Giving your business plan a good once-over one time a year may not be often enough. Reviewing your business plan annually is fine under most circumstances, but if your business environment is experiencing choppy conditions, or if you’re facing major threats or opportunities, your plan should be the first place you turn.
When Costs rise, revenues fall
The antidote? Study your financials, especially keeping an eye on
- Gross profit trends to see whether your costs of goods sold are slowly climbing out of control
- Operating profits to see whether your overhead and expenses are getting out of line
- Profitability to see how much of your original sales revenue is making its way to your bottom line
When new competitors appear
Even with careful planning, a competitive assault that you don’t see coming can rock your company. If that situation occurs, take a deep breath and remember that competition isn’t always a bad thing: It usually increases interest in your business sector, and it almost always forces you to focus on what you do best and how to do it as efficiently as possible.
If a big, predatory fish comes swimming into your little pond, revise the situation analysis in your business plan — immediately.
When important customers defect
From time to time, good customers will switch allegiances to a new supplier. However, if you notice a trend in customer defections, something may be wrong. For instance, your competitors may be stronger than you anticipated, your efforts may be falling short, or the market itself may be changing.
The defection of important customers is an alarm signal that you can’t afford to ignore. As your first step, look for deficiencies in your product or service offering. When possible, ask departing customers why they want to make a change, and talk to your salespeople and frontline staff for their insights. Get ready to retool your business plan, paying close attention to how your business strengths and weaknesses may have shifted and how those changes may be affecting your ability to compete in your market.
When growth is out of your control
Entrepreneurs don’t usually complain when business is booming, but your company can grow too fast — and that can mean trouble if you’re not prepared. When business is booming, customer service can suffer or manufacturing may not be able to keep up with demand, for example. Some companies even find that their basic organizational structures no longer fit their new dimensions. If your business experiences similar growing pains, look at your business plan to identify the parts that need to change in order to accommodate the good news — and your increasing size.