The Importance of Updating Your Business Plan
Posted by Ellisa Brenneman on August 3, 2009 in Business Management, Business Valuation [ 1 Comment ]
Business plans are the homework that just won’t end. Imagine being in school and being given an assignment to write a term paper. You have an outline of what’s required, a recommended format that you should use, and a timeline in which completing it would be advised. Here’s the rub: what if that assignment is never done. The due date comes and goes and it constantly has to be redone and revised and updated.
The importance of updating a business plan is simple: it creates a long-term strategy for your business, while alleviating the stress and headaches of operating a business if action is continually implemented. There are important factors to consider when revising and updating a business plan. The following outlines the necessary steps in perfecting that business plan you filed away months – or even years ago.
Reminisce: Remember to look back at your initial business plan at least once a year. Perhaps your business’ target market has changed. Maybe your customers are purchasing one particular product or service more than others. And, of course, one must always look at new industry trends – this in itself can have a positive or even devastating effect on a business. Small business owners must continually refresh their business plan by focusing on the aforementioned elements when reevaluating the business plan’s content.
Financial Updates: A financial analysis should be updated monthly. Entrepreneur.com eloquently puts it: “Have a monthly review of the difference between planned results and actual results for your sales, profits, balance and cash.” A solid, well thought out business plans should have monthly milestones, assumptions, and tasks.
Another reason to update a business plan: every small business could use more money at some point. An outdated plan will not convince any borrower – or potential investor – to fund your business. It makes you, as the entrepreneur seem unprepared and unmotivated in staying current with new market trends, financial projections, and customer feedback. Notably, changes to the management team and competition are just as significant. Believe it or not, a business’ competition will at some point increase, decrease, or elevate depending on the climate of the market. Fully evaluating and analyzing competitors is essential to understanding the market and what is needed stay ahead of competition.
Evolution: Finally, if your business is changing, evolving, or adding to its line of services or products, it is absolutely essential to renew the product and services description section of the business plan. With the constant fluctuation of the market, small businesses are adding or taking away products and services in order to meet the needs of their intended market segment.
As the company’s vision continues to evolve, the business plan becomes a reflection of the business’ personnel, mission, and philosophy. However, in order to properly convey a company’s new fangled identity, management team, or other core values, the business plan itself must evolve as the business’ does. Both go hand-in-hand.
Tools: It’s a poor carpenter that blames their tools. Not everyone can feel truly qualified when it comes to writing up their own business plan. There are a few options here to make sure that you’re not going in blind to the formatting, requirements, and structure that may be demanded of your document. Some seek the help of mentors who have written their fair share of business plans to review and advise on the plan that the entrepreneur is writing. Some outsource the entire endeavor to third party firms or even MBA students off of CraigList.org who are looking for a few bucks. The happy medium can sometimes come in the form of tools from companies that offer software solutions.
Business plan updating has become so pertinent to a business’ long-term success that colleges and trade schools are offering courses in this particular subject. Entrepreneurs must recognize that paying close attention – as well as constantly altering and updating the content and past performance or projected financials of a business plan – is vital to not only the company’s future, but ultimately its sustainability and growth in the marketplace.