Why Is it Necessary to Update the Business Plan?
Why is it necessary to update the business plan? Updating your business plan is essential to keep all your information up to date.3 min read
Why is it necessary to update the business plan? Updating your business plan is essential to keep all your information up to date. It might need updating to show a change in physical location, alter your business goals, add a new business partner, or similar adjustments.
Reasons to Update Your Business Plan
There are a number of important reasons you may need to update your business plan. Some of these include:
- You need to seek financing. A lender will require proof of an updated business plan in order to make their decision on whether or not to approve your loan.
- There is stronger or new competition you need to worry about losing customers to.
- You are about to start a new financial period. It's best to choose a regular interval, like annually or quarterly. If you are in an industry that changes often, you may want to update your business plan every month.
- Your business has undergone a management change.
- Your business develops a new technology, product, skill, or service. When major changes like these occur after your initial business plan, it's important to update it.
- Your old business plan does not reflect your current state anymore. Perhaps it's not a well-drafted business plan, it is no longer relevant, or things have drastically changed.
- Your business has reached a threshold, like reaching a sales goal or employing a certain amount of people.
- There has been a significant change in your market. A shift in client tastes, altered regulatory climates, or consolidation trends among customers are some elements that can be the trigger for an updated plan.
Don't make your business plan update a robotic-type task where you simply address any necessary routine changes. Challenge yourself to take a hard look at your plan to understand whether the contents are still applicable or not. Is your new location not performing as well as you anticipated? Are your profit margins higher than expected? Look at different aspects of your business plan and address questions like these — both the positive and negative aspects of your current business situation.
You'll find that in large corporations that have strict planning routines that require regular updates, the managers spend a portion of their time thinking about plan updates or a new business plan altogether. That research then is disseminated to senior managers through the distribution of the new business plan, which keeps them informed. It is also useful information for lower level employees to understand how the business is performing, especially if they are directly judged or compensated based on past performance.
When to Update Your Business Plan
You should update your business plan when:
- You have a new location or change your existing one.
- You have a new owner or add a new partner.
- You have a financial snag like falling revenue, a decline in sales figures, you don't meet your financial projections, or important customers are leaving.
- There is competitive disruption, like a technological advancement, that ends up disrupting your business model.
- You need to secure financing so investors can see your updated business plan.
- You are growing at a fast pace.
- Your company's goals are not being met or you are falling behind. You should have SMART goals — Specific, Measurable, Achievable, Relevant, and Time-bound.
- You are experiencing a pivot in your business.
These are all important events that should trigger you to update your business plan. Situations like a fast-growing business can actually create problems if you don't update your business plan. You could suffer a decline in customer satisfaction or employees may suddenly feel overwhelmed and start making mistakes, miss deadlines, or overlook key quality control elements.
When your business is experiencing competitive disruption, it can cause upheaval in your operations. This is when you need to take a look at your competitors' business and then look at yours to see how you can differentiate yourself. This may call for changes to your product, marketing strategy, or customer service.
When you hit a financial snag, don't wait until the next annual report to address a large financial loss. Reassess your market now and get some customer feedback. Perhaps you need to change how you deliver your product to consumers or alter your brand positioning.
If you need help with updating a business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel only accepts the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.