought in from the outside. If nothing else, this is one of those rare business management activities where you can never have too much input. As with any exercise in creativity, you can never have too many good ideas and, at this stage, quantity trumps quality.

In the next column, we'll look at a process that turns this tool from an intellectual operation into a pragmatic operational one.

John F. Riddell Jr., director of the Center for Entrepreneurial Growth-Hamilton County, writes every other Tuesday about entrepreneurs and their impact on companies and the marketplace. Submit comments to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at business@timesfreepress.com.