When Should I Update my Business Plan?


 
All over the internet, including our own previous blog posts, business plans are referred to as “living documents.” That is a document which is modified, updated, added to, or even changed entirely. A common reference that is considered a living document is the United States Constitution, which is constantly being interpreted and, more uncommonly, added to or changed. Business plans should be used the same way.
 
Business plans should be considered living for several reasons but I think the biggest reason is the fact that much of the business plan is a lot like a forecast. Anyone who has done any forecasting in their career knows one simple fact: Forecasts are always wrong. Does that fact make forecasting unnecessary and ineffective? Ask those people who create forecasts or managers who make decisions based upon forecasts and they will tell you, “Absolutely not.” Forecasts are essential and useful. So, without plugging the necessity of business plans too much; business plans, like forecasts, are useful and effective tools not only in the development stages, but also during the entire life cycle of the organization.
 
That leads us into our title question, when should we revisit and update our business plans? The simple answer would be always. It is probably unrealistic to expect that we will be formally revising our business plan always but we should have a systematic approach to this process. Find what works best for you and your start-up, whether it be yearly, monthly, or quarterly updates. The key is that the business plan is used as a strategic planning and performance measuring tool. A systematic approach and timeline to revisiting your business plan will help you accomplish those effective uses of your business plan.
 
There are times when the business plan should be revisited outside of the scheduled times. This can be due to external or internal factors. Examples include,
 

  • New competitors enter market or previous competitors begin to obtain greater market share
  • Changes in economic environment/government regulation
  • Changes in supplier or contracted agreements
  • Growth accelerating at higher than planned rate/increased staffing needs
  • Changes in major buyers
  • Expansion into new areas
  • Technology upgrades
  •  
    These are only a few of many potential scenarios where it would be wise to revisit and update your business plan. The point being is that the business plan should be considered living and be updated at least once a year or more. Also external or internal factors may dictate updating your plan at an even greater frequency. In a young start-up’s life this is fairly common.
     
    Constant changes do not negate the need for a business plan. They create the need for flexibility and business plans are as flexible as we make them. But be prudent to not over-do it when it comes to modifying a business plan. Doing so would actually negate the idea of having a plan to work against. Done properly, revisiting your business plan consistently and in key moments will help your business adapt and prosper throughout its life-cycle.

    What Are Investors Really Looking For?


    We all have ideas. Some of us are looking to take those ideas and create a business from them, and many of us finding ourselves sitting in front of investors trying to gain their support for our business ideas. The idea of this has become so common and popular that there are TV shows dedicated to entrepreneurs sitting in front of
    investors to pitch their ideas.
     
    While some ideas might be crazy and unprofitable, many are fantastic and have the potential to become a viable and successful business model. So why don’t we all get capital when we are looking for it? Is it because our idea is terrible?
     
    More often than we think it is not because of a bad idea but because of a lack of proof that our idea will be executed into a strong revenue model.
     

    The Next Big Thing Is More Than a Good Idea

     
    Investors are looking for a return on their investment. Their decision is based not only if they think you’re product will sell but if you have a proven plan to sell it.
     
    This is where the routine business functions come in such as finance, marketing, sales, manufacturing, and others. Without these success is basically impossible. Not only should plans be made of how to start your business in these aspects but how these will run from a day-to-day operational standpoint down the road.
     

    Show Investors How Your Product Will Reach Consumers

     
    When we find ourselves in front of investors our first instinct is to spend all our time selling them on why people will buy our product. Is this a bad thing? No. Is it all we should cover? No way. Not only should we show them why people will buy it, but we should show them how our product will reach those consumers. Many sells pitches lack this very important element in the eyes of the investor.
     
    During this time explain to them your revenue model. Include channels through which people will buy your product such as personal stores, other retail outlets, or online. Include cost structures of procuring and shipping your goods and how your pricing strategy will still bring profit. To sum this up, investors need to know the why and how people will buy your product.
     
    As we started, we all have ideas which can turn into a profitable business. Initial failure does not necessarily mean we have a bad idea, it may just mean we need to refine how we execute. Taking the time to clearly outline an execution model will lead to more investors taking our ideas seriously and more consumers buying our products.

    Three Keys to Defining Employee Roles

    Chances are your start-up’s employee list includes yourself plus maybe a handful of other employees. That means a lot of work of varying nature has to be split among a few different people. Combinations of marketing, finance, development, planning, etc. have to be done by potentially the same individual.
     
    Such a scenario is unavoidable early on but that does not mean that job roles cannot be defined. A lack of definition to job roles at any stage leads to disastrous results. It is not a matter of if it will catch up to you; it is a matter of when. With this mind it is important to define three things associated with any individual within the company. They are the tasks associated with the position, the responsibilities, and specific success
    metrics.
     

    Position Tasks

     
    Position tasks is straight-forward. It should be clearly defined day-to-day activities that a person will carry out on a daily, weekly, or monthly basis. These tasks combine to create some kind of deliverable the individual is expected to produce. Clearly defining these tasks not only gives the employee a sense of what they do but also how it should be accomplished.
     

    Responsibilities

     
    Responsibilities could be summed using other words such as roles or deliverables. Essentially these are the expectation set for an employee. At the end of the day what do they need to deliver in order to ensure company success. Examples could be specific reports, efficiencies, or product developments.
     

    Success Metrics

     
    Tasks and responsibilities have no worth if they cannot be measured. When defining individual roles it is important that a standard be set for what needs to be delivered, when it needs to be delivered, and what it should cost. And of course, accountability must be expected for this to function properly. Good success metrics will not only promote individual growth but will increase organizational performance.
    It is never too early to begin defining roles using these three criteria. It will help your start-up and those who make it become everything they can be.