When to Consider Reviewing Your Business Plan
Giving your business plan a good once-over one time a year may not be often enough. Reviewing your business plan annually is fine under most circumstances, but if your business environment is experiencing choppy conditions, or if you're facing major threats or opportunities, your plan should be the first place you turn.
Costs rise, revenues fall
The clearest sign of business trouble is that costs are going up and revenues are going down, yet many business owners ignore the warning. Why? Because these situations don't usually go wrong overnight. Costs creep upward while revenues drift downward, and too many business owners don't see what's happening because they don't watch (or maybe don't know how to watch) their financial margins.
The antidote? Study your financials, especially keeping an eye on
- Gross profit trends to see whether your costs of goods sold are slowly climbing out of control
- Operating profits to see whether your overhead and expenses are getting out of line
- Profitability to see how much of your original sales revenue is making its way to your bottom line
Sales figures head south
If your sales for a product or service line aren't meeting your expectations — or if you see an unexpected drop in your overall sales revenues — move quickly to diagnose the problem. Take a look at your sales figures, and view them like a customer poll. If sales are sinking, you may have a disconnect between the features you offer and the benefits your customers seek, a problem with quality control, or a breakdown in customer service. Or perhaps the competition is simply tougher than you expected, or maybe your marketing message is off target. Your mission is to identify the reason that sales are slipping. After you spot the problem, revise the appropriate parts of your business plan — product design, operations, marketing strategy — to support your revised forecasts.
You don't meet financial projections
When your financial projections are off, your business plan needs attention — right now. Plenty of issues can knock even the most conservative financial projections out of whack, and you can't ignore a single one of them. Follow this plan:
1. Start by reviewing the assumptions behind your original projections.
2. Make a detailed list of every internal and external force that may be responsible for the variances.
3. Fix what you can and plan around what you can't, but don't ignore what the black-and-white financial statements tell you.
Don't just hope that things will change; in other words, don't wait until the crash to shore your projections up. Develop a revised set of financial statements based on the new reality and then revise your strategy and action plan accordingly.
Employee morale sags
The morale of the people who work for you isn't easy to measure, but it's absolutely critical to your company's success. If you sense that employee morale and motivation are on the skids, don't sit on your hands. Talk to key people around you to uncover what's wrong. Perhaps your goals and objectives are unreasonable, creating frustration rather than motivation. Or maybe you can spot a gap between the company's stated mission and your plan of action, creating confusion and indirection. When employee morale is at stake, you can't wait for the annual business-plan review; you have to address the problems immediately.
Key projects fall behind schedule
A serious business plan includes timelines for what needs to happen. If your company misses the deadlines, it can't move forward as planned. The minute you sense that important projects are falling behind schedule, sit down with all involved employees to assess the situation. Identify the source of the problem, including aspects of your current business plan that may not be playing out as expected. Brainstorm solutions for getting back on schedule. If you can't catch up and resetting timelines won't derail opportunities, amend your business plan, revise your action plan, and notify all involved.
New competitors appear
Even with careful planning, a competitive assault that you don't see coming can rock your company. If that situation occurs, take a deep breath and remember that competition isn't always a bad thing: It usually increases interest in your business sector, and it almost always forces you to focus on what you do best and how to do it as efficiently as possible.
If a big, predatory fish comes swimming into your little pond, revise the situation analysis in your business plan — immediately.
Technology shakes up your world
In this age of constant technological innovation, no one needs to tell you that new products and processes can turn your company upside down, for better or worse. A shift in technology can make existing products obsolete and create markets for new products or services almost overnight. Technological change is often accompanied by a shift in customer preferences and demands. As a result, the competitive landscape is redrawn.
Meanwhile, business operations need revamping to address and incorporate the technological breakthroughs, including the installation of new equipment and processes that can affect your company and its financial statements. Therefore, when a new technology appears on your business horizon, reassess your business plan — fast. Ask yourself how the new technology may change the desires and demands of the markets you serve and how it may affect the way that you — and your competitors — do business. Lay out plans for how your business will incorporate the new technology and use it to your advantage.
Important customers defect
From time to time, good customers will switch allegiances to a new supplier. However, if you notice a trend in customer defections, something may be wrong. For instance, your competitors may be stronger than you anticipated, your efforts may be falling short, or the market itself may be changing.
The defection of important customers is an alarm signal that you can't afford to ignore. As your first step, look for deficiencies in your product or service offering. When possible, ask departing customers why they want to make a change, and talk to your salespeople and frontline staff for their insights. Get ready to retool your business plan, paying close attention to how your business strengths and weaknesses may have shifted and how those changes may be affecting your ability to compete in your market.
Growth is out of your control
Entrepreneurs don't usually complain when business is booming, but your company can grow too fast — and that can mean trouble if you're not prepared. When business is booming, customer service can suffer or manufacturing may not be able to keep up with demand, for example. Some companies even find that their basic organizational structures no longer fit their new dimensions. If your business experiences similar growing pains, look at your business plan to identify the parts that need to change in order to accommodate the good news — and your increasing size.