When To Revise A Business Plan
©2000 All Rights Reserved
Before we even talk about wholesale revision of a plan, we have to first establish that without regular review -- monthly or at least quarterly review of plan vs. actual results, with practical analysis of the reasons for variance -- planning is likely to be a waste of time.
Real planning requires regular reviews just as much as navigation requires knowing where you are as well as where you were and where you wanted to go.
So every real plan needs to be full of specific dates, budgets, forecasts, and management responsibilities. People involved have to know there will be tracking and following up on specifics. Then that plan must be reviewed against results, and those reviews should produce course corrections and fine tuning.
Generally a business hopes for a consistent long-term strategy built on short-step incremental changes, not major revisions. Consistency is important to strategy, and the business should avoid the temptation to jump around from one strategy to another so quickly that no strategy is ever really implemented. Remember that even a mediocre strategy well and consistently implemented is much better than a brilliant strategy that wasn't implemented.
However, businesses do come to crossroads demanding major revisions. There are some signs that indicate its time to review:
• Major changes in market situation
• Look especially for changing market factors, changing market behavior.
• Have your underlying business assumptions changed?
For a wealth of easy examples, the Internet has changed the business landscape so enormously that in some industries almost any plan that was developed without a view of the Internet may need revisions. That may not be true for a landscape architect or restaurant, but for a travel agent, graphic artist, or market researcher it's obvious.
Do you have new competition? Have new competitors emerged, or existing competitors changed the business landscape so much that you need to review and revise?
Has the product or service picture changed? For example a new technology may have emerged, changing the market perception of what you sell. There may be new products or services offering related solutions to the same user needs you satisfy.
Major changes in internal situation. The most obvious major changes are changes in ownership, which are frequently the result of changing partnerships, divorces, deaths, and investment. The company takes on new partners, or sells out to a larger company. On a more ominous note, the company suffers significant declines in sales, profits, and financial health.
Always keep the revision in perspective. While you do want to review and correct constantly, you don't want to change a strategy unless you are sure it isn't working or you see real changes in the underlying assumptions that formed the foundations of strategy.
Tim Berry, President of Palo Alto Software and author of CPA's Guide to Business Planning and Hurdle: The Book of Business Planning. He is the principal author of several successful software packages, including the #1-rated software for developing a business plan, Business Plan Pro.
