Reviewing your business plan

You should look to update your business plan as your business grows and changes.

You can consider your business plan as a dynamic template intended to help your business thrive.

As you regularly review your business' performance against that plan, you'll also gain insight into the most likely strategies for future growth.

Once you've reviewed your progress and identified the key areas of growth you want to target, it's time to revisit your business plan and make it a road map to the next stage for your business.

Why you need a business plan

A business plan is a written document that describes your business.

It covers objectives, strategies, sales, marketing and financial forecasts.

A business plan helps you to:

• clarify your business idea
• spot potential problems
• set out your goals
• measure your progress

You'll need a business plan if you want to secure investment or a loan from a bank or other financial institution.

The importance of regular business planning

You can give yourself the best possible chances of success by adopting a continuous and regular business planning cycle that keeps the plan up to date.

This should include regular meetings that involve key people from the business.

If you regularly assess your performance against the plans and targets you've set, you're more likely to meet your objectives.

It can also signpost where and why you're going astray.

Many businesses choose to assess progress every three or six months.

In addition, a regular review can help highlight high-growth areas that you should perhaps be putting more resources into.

The assessment will also help you in discussions with banks, investors and even potential buyers of your business.

Regular review is also a good vehicle for showing direction and commitment to employees, customers, and suppliers.

What your business plan should include

If your plan is just for internal purposes, your business plan doesn't need much marketing razzamatazz but should answer basic questions.

• What is the timeframe for my plan?
• What are the specific goals around revenue and profit?
• How do I know if there's a market for this new product/service?
• What lies behind the sales forecast?
• What are the plans for marketing and selling?
• What investments do I need to make (in staff, premises, equipment, marketing)?
• Will I have enough cash to finance this?
• If not, do I need to borrow or sell equity?
• How will I pay back any funds I borrow, or return money to investors?
• What are the risks?

The financial section of the plan is likely to include the following information for the period the plan covers (at least a year):

• Profit and loss account
• Cashflow forecast
• Projected balance sheet

Seeking funding or investment

If you intend to present your business plan to a bank or investor, you'll need some additional frills but you do need to take care.

In his book, 'How to write a great business plan', Harvard Business School Professor William Sahlman explains the problem with most business plans seeking investment: “Most waste too much ink on numbers and devote too little to the information that really matters to intelligent investors.”

While acknowledging that business plans should include some numbers, Sahlman states: “...those numbers should appear mainly in the form of a business model that shows the entrepreneurial team has thought through the key drivers of the venture's success or failure.”

Instead, he focuses on four factors that are crucial to the success of every new venture. You should look to include these in your business plan.

• The people. Introduce the people running your business, as well as outside people including lawyers, accountants and suppliers. Most savvy investors will focus on people as they believe that execution skills are what matters most. You need to prove you have the skills, experience and network necessary for success.
• The opportunity. Profile the business and discuss what it will sell, to whom and for how much. Explain how fast the business can grow and its competition. Openly discuss strengths and vulnerabilities.
• The context. You need to show you understand the 'big picture', the regulatory environment, interest rates, demographic trends, inflation and how you'll respond when these inevitably change.
• Risk and reward. Assess a wide range of events that can go wrong and right and how you'll respond to cope or take advantage of it.

Allocating resources

The business plan plays a key role when you're allocating resources throughout your business in order to meet the objectives you've set.

Once you've reviewed your progress to date and identified your strategy for growth, your existing business plan may look dated and may no longer reflect your business' position and future direction.

When you're reviewing your business plan to cover the next stages, it's important to be clear on how you'll allocate your resources to make your strategy work.

Using targets to implement your business plan

A useful business plan should incorporate a set of targets and objectives.

While the overall plan may set strategic goals, you're less likely to achieve them unless you use SMART objectives or targets.

That is, ones that are:

• Specific
• Measurable
• Achievable
• Realistic
• Timely

Targets help everyone within a business understand what they need to achieve and when.

It also ensures you monitor progress against these targets.

When to review your business plan

You should carry out a formal review of your business plan regularly, certainly at least once a year and probably more often.

It all depends on the nature of your business.

Any events that disrupt markets, or have the potential to, should also trigger an emergency review.

Moreover, you need to monitor your business plan to make sure you're meeting the objectives within it.