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.

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