5 Ways to Keep Your Business Plan A Living Document
A lot of attention is spent on how to write a business plan, but what happens after it's done? Take your business plan out of your file cabinet and put it to work!
Even the best-laid business plans go awry. And chances of a plan failing to provide a guide to the future increase if it's shelved after completion, never to be refreshed or looked at again until the next annual business planning session. To reach its full potential as a business decision-making tool and aide to work efficiency, a business plan is best kept updated with the latest information. Experts on how to write a business plan add that it is far better used in guiding day-to-day decisions than put away and allowed to gather dust.
It's important to refresh and review a business plan regularly, especially when conditions change, says Brad Sugars, chairman and CEO of Las Vegas business coaching company ActionCOACH.
“If you have a business plan and you're going to recruit someone two months earlier than you thought, you've got to be able to punch that in and see the impact on the cash flow of recruiting this person early," he says.
With that in mind, here are five tips on how to write a business plan and ways business owners can keep their business plans fresh and updated to help guide daily decisions:
1. Make a plan, not a pitch.
A business plan may get written for a one-time purpose such as applying for a loan or wooing investors. But a plan is valuable for much more than a single financing presentation, says Robert Morlot, managing partner of Clearwater Business Advisers in Tampa. To achieve its potential, it has to include performance benchmarks that can be used to guide future decisions.
“If you're going to do a plan, hang onto it and adjust it," Morlot says.
Morlot has some advice for business leaders learning how to write a business plan: encourage regular use of your plan by seeing that its contents connect to key performance indicators used for daily management activities.
“Everybody has to know what the key performance indicators are," Morlot says.
2. Relate it to your daily activities.
To develop a detailed business plan is an organizational challenge. Business plans are organized by function, such as marketing, finance and operations, Sugars notes.
“But really they are calendar-based," he says. “It's built around when things happen."
With that in mind, a good business plan provides guidance that decision makers will want to refer to often.
“A business planning process should be broken down into annual planning and quarterly planning," Sugars says. “The most important is the daily plan. What's going to be done tomorrow?"
When business plans are consulted that often, it helps keep them centered in decision makers' sights.
3. Keep it to a manageable size.
Knowing how to write a business plan well starts with knowing how long to make it. Some business plans are nearly book-length with dozens of detailed spreadsheets. Others consist of no more than a dozen presentation slides. This is an important consideration for businesses interested in keeping a business plan fresh and in play—a shorter plan is more likely to be used.
You should change your business plan as needed as you expand into new markets for your products and services, and you may adjust your value proposition as you continue to gather customer feedback.
—Susan Scherreik, director of the Center for Entrepreneurial Studies, Seton Hall University
“Today, business plans should be no more than 30 pages versus the 80- to 100-page business plans of yesteryear," says Susan Scherreik, director of the Center for Entrepreneurial Studies at Seton Hall University in South Orange, New Jersey. (To help see how to write a business plan, Scherreik suggests business owners consider patterning their plan on a free template from SCORE, the Service Core of Retired Executives.)
4. Refer to it in reviews.
How to update a business plan is another key question. Perhaps the most reliable way to keep a plan crisp and relevant is to make it a central part of regular management meetings.
“An operations review should happen every Monday with key employees where you go over key performance indicators," Morlot says. “If there's an issue, discuss what to do about it. That way you pull people into the process.
Sugars says at the start of each week he sits with his direct reports to discuss how they're performing against plan and what comes next.
“It's really about communication—making sure all team members know what all team members have to do," he says. “If you want execution of a plan's objectives there has to be regular communication around them."
5. Change it when conditions change.
At minimum, a business plan should be referred to when conditions change. That could be anything from hiring a new employee ahead of schedule to introducing a new product.
“You should change your business plan as needed as you expand into new markets for your products and services, and you may adjust your value proposition as you continue to gather customer feedback," Scherreik says.
“As your business expands and you hire administrators to run different departments," she continues, "your business plan can serve as a document to make sure that your administrators, employees, and your company is setting and meeting sales and other goals."
Ultimately a fresh and well-used business plan can do much more than persuade an investor or land a loan. When referred to regularly it can keep business decision-makers on track. And when kept updated it has the added ability to warn of looming threats, Scherreik says.
“It will help to unearth problems you may not be focused on," she says. “If your reality falls short of the forecast, that might be a red flag for something."