Updating Your Business Plan There are many reasons why you should revisit your business plan.
Opinions expressed by Entrepreneur contributors are their own.
Q: Do I really need to look at my business plan again once I've received funding?
A: A well-crafted business plan is more than a one-time product. It's your chance to step back, examine and organize your thinking about the business, and make sure you're charting a successful course for the future. Some people discard their plan after they raise funds, but by keeping the plan up-to-date going forward, you can turn it into a valuable business tool.
When you founded the company, you wrote the plan to persuade investors that all the pieces fit together. You predicted which markets would exist, what your production demands and capabilities would be, and what your customers' needs were. You created projections that were, at best, a guess about how the future would play out. And you asked for money based on that imagined future.
Bringing your plan up-to-date forces you to step back from the day-to-day chaos and make sure the big picture still makes sense. Once things are underway, you discover which assumptions were right and which were wrong. Did your markets actually materialize? Were you right about your product's benefits? How about competitors; did you anticipate them correctly? A second pass at your plan helps you revisit all the issues and decide whether or not you're on track.
The day-to-day life of a business is spent in the details, and the details you're thinking about at any given moment tend to dominate your thinking. The rigor of a full business plan reminds you to bring everything together in one place. Yes, you'll identify your assumptions about marketing, strategy and operations individually. But putting them in one place helps you spot connections between the pieces that a smaller department or division plan won't uncover.
And the plan is more than just a big-picture exercise. It's a plan, and treating it as such will help chart your future course. Your plan includes headcount numbers, expenses, sales growth and so on. Revisit those forecasts. Are you deviating from your expectations? If so, you can act now, rather than being blindsided by a sudden cash crunch. If January sales are 10 percent less than projected, you can reevaluate future months and immediately decide whether you'll be able to get back on plan or whether you need corrective action. With advance warning, you can start cutting expenses, looking for better marketing tactics, revamping your sales strategy or exploring ways to make your cash last. But it's only having and maintaining a plan that gives you that advance warning. You'll never know that the world is unfolding differently without a plan to use as a yardstick for reality.
Of course, even if things are going as expected, your understanding of the risks improves with experience. Revising your plan gives you the chance to find out whether the business landmines are where you thought they'd be. Most business risks can be predicted in advance, and keeping your plan's risk analysis current keeps you on your toes and nullifies risks before they happen.
A current plan can also be a good training tool. You can give copies to new employees to help them understand how the company is put together and what expectations you have regarding its growth. It can even go further than training: Some companies distribute their updated plan yearly, and department heads are expected to create their yearly plans aligned with the goals laid out in the overall company plan.
Of course, you can get many of these same effects through strategic planning off-site, good project planning and ongoing employee training. But you've already written a business plan that brings all these benefits together in one place. Keep the plan current, and you'll get the most from it by turning it into a document that helps run--rather than simply sell--your business.
Stever Robbins is a consultant specializing in mastering overwhelm, power and influence. The author ofIt Takes a Lot More Than Attitude...to Lead a Stellar Organization, he has been a team member or co-founder of nine startups, an advisor and angel investor, and co-developer of Harvard's MBA program. You can find his other articles and information at SteverRobbins.com.
This article originally appeared on Entrepreneur.com in 2002.