Business Plans Kit For Dummies®, 3rd Edition

Chapter 16. Ten Signs That Your Plan May Need an Overhaul

In This Chapter

• Recognizing the red flags

• Revising your plan to reflect new business realities

Giving your business plan a good once-over one time a year may not be often enough, especially when the economy is tight or markets are changing fast. If your business environment is experiencing choppy conditions, or if you're facing major threats or opportunities, your plan should be the first place you turn. Chapter 11 offers help for companies in trouble; the first step is to see and recognize the warning signs. Here are ten red flags to watch for as you monitor your business situation.

Costs Rise, Revenues Fall

The clearest sign of business trouble is that costs are going up and revenues are going down, yet many business owners ignore the warning. Why? Because these situations don't usually go wrong overnight. Costs creep upward while revenues drift downward, and too many business owners don't see what's happening because they don't watch (or maybe don't know how to watch) their financial margins. Others hope things will turn around and go on hoping until it's too late.

The antidote? Study your financials, especially keeping an eye on

• Gross profit trends to see whether your costs of goods sold are slowly climbing out of control

• Operating profits to see whether your overhead and expenses are getting out of line

• Profitability to see how much of your original sales revenue is making its way to your bottom line

• Number of bids or inquiries ...