Nobody, including capital providers, expects a business to evolve exactly as set out in an original business plan. There are many elements that change over time including internal company factors, as well as external market, customer, competitor, regulatory and financial factors.

These changes will impact many sections of the plan. Assuming the general concept and direction of the business remain the same, financial, industry, market and factual changes should be reviewed and updated routinely every quarter. On an annual basis, the whole plan should be subject to a thorough evaluation as part of an overall assessment of the status of the business, progress achieved to date and goals for the future.

In addition to scheduled reviews, any event which precipitates a material change in the company’s status or objectives should result in a revision of the business plan. Such events may include:

• A change in business direction following new information. This information may be positive such as the identification of a major market opportunity, a breakthrough in product development or the acquisition of a very large client. Conversely, the information may be perceived as less positive, such as the failure to raise capital with the original plan.
• A major change in capital requirements or structure. This may be the result of unanticipated growth or contraction of the business or a change in how the company is to be financed.
• A major unanticipated change in outside factors such as the competitive environment, regulatory issues or the financial markets.

Whatever the reason for updating a business plan, the most important element is honesty, both with yourself and your capital providers. Your business is an evolving entity and the plan needs to be accurate evaluation of where that entity stands and is heading.