Time To Update Your Business Plan?

2 years ago

Becky Ames, business advisor and partner at chartered accountants Larking Gowen, on the importance of keeping your business plan current

Why do so many small firms fail to update their business plan?

Becky Ames (BA): “Many owners prepare a business plan when starting up, sometimes when applying for funding. But soon that plan is forgotten, which is a mistake, because a regularly updated business plan can help you to grow your business in the right way, judge performance and progress – or lack of.”

How else can a business plan prove useful?

BA: “How you describe your business in your business plan can form the basis for your ‘elevator pitch’, which you can use when networking or trying to win new customers. Business plans don’t always have to be huge. In fact, 10-20 pages is about right for most small businesses. I’ve even seen some pretty good one-page business plans.”

What are the key dangers of not having an up-to-date plan?

BA: “A business plan details your goals in year one, year two and year three – most business plans are for three years. If you don’t regularly remind yourself of your goals, you might not achieve them or head off in the wrong direction.”

So the business might not grow?

BA: “ Ultimately, without a business plan, your business could fail to grow to its full potential. Working with an up-to-date business plan encourages you to stay focused on your goals, judge your performance and decide whether your strategy is the right one. If not, you can make changes.”

What facts and figures are most likely to change?

BA: “Conceivably, most facts and figures can change – sometimes significantly, sometimes quickly. These could be linked to your business – for example, you might launch a new product, take on new staff, gain new important customers and market share, etc. Your financial forecasts should be updated with actual figures where possible. Conditions in your market can change, too; for example, competitors can come or go.”

So, most aspects of a business plan can change over time?

BA: “Indeed, although some might remain the same. You should assess every fact and figure and update where necessary. Having to update your business plan can help to ensure that your knowledge of your business and market remains current, which is crucial. If your business plan isn’t up to date, then your business goals and strategy for achieving them could be flawed.”

How often should a business owner update their business plan?

BA: “Whenever significant changes occur to the business or its market, or, as a matter of course – at least every year. This can include big changes, such as setting new goals and changing strategy, where necessary.”

What key tips do you offer when it comes to updating business plans?

BA: “See your business plan as a living, working document that will change. Things can change day to day, as new opportunities arise, and some come to an end – that’s normal. But you need to keep your business plan as current as possible if it’s to remain useful.

“Secondly, pay particular attention to the financials. Make sure these are as current as possible and back up your claims and assumptions. Experienced people – including lenders and funders – will focus on your financials. If they’re out of date or don’t stand up to closer scrutiny, experienced people won’t believe in you or your business plan.”

Any other advice on business plans?

BA: “Remind yourself of the key goals and development strategy within your business plan every month at least, and aim to update your plan every six or 12 months. I’d also recommend getting an external expert, such as a qualified, experienced accountant, to review your plan with you at least every year. Don’t be afraid to seek advice, because it could ultimately lead to a better plan and a more successful business.”

Larking Gowen is one of the UK’s top 50 accountancy firms. It has nine offices in East Anglia and some 300 employees.