Did you know updating your business plan should be a part of your regular business practices? If not, don’t worry — a lot of people skip this step. But it could benefit you to make this effort.

Read on to learn why updating your business plan is so important, how to tackle this task, how often you should make updates, and key things to keep in mind.

Let’s get to it!

Why should you update your business plan?

Outside of updating your business plan as a standard course of doing business (which we’ll discuss in detail shortly), there are a few noteworthy situations that warrant a full business plan overhaul:

You need to raise funds

If you need capital to make tech upgrades, grow your team, or expand operations, you’ll likely need to raise funds. Before you can reach out to new investors, however, your business plan must be up-to-date and reflect your company’s current financial situation, including operating costs, cash flow, business goals, and income projections.

Related: 10 small business funding options

You want to refinance

Similar to potential fundraising moves, refinancing your business loans requires an updated business plan because it outlines operating costs, your company’s challenges, and forecasted revenue. No lender will entertain refinancing or even new loans without an updated business plan and financials.

You want to launch a new product

Big business moves necessitate an updated business plan and launching a new product or service qualifies. A new product means new potential revenue, so updating your business plan to reflect that fresh revenue stream is critical. Be sure to include everything you would’ve when writing your business plan the first time around — like costs, vendors, time frames, target demographic/segmentation, and financial projections.

You want to expand your company

Company expansion can take many forms. Perhaps you’d like to open up a second location in another city. Maybe you want to purchase more warehouse space for your products. Large technological upgrades are considered expansions, too. No matter what type of growth you have in mind for your business, updating your business plan to reflect this intention to grow is a key step before reaching out to investors and potential lenders.

You’ve changed your supply chain

Supply chain issues have become an acute problem since 2020. However, there has always been a need to update business plans to reflect changes in the supply chain and/or a change in the vendors you decide to use. Any time you make changes to your vendor list, put updating your business plan on your schedule.

Related: How to overcome supply chain challenges in 2022

You have new competitors

If a new major competitor enters your industry, it’s likely to affect how you do business. Whether that means your share of the industry “pie,” so to speak, decreases, or it means a new brand changes the expectations for your industry and you need to now follow suit — a  business plan update is in the cards to reflect these changes.

When and how often should you update your business plan?

As you can likely see by now, updating your business plan is an essential part of having a business plan in the first place.

It’s a dynamic document that needs to be updated to meet where your business is at right now.

Though you don’t need to update your business plan to reflect every little change, making regular updates is a solid business practice.

If your company is chugging along with no major changes, giving your business plan the once-over at least once a year should be sufficient for updating financial data and projections. However, if your company undergoes a major shift, you’ll want to update your business model when you expect that change to occur.

How to update your business plan

Now that you have a sense of how often you should update your business plan and why you need to do so in the first place, let’s turn our attention to the real meat of this article: how to update your business plan. Here are six key things to keep in mind when updating this most important document.

1. Make updating your business plan part of your regular review process

One of the biggest obstacles to updating a business plan is scheduling the time to do it. Business owners are busy people, and it’s all too tempting to leave these sorts of tasks until tomorrow. However, you can get around this by simply incorporating a business model review into other processes you already complete.

If your company does quarterly financial reviews, add in a business plan review during this time. You’ll already be taking time away from day-to-day business operations to complete the financial review, so you might as well spend a couple of extra hours updating your business plan.

You could even schedule it for when you do your taxes or prep documents to send to your accountant. Add the business plan update to your to-do list for those days.

2. Include your team in the process

If you have any kind of team for your business, you must include them in this process. They are likely involved with the day-to-day functions of operating your business and can provide key insights into what the future of your company looks like. For example:

• Ask the marketing team for reports on trends they’ve noticed over the past six months or so.
• Ask sales about any demographic shifts they’re noticing in the customer base.

Those who are doing work within your industry daily are going to feel the subtle shifts within the market before anybody else. And they might have insights into what projections look like — things that you might not come up with on your own.

Leveraging your team means getting a more complete picture of what your company has accomplished, how it’s currently positioned, and where it will go from here.

Pro tip: You can manage these tasks directly in Microsoft 365 as well. Sharing documents is a snap and you can collaborate on your business plan in real-time.

3. Note regulatory changes

When updating your business strategy, take some time to research any regulatory changes that have taken place in your industry. New rules, regulations and laws are passed all the time and many can have a direct impact on how you do business.

For instance, payment processors now must report your earnings to the IRS. This change could affect how you report income and change your relationship with contractors. The implementation of sales tax on internet sales made in the state where your business is located is another example from the past that had a profound effect on companies doing business online.

Such changes can impact your financial reporting and/or make your business more competitive, and less competitive, and otherwise change your approach to how you do business.

4. Note vendor/supply chain changes

Another factor to take into consideration when updating your business plan is any vendor or supply chain issues or changes that have occurred since your last plan update. If a vendor suddenly changed their billing system or adjusted their fees, you might need to account for this in your business plan as it could cut into your profit margin projections.

Or, if the supply chain has made it so you need to use multiple vendors to meet your company’s needs without experiencing disruptions, your business plan should make note of this change — and even indicate that supply chain issues are an ongoing problem.

To be honest, nearly every company has experienced some issue with the supply chain since 2020, so if you haven’t updated your business plan since then, now is probably the time.

5. Keep broader economics in mind

The overall state of the economy can directly affect your company’s performance. And while economic downturns can leave some industries untouched, it’s rather rare. But even if your company is lucky and hasn’t been affected by broader economic fluctuations as of yet, keep updating your business plan on your radar.

