In this post, you will learn what events trigger a need to update your business plan, how updating a business plan differs from creating the original, and who should be involved in the updating process.
Do I Need to Update My Entire Plan?
Most likely, no. It depends on what trigger situations you are addressing. Almost all businesses should update the strategies and tactics in the marketing section to meet constantly changing market realities.
For example, which of your actions/activities worked well and should be continued, and which should not? If everything is working, then you are not experimenting enough — not everything will work as planned and you can only grow from the lessons learned.
If updating your plan fills you with dread, don’t worry.
Creating your first business plan may have been a chore, but updating a plan is easier and more fun. During your start-up, you likely had little direct experience and no track record or historical information, so many of the marketing and operational forecasts were educated guesses. Now you have some experience and a track record, and you have experimented and know what works and what doesn’t. Plus, you have already existing information to use as a foundation.
Situations That May Trigger a Plan Update
Business plans are living documents and need to be revisited every so often to ensure they are still relevant. In this way you can continue to use and benefit from the strategies and tactics.
Further, business plans are forward-looking, so they are based on estimates, which means updates are often necessary. Following are some specific situations that may be cause for you to look at updating your plan.
1. Competitors have reacted to your market entry by reducing prices for similar products, extending business hours, liberalizing their return policy, providing free shipping, etc.
You must decide whether to match their tactics or stick to your plan. In either case, your revenues will be lower, so you will need to plan a course of action. These situations may affect your plan’s marketing, products & services and operations sections with a resultant impact on the financial section.
2. A competitor has copied your product or service.
Do you have intellectual property protection (patents, copyrights), and is it economically feasible to go after the perpetrators? If yes, there will be legal expenses, and revenues may decline with the increased competition.
3. The economy has changed (inflation, recession, unemployment rates), impacting potential customers’ ability to buy your product or service.
This will negatively impact your revenues, and depending on your staffing, adjustments may be needed there as well.
4. You land a major new customer, or an existing customer cancels a big contract.
The first is good news and might require more resources than originally planned, but the latter is not good at all and will require you to come up with a fresh approach.
5. A major vendor has cut you off or changed their terms and conditions.
For example, they previously allowed a 30-day grace period but now require cash in advance. If you are cut off, you must scramble to find a replacement. Maybe you stop buying from a vendor due to quality and dependability issues, or your business has outgrown a vendor’s limited services.
6. Regulatory changes impact your business.
One potential change in many states is the imposition of sales tax on all internet sales. The possible result? Online sellers and brick and mortar stores with the same prices — and no competitive edge.
7. You lose a key staff member, which affects productivity.
Reduced resources means either your business must reduce its size or you need to find alternatives.
8. You are ready to take your business to the next level.
Obtaining growth funds from a bank or angel investor requires a more sophisticated plan. Even if you do not need additional funding, a business plan based on an estimated $50,000 business might not be adequate to support a $300,000 one, which may need additional employees, for example.
Whether one of the previous reasons dictates an update or not, make it a practice to review your business plan at least once a year and plot your activities for the coming year. Do this as part of your annual planning and budgeting process at the end of your fiscal year. If you previously had your forecast in a full year increment, this time do it quarterly, and next year monthly.
Who Should Update Your Company’s Business Plan?
You probably prepared the original business plan yourself, since you were likely the only employee. If you have now grown and added staff, try to involve them so there is buy-in. That way, when it is time to implement the plan, your staff will be on-board and the activities will go smoother.
- External and internal events can trigger the need to update your business plan.
- Business plans should be reviewed and possibly updated at least once a year, especially for younger companies.
- Updating your business plan is more focused and fun than the writing the original one.
- Involve staff in the updating process.
- It is never too late to create a business plan.
- Determine if any of the triggering events have occurred in your business
- Schedule an update of your plan by the end of your fiscal year.
Next month, we will look at creating a business plan for a nonprofit.09