Should you
update your
business plan?

We have already discussed the importance of preparing a strong business plan. It is a fundamental document to support the launching of an entrepreneurial project. It is also a powerful management tool, if it’s kept up to date.

In reality, the business plan that you used to start up your business becomes a much less useful tool as time advances. For it to remain relevant, once in a while you have to go back to the drawing board.

If the idea of re-examining your business plan gives you the heebie-jeebies, don't worry. Barring exceptional circumstances, updating a business plan is usually less painstaking than developing the original document, since you normally have a solid base to rely on.

When should you update your business plan?

There’s no magic rule that determines how often you should update this important document. However, certain key aspects of the plan should be reviewed on a regular basis. For example, you may want to adjust your financial forecasts monthly.

Moreover, each year, just before the start of a new fiscal year, it may be a good idea to review the entire plan to make sure that all aspects are taken into account.

Beyond periodic revisions, certain circumstances should also lead you to review your business plan. Here are a few examples.

Need for financing

If you need a new inflow of capital for any reason, you should completely update your business plan.

Trying to convince lenders and investors by presenting them a business plan that contains outdated information is an excellent way to get turned down flat. You are responsible for providing them with the data they need to make an enlightened decision.

The arrival of a new variable on the market

The arrival of a new competitor could affect your market share, the development of a new technology could threaten to make your products obsolete, etc. These setbacks could have a major impact on your business and should make you rethink your priorities.

When the market changes, the way you originally planned to make your business profitable may no longer be viable. To avoid getting off track, you have to keep up on things and make sure that your business plan reflects these changes.

A major increase in expenses or income

If your cash flow changes, your financial leeway also changes. An increase in expenses will obligate you to reconsider certain ambitions and review your prices. However, an increase in your income may allow you to implement a new marketing offensive, hire staff, etc.

When your liquidity changes substantially, you should go over your business plan to adjust it and determine the optimum way to use the resources you have.

Keep your goals in mind

When drafting your original business plan, you probably set goals. Have you reached them? If not, why not? Were they too ambitious, too difficult to measure?

Understanding where your business is in terms of its goals is crucial, and constantly reflecting on your business plan is an excellent way to achieve this. By keeping your business plan up to date, you will have the tools you need to set measurable objectives that are rooted in reality.

In short, reviewing your business plan is the ideal opportunity to do new research, hone your knowledge of the market and rethink your strategy. Abandoning or neglecting your business plan is like losing your GPS signal: you can continue to advance using your instincts only, but it will be much harder to reach your destination.