Once you have gone through the process of planning your business strategy and you are up and running, it can be easy to assume the hard work is over. While you may be inclined to sit back and let the business run itself, regular reviews of your business plan are essential if you want to remain successful.
During the crucial early stages in particular, reviewing your progress, identifying where you want your business to go next and establishing how to make the most of your market position should become second nature. Updating your business plan as you go along will ensure you are always one step ahead, changing and developing with the industry.
On this page we will look at the ideal time to review your business plan, the various areas you should consider during the review and how professional business accountants can help.
Why you should review your business plan
During the early days it can be easy to focus solely on the day-to-day running of the business, but once you are established in the market it can pay dividends to think about the long-term and more strategic planning. If you begin to take on more staff, appoint managers or become distanced from the daily activities of the business - this is especially important.
Reviewing your business can be a particularly useful exercise if you feel the following way:
- unsure of how the business is performing
- uncertain if you are making the most from the business
- that your business plan is out of date
- that your business is moving in a new direction
- that your business is becoming unresponsive to changes in the market.
Developing a clear strategy within your business plan review can help to answer any queries or concerns while helping you decide practical ways to move forward. To begin with, you will want to ask yourself some key questions about the business and the direction you want to head in. To get the process going, you may want to consider the following things:
- where you want your business to be in five years
- what your markets are - both now and in the future
- what you can do to gain an advantage in the market
- what resources you need to succeed, and how you can get these
- the external factors affecting your business's ability to compete
- how you are measuring your success.
You may find it helpful to involve some other people when asking these questions. Professional advisors, fellow directors, staff members and business accountants can all offer insight and help you consider the future of your business in a more effective way.
When to consider reviewing your business
When you decide to review your business plan will depend on the nature of your business; for those that are succeeding at a steady pace - an annual review may be all that's needed, for others - a more regular review may be useful. As a rule of thumb, you may want to consider a business review if any of the following situations arise:
Revenues fall but costs rise
The clearest sign that your business is in trouble is that your revenues are going down while costs continue to rise. For some business managers this can come as a surprise as changes in cost and revenue can happen slowly, creeping up on you without you realising. Keeping a close eye on financial margins can help to avoid this scenario, and if you do spot any changes - this could be a sign that you need to carry out a business review.
Sales figures go down
Whether your sales figures aren't meeting your expectations or you encounter an unexpected drop in sales revenue - this should be seen as a red flag. Moving quickly to diagnose the problem and identifying the cause can help you to revise the appropriate aspects of your business plan review.
You aren't meeting financial projections
If your financial projections are out of line with what you are turning over, you could benefit from a business review. There are multiple issues that can arise to disrupt even the most conservative of projections. The trick is not to ignore them in the hope that they will go away - review your finances to ensure you remain in line with projections.
Employee morale is low
While this isn't a metric that is easy to measure, it is one that is critical to the success of your business. If you don't think employee morale is where it should be, try talking to key people in the company to see what is going wrong. Reviewing your business here will ensure the targets and objectives you are setting are realistic, helping employees to feel motivated rather than frustrated.
New competitors appear
No matter how carefully you plan your business strategy, there are unforeseen circumstances that can require you to reconsider. One such example is when a new competitor appears. While it is important to remember that competition isn't necessarily a bad thing, you should take the opportunity to review your business to ensure you are offering the best service possible.
New technology comes into play
Another unforeseen situation would be if there was an advancement in technology that affects your business. New products and processes can be a blessing or a curse depending on your reaction. Staying abreast of news like this and reacting quickly and accordingly is crucial.
Growth becomes unmanageable
While it may seem strange to run into difficulties when a business is expanding, it can happen. It may be that your company is growing faster than expected, causing customer service to suffer or manufacturers unable to keep up with demand. If your business is expanding, reviewing your business growth plan can ensure you spot potential difficulties before they happen and plan accordingly.
