Reality Check for Your Business Plan

Many entrepreneurs would say that their business plan ceases to be relevant I year into business when it meets the ground realities. Quite often things don’t work as stated or presumed in the business plan and entrepreneurs stop referring to it as a guiding document. However it is only natural for your assumptions to go wrong in a course of time because one cannot predict everything accurately. In that case you must consider a reality check, review your plan and adapt it according to the changed scenario. Here are 3 steps for a quick reality check.

1.  Review the Assumptions

Every business plan is full of assumptions. Say you plan your cash flow requirements assuming that your business will have reached profitability by the end of 8 months. Or you base your growth plan on the assumption that your specific industry will grow by 10%. Then there comes an economic crash and all your assumption turn wrong. That’s the time for a review. Change your plan accordingly.

2.   What worked, what did not and ….the whys?

You planned your expenses to a particular amount but your costs turned out to be much higher. Bad news for you. This variance suggests that certain areas of your business need to be more efficient. Say in the past one year a number of key employees left, increasing your costs of hiring fresh talent and training them according to your requirements. Here you need to review your ‘people policies’.

You achieved break even sooner than you had planned. Cheers! Figure out what helped this achievement? What business development techniques had you been following? Find out if your sales team followed some innovative techniques to reach out to the customer (which weren’t mentioned in the plan). Make changes in your plan accordingly. On the other hand if your have not been able to achieve breakeven till the time duration planned then you need to assess your plan again. That may connote that you have not been able to define your target market very clearly. So, again time for a review.  

3.   Now change your plan

When you are assessing your plan, you know whom to give credit and whom to blame. But the most important thing is to realize that all this is normal in the course of your business cycle. Understand that you would have to correct your plan constantly to keep yourself on track. Involve everyone and talk to them about the assumptions which turned wrong, the targets that were not achieved and the reasons. At the same time give credit to those who helped the plan work its way, may be even better than planned. Talk to them about fresh strategies that could help work the areas which do not do very well. Make these changes in your plan and get going again.

You may say what is the use of taking pains to chalk out a plan if it has to be changed always. Remember that having a plan will help you figure out what you misjudged and what you understood rightly. It is a tool to measure your performance against preset benchmarks.