The economy as a whole can impact your vendors, shipping, packing, contractors and other services related to how you do business. It can also affect staffing and the accessibility of talent. So even if your company hasn’t experienced negative effects, acknowledge the general state of the economy in your business plan and include contingency plans should issues arise.

6. Follow demographic changes

We’re currently in the midst of huge demographic changes in the United States and all over the world, which will have a direct impact on how you do business and what the future might bring to your company.

As of 2022, the median income among the middle class is going down, the income of the very wealthy continues to go up, and the median age of workers is going up, too. People are having babies later in life and at lower rates than in the previous generation.

All of these factors can directly impact your revenue potential as well as who your target demographic or ideal customer even is. And this means you need to update your business plan to account for these shifts. Continue to revisit demographic data and projections a couple of times per year to ensure your internal projections still apply and to see if your processes need updating and track your actual results. If so, a business plan update is in order, too.

What to do next

If you haven’t even so much as glanced at your business plan in a bit, now’s the time to dust off the document and give it a once-over. Times are changing — seemingly faster than ever before — so it would behoove you to set aside some time to update your business plan sooner rather than later.

Setting the right business goals can provide your business with a sense of direction and allow you to measure your progress. But business goals shouldn’t be static and unchanging. Instead, they should adapt as you learn more about your business and your industry. So how often should you reevaluate your business goals? And what’s the best approach to setting new goals?

Why setting business goals is important

Business goals help you in several ways. For starters, they provide your business with direction.

If your ultimate goal is to generate $5 million a year in revenue, you can plan a course of development that ultimately gets you to that destination.

That business is going to operate very differently than one whose goal is to establish operations in 10 different countries. Goals also give you a timeline, so you have expectations for how quickly your business should be growing or progressing.

Business goals play other roles too, including:

• They motivate you. Just like personal goals, business goals serve as a form of motivation. Knowing the end result you want can inspire you to work harder and be more focused. It also can help you take obstacles in stride and avoid feeling daunted by setbacks.
• They allow you to measure progress objectively. Is your business succeeding? That’s often a hard question to answer objectively. But a solid set of goals will allow you to determine whether or not you’re making significant progress: You’ve either reached your goal by the deadline or you haven’t.
• They align teams and individuals. Goals also can provide a fabric of shared philosophy for the entire organization, making sure that your teams and individuals all share the same high-level vision for the company.

How to set business goals

There are several types of business goals you’re going to need to set.

You’ll be setting goals for the entire organization as well as goals for teams and individual employees. You’ll be setting long-term goals, forecasting the future of the business for years, if not decades to come, and short-term goals that you can knock out in the span of a week.

Your long-term goals for the business are going to be the most important, and the ones that provide a foundational architecture for all your other business goals.

These types of goals tend to include topics like the amount of revenue you’re going to generate, the number of people you’re going to reach and the products and services you’re going to roll out. The best all-around approach to setting goals is following SMART criteria.

Your goals should be:

• Specific. The more specific you are, the better. A vague goal like “become the best ____ business in the world” isn’t going to cut it.
• Measurable. Achieving the goal should be unambiguous. How will you know when you’ve reached it?
• Achievable. Realistic, achievable goals strike the right balance of motivation and challenge.
• Relevant. Your goals should be relevant to your industry and your capabilities
• Time-bound. You also need to have deadlines in mind for your goal achievements.

Why reevaluate your business goals?

Why do you need to reevaluate your business goals? The simplest answer is that things change.

Maybe your company was the recipient of $3 million in new funding that you weren’t expecting. Maybe a new competitor emerged and is threatening your business share. Maybe new regulatory requirements are forcing your company to pivot. Or maybe you’ve already achieved your first goals and your company is rudderless.

All your business goals are based on what you understand about your business environment and what you want for the company’s future.

It stands to reason that if your business environment changes or if your vision for the future changes, your goals must change as well.

How often should you reevaluate your business goals?

How often do you need to reevaluate your business goals? The answer will be different for every business, but you’ll need to keep in mind things like:

• Your previous goal progress. What has your progress been like for your previous business goals? Were you able to achieve them in record time? Are you struggling to make any progress toward them? If your goals didn’t seem like a good fit, or if they’re still not a good fit, you’ll need to change them.
• The pace of your industry. Different industries have different paces. Some business environments haven’t changed much in the past 50 years. Others, especially those focused on technological development, seem to evolve on a daily basis. The faster your industry changes, the more frequently your goals will have to be fine-tuned.
• Recent and forthcoming impactful changes. What changes have you noticed in your business and your industry and what changes are coming in the future? Changing consumer preferences, new laws, major rounds of employee turnover and new competitors all can strongly influence your business’s course of development.

Regardless of the answers to these questions, you should plan on evaluating your long-term goals at least once a year. Your short-term goals will require more frequent attention and analysis.

Tools to help you set business goals

If you’re struggling to set the best goals for your business, there are several tools that can help you:

• Microsoft 365. Through GoDaddy, you can access Microsoft 365, a suite of productivity and business planning tools to use throughout your entrepreneurial journey.
• The Small Business Administration (SBA). The SBA is dedicated to providing resources and education to entrepreneurs of businesses of all shapes and sizes. There, you can find thorough guides and templates for your business planning needs.
• Any project management platform. Tools like Asana and Trello are specifically designed to help professionals set goals, plan projects and manage the individual tasks that allow them to complete those projects. It’s the perfect place to keep track of your goal progress with the entire team.

Ready, set, go!

While business goals are designed to provide a firm long-term direction for your business, they also need to remain fluid and responsive to your business conditions.

It’s important to reevaluate your business goals at least once a year. Even if you don’t change your goals with every review, doing so enables you to redouble your commitment to your original vision and reinvigorate your business with renewed motivation.