A prerequisite to deriving the benefits you get from using your written business plan is to keep it current. You should treat your business plan as a dynamic document that should be kept current as your business evolves. While you might have initially created your business plan for a specific purpose (such as obtaining financing), the plan can serve you well in a number of capacities. It provides the baseline against which to measure your business's performance. It can help you to anticipate the impact of changing market and economic conditions.
A written plan can also be important when the unexpected occurs. For example, you might have an unexpected need for short-term financing if a large customer is late in paying or you incur unexpected expenses. An up-to-date plan means that you can go to your lender and demonstrate what happened and how you plan to respond. If a vendor goes out of business or can't deliver what you need when you need it, a current plan can be used in negotiating with a back-up source of supply.
Finally, there is a selfish reason to keep your plan current. You invested a good deal of your time and effort to create the plan in the first place. If you don't keep the plan current, you can look forward to a similar effort the next time you need a written plan. You preserve your planning investment by making the incremental changes that reflect actual business results, changes in assumptions, and other adjustments to your initial plan. Remember, it's almost always easier to edit an existing document than to create a new one from scratch.
We've suggested that your plan should cover a five-year period. Now let's look at some of the specific issues you'll face in keeping your plan up to date:
- How often should you update your plan?
- When's the best time to do planning?