Level Up: Improve Your Business Plan and Expand

When your business started out, you probably had a business plan that focused on getting off the ground. You likely included things like your target market, the product or service you offer, your plan to attract customers, and, more importantly, how the business will make money.

But that was then, and this is now. As your business changes, so should your business plan.

After you’ve been operating for a while, you’ll have something you didn’t have at the beginning: real-world information. With the passage of time, you now know more about your customers, your revenue streams, your expenses, and which parts of the business are working well.

If you’ve arrived at a point where you think your business is ready to grow and expand, taking a moment to update your business plan can help you better envision what growth will look like, how much it might cost, and whether your company is financially prepared to take it on.

Why update your business plan before you expand?

A business plan isn’t just something you create when you launch your business. It’s a tool you can use to help you determine where you should go in the future as your company changes.

The U.S. Small Business Administration (SBA) describes a business plan as a tool for structuring, running, and also growing a business. If you’re already an established business owner, updating that plan means replacing your early assumptions with the facts you know now.

Perhaps your most profitable customer segment is different from the one you originally anticipated. Or maybe a new product or service has become a key revenue stream. Your marketing strategy may have changed entirely because customers now find you through different channels.

“Your business plan should evolve alongside your business,” says Analicia Booth, Community Banker at Amplify Credit Union. “Once you have actual sales data and observed customer behavior, you can make growth decisions based on what your business is actually telling you, rather than what you originally expected when you started out.”

Is your business ready to grow?

Now that you know the importance of the business plan and how important it is to keep it updated, how do you know whether your business is ready to expand? 

There are several signs to look for that signal you’ve already got a solid foundation on which to build:

• Demand regularly exceeds what your current staff, inventory, or location can handle.
• Your current operation is financially stable enough to take on additional expenses.
• You understand your cash flow and how seasonal fluctuations or timing changes impact it.
• Your team has the capacity to support growth, or you have a realistic hiring plan to support that growth.
• Market research shows you have an opportunity to reach new customers or increase your market share.
• You know specifically what you want to accomplish through the expansion.

Of course, none of these signs guarantees that your goal to grow your business will be successful. However, if you recognize several of these signs in your company, it can help you determine whether you’re seeing just a temporary increase in business or a more sustainable opportunity to grow.

How to Expand Your Business Plan

If your current business plan is already several years old, tacking on an expansion strategy at the end isn’t the best plan. Instead, review the document in its entirety and update anything that no longer reflects how your business operates today.

1. Start with what you know.

When you were first starting your business, your business plan probably relied heavily on forecasts, information from competitors, and outside market research. Now, you have something extremely valuable you didn’t have then: your own track record.

Review your sales, expenses, profit margins, revenue streams, and your cash flow. Then, compare those numbers with your original financial plans. Did the business outperform expectations in certain areas? Did it fall short in others?

Also, update basic information about your products or services, your leadership team, operations, and any competitive advantages you’ve found over time.

2. Revisit your target market.

Circumstances are always in flux, so it’s entirely possible that your customer base may have changed since you launched. Look at who currently buys from you, which of those customer segments generate the most revenue, and which are most profitable to serve. Then, research what other customers you hope to reach if you expand.

For instance, opening a second location might require new analysis of the local market. If you’re launching a new product, you might need to target an entirely different audience. And if you’re expanding online, you might be facing competitors you never encountered in your local market.

Your updated plan should explain who those customers are, what they need and want, and why they would choose your business over any alternatives.

3. Define what growth actually means.

The plan to “grow the business” sounds great, but it’s not specific enough to actually build a strategy around. Instead, try to define exactly what you want to accomplish in as much detail as possible. Are you opening a new location? Hiring new employees? Adding equipment? Entering a new market? Launching a different product or service?

Once you’ve defined your growth objective, establish measurable goals. The SMART framework — specific, measurable, achievable, relevant, and time-bound — can help you set your new goalposts.

So, instead of simply saying you want to increase sales, you might say you want to increase revenue by 10% from customers in your local market by the end of the next quarter. In addition to defining a SMART goal, you’ll also need to clearly specify who is responsible for different parts of the expansion and establish how you’ll measure that progress along the way.

4. Update your marketing strategy.

Growing your business often requires a different strategy than starting your business or maintaining your current trajectory. 

Think about how new customers will find you. Will you increase your advertising spend, enter new marketing channels, develop partnerships, hire new salespeople, or update your brand’s messaging?

Tie these new marketing plans back to the updated target market you identified earlier. When you know exactly who you’re trying to reach, it’s easier to determine where your marketing dollars will be most effective.

Decide How You’ll Pay for Expansion

Once you have your new plan in place, you’ll need to determine where the money to fund your growth will come from.

Some businesses can fund expansion using cash they’ve already accumulated. Others may need a business loan, line of credit, equipment financing, or outside investment. If you do plan to borrow, be clear about how much funding you’ll need, what the money will pay for, and how your company will handle the additional payments.

“One of the most important questions to answer is not just, ‘How much money do I need?’ but ‘What will this money allow the business to do?’” Booth says. “Connecting the financing to a specific growth strategy makes it much easier to evaluate whether taking on that expense makes financial sense.”

Let Your Business Grow With You

Your original business plan helped you launch your company and get you where you are today. But that plan likely won’t be the same one that takes you through your next phase of growth. 

As your customers, finances, and target market evolve, your plans should change with them. By reviewing your business plan at regular intervals, you can identify new possibilities, spot potential financial pressure points, and make expansion decisions based on real data, rather than enthusiasm alone. Of course, growth will always involve some uncertainty. But updating and expanding your business plan can give you a clearer picture of where you want to go, what it will take you to get there, and how you’ll decide if the investment was worthwhile.

This article was originally published on September 24, 2021.