Why your business plan needs regular updates
How (and Why) to Continually Update Your Business Plan
“New year, new business plan.” Well, that’s not the exact saying, but in an increasingly competitive business world, it’s a nice catchphrase as we quickly approach the second month of 2020.
Truthfully, you should always update your business plan to reflect your company’s current standing in the marketplace, finances, personnel, technology and more. These things change rapidly in virtually every industry, so it’s vital to stay in tune with what your business is and isn’t doing well.
This time of year offers a natural opportunity to take a look at your business and update your plan accordingly. As we enter a new decade, here are some considerations and tips for refreshing your business plan.
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Analyze your finances
Your financials play an important role in updating your business plan. Think back to last year: when you began 2019, you likely made financial forecasts for the year. If you managed your business responsibly, you frequently updated those projections based on actual results. The adjustments you made throughout the year should help you to make more accurate, better informed projections for the year ahead.
There are many factors that may affect your financial analysis for the new year:
- Missed goals: If you frequently missed goals last year, adjust the goals or timelines to be more realistic in the coming year. Then, pay attention and take note of any underlying problems that may cause you to miss goals. Maybe the goals are too ambitious, or maybe your overhead is too high.
- Losing money: Speaking of overhead, if you’re losing money, you need to adjust your financial forecast accordingly and reduce operating costs as much as possible.
- New hires: More employees may help you accomplish more, but they will also affect your cash flow, so be sure to adjust expectations.
- Technology: If new or emerging tech can help lower your operating costs, assist customers better or reduce the time it takes you to do something, take note.
While these factors may influence your initial projections for the year, you should still visit your plan every month and make adjustments accordingly.
Entrepreneur Tim Berry recommends tracking your financials in three tables: your business plan’s original projections, another with actual results, and a third with the difference between the plan and actuals, called a variance. This way, you can proactively change your business plan and refocus your financial projections based on early year success (or failure).
If scaling your business is a priority this year, you may also want to include a funding section in your business plan. Whether you plan to apply for a business loan or you’re approaching investors, you’ll need cash flow reports, profit and loss reports, budgets and projections on hand and ready to go. All of these documents will be essential to getting that influx of capital. Do not make projections based on that capital before you’ve secured the funding.
Likewise, if your business doesn’t have any credit history, you should open a business credit card and pay off the balance regularly to build strong credit in 2020. That can help when applying for additional funding down the road.
Talk to your customers
Customers are any business’s lifeblood, and a new year represents an excellent chance to check in with them. Again, you should always be in touch with your customers and actively gathering feedback to improve your product or service, but a new calendar year is a great opportunity to send out a survey or set up some time to speak with your best customers directly on a one-on-one basis.
Whether you failed to retain customers or noticed that some of your biggest customers cut back on their business with you, you need to understand why. A business plan should illustrate how your product or service can satisfy a customer need or solve a customer problem. It should demonstrate how you can drive demand.
A good business plan emphasizes the customer, so you can’t effectively update your business plan without current customer feedback. Check in at the beginning of the year so you’ll know what you can do better.
You should try to identify the following:
- Have competitors cut into your market share?
- Are customer expectations not being met?
- Is your product not satisfying the need it’s supposed to?
- Have changes in your field changed how customers want to shop for or use your product?
Customer feedback may profoundly affect your business plan. It will also help you understand how to target and convert potential customers in 2020.
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Analyze your market
As stated before, businesses must constantly adapt to stay relevant. That’s because the market isn’t static. Your competitors change, peoples’ tastes and preferences change, expectations change. You have to be a trendsetter rather than a follower.
As the calendar year changes, perform an audit of your industry and your niche in the marketplace. What are you doing better than anyone else? What should you do better than anyone else that you’re not doing now?
Some things to look at:
- Changing competitors: If a major competitor dropped out of the picture, you should adjust your projections accordingly. Likewise, if a new competitor appears, your business plan should reflect the increased competition.
- Segmentation: Change the way you perceive the market to get a fresh perspective for a new year. If you normally view your market by product type, try looking at it by channel or potential buyer. Divide by region, disposable income, occupation—new segmentation lets you develop fresh perspectives and, therefore, fresh approaches to the marketplace.
- Existing problems: Identify what’s not working in your business. Your updated business plan should comment on those problems and come up with solutions.
Everything changes in business, often at a moment’s notice. New competitors rise, new marketing solutions emerge. Your business plan should reflect changes not just in your own business, but in the market at-large.
New goals, new costs and new competitors can all make 2020 significantly different from 2019. Whether you haven’t updated your business plan in a while or you’re constantly making adjustments, these tips can help you bring a fresh perspective to your plan.