Assessing your core activities and business efficiency
A key aspect of your business review should include assessing your core activities - what it is you sell/provide. A good starting point for your review is to ask yourself a number of questions about your core activities, for example:
- How effectively are you meeting customer's needs?
- Which of your products or services is succeeding?
- Which are not succeeding? Why do you think this is?
- Are you reviewing your costs frequently?
- Are there any other ways you can cut costs?
Once you have the answers to these questions in place, looking at the efficiency of your business is a logical next step. At this stage you can ask yourself whether there are any internal factors holding your business back and, if there is, what you can do about them. There are various aspects of the business to consider, including the following:
- Premises - Do you have room to grow where you are currently? Do you have flexibility to cut back if necessary?
- Facilities - What is the capacity of your current facilities compared to current and future demand? How will you fund future improvements?
- Information technology - Will the systems you have in place cater for future expansion? Are they truly making a difference to the quality of service you provide?
- People and skills - Do you have the right people in your team to help you achieve your objectives? Are you paying as well as the competition?
- Training - Does your staff require further training?
Reviewing your financial position
A big factor in the failure of business often involves poor financial management or inadequate planning. With this in mind, ensuring you review your financial position regularly is important. Hiring an expert in business accounting or a management accountant could be advantageous here.
When it comes to looking at your finances there are certain elements that should be considered:
- Cash flow - This relates to the balance of all money coming in and out of your business.
- Working capital - If your requirements have changed, you may want to investigate why and, if necessary, source additional capital.
- Cost base - Review your costs and ensure they are covered in your sale price.
- Borrowing - Where are you in terms of paying back any loans?
- Expansion - Do you have financial planning in place to accommodate your business's growth?
As well as addressing the above, measuring your profitability is key. For most growing businesses, increasing profits is the ultimate target, so therefore it is useful to measure how you're doing. The standard measures of profitability are:
- gross profit margin
- operating margin
- net profit margin
- return on capital employed.
Other accounting ratios you may be interested to measure include liquidity ratios (which tell you if you can meet short-term financial obligations), efficiency ratios (which tell you how well you are utilising your business's assets) and financial leverage ratios (which tell you how sustainable your exposure to any long-term debt is).
Competitor, customer and market analysis
When you devised your business plan, you probably considered your competitors, customers and the market. During your business review it can be helpful to look over these areas again to identify any changes.
The type of competitor information you'll need will depend on the nature of your business, however there are key questions you should think about including: Who are they? What do they offer? How big are they compared to you? How do they price their products/services? What was their reaction to you joining the market?
Another helpful tool is a SWOT analysis - that's Strengths, Weaknesses, Opportunities and Threats. This will give you a good overview of how you are doing in relation to the market. There are many ways you can find out more about your competitors including what they say about themselves (read their websites, press releases and advertisements) what other people say about them and commissioned market research.
While your target market may have stayed the same since you launched, their needs and expectations may have changed. Try asking for customer feedback to identify areas of improvement or future suggestions. Ensure you take this feedback on board and try to incorporate it into future plans.
Your business review is an ideal opportunity to take a step back and analyse the current market. Within this you should be looking out for any changes within the market, new and emerging services as well as any external factors such as new technology or the economy.
When you have completed your business review
At the end of the business review process it is essential that work plans are devised to put plans into action and that a timetable is set with expected completion dates. Be realistic with your time frames and work in a strategic way - addressing the most pressing issues first.
The world of business is incredibly dynamic and therefore updates and reviews should be considered on a regular basis. To help drive continuous improvement, try to establish a planning schedule. This will help you prepare for reviews and should make the process of making changes smoother when they're required.
Many business owners find it useful to gain expert input when reviewing their business plan. Helping to provide advice, business development specialists also offer a fresh pair of eyes and may spot issues you haven't noticed. Business accountants can be especially helpful when reviewing your business plan, offering advice and expertise in all financial aspects of the business.
To find out more about the services business accountants can offer, please see our business advice and support page.
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