When it comes to business plans, most entrepreneurs and small businesses focus on them in terms of starting up. While a well-crafted plan is essential for launching a new venture, many business owners fail to realize the value of updating their business plan on a regular basis. They simply lock their document away in a filing cabinet somewhere, never using it, let along updating it.
A good business plan is an invaluable tool. Not only does it help get your business funded and off the ground, it also creates a strategy for growth and success. You should look at your business plan as a living document that grows and changes along with you and your business. Updating your business plan on a regular basis provides benefits to your business and creates value. Here is what an updated business plan does for you.
It provides updated financial data.
Financial analysis should be ongoing in any business, but aside from those monthly balance sheets, take a look at your business plan.
Keeping your business plan current helps you update milestones, working capital, forecasts and assumptions, which helps you stay on track and plan ahead financially.
However, there is an even greater reason for keeping this document current — funding. At some point, every small business needs more money. An outdated document will hardly convince any lender or investor to finance your business. It spells lack of credibility. It makes you look unprepared and informed about your business, as well as current market trends, financial projections and how you fare against the competition. Keeping up to date with your plan makes you a lower overall financial risk for lenders — and helps you avoid risky financial behavior.
It’s an opportunity for review.
Updating your business plan also provides you with a valuable review of your business. It is an opportunity to see how far you have come and where you want your business to go.
When reviewing your document you may notice that your customer base or target market has changed. Perhaps the anticipated growth in one segment of your business was way off. It’s also possible that recent industry trends have impacted certain products or services. Whatever the case may be, updating your business plan forces you to reevaluate these items.
It allows for strategic planning.
Aside from reviewing the previous period or year, an updated business plan allows for future strategic planning. Businesses are more dynamic than ever, especially small businesses. They are constantly evolving. Products and services change, customers change, market fluctuations occur, and technology advances. All of these factors impact today’s business owner.
An updated business plan can help define a company’s broad, long-term visions and objectives. It provides both the big picture and the road map, making it much easier to navigate the direction of your business.
When should you update?
So, when should you update your business plan? Well, if you ask Tim Berry, the author of The Plan-As-You-Go Business Plan, he will tell you “always.” He certainly does have a point. It is important to constantly think about your business plan and be aware of how everyday changes can (and do) impact this living document.
Realistically, though, a thorough annual update can provide excellent value to both you and your business.
A success story.
The value of updating your business plan may sound great on paper, but what about people in the real world of business? Here is one success story.
Sean Hackney, the founder and co-owner of Roaring Lion Energy Drink originally started out in the year 2000 with a brief scripted plan that landed him help to get his business going. Since then he has updated his business plan multiple times, growing his business from an initial $62,000 investment into a multi-million dollar company within a few years.
Regardless of where you are in your business, the value of updating your business plan cannot be underestimated.
If you own a small business and could use some help updating your business plan, contact Acceler8. We are your small business advisors. We offer tax, accounting, and business advice, so get in touch with Acceler8 to learn more today.