Your business plan should set a consistent course for your company, but it needs to change over time.
Most entrepreneurs will tell you that their business plans are the blueprints for their company, or are the Bible of the business they're trying to build. It's good to have this mentality, and I don't advise trying to build a business without a plan; however, there's a critical misconception that leads to disaster more often than it reasonably should.
Too many entrepreneurs use their original business plan as an unbreakable, binding document, when in reality, it should be flexible, and ever-changing.
Why Adaptability Is Important
Adaptability is important for your business because the original circumstances in which you wrote your business plan will never be the same. You'll have more information, new competitors, different target demographics, and maybe even different goals. Keeping your business model the same in these ever-changing circumstances is a good way to cause your company to crumble.
How to Update
Don't try to rewrite your entire business plan from scratch unless you're making a hard shift; instead, stick to gradual, relatively small changes. Focus on one section at a time, and make sure your changes reflect your new goals whenever possible.
When to Update
There's no hard rule for when to update your business plan, but it's something you should be doing at least once a year (for established businesses) and more often for less established businesses. Any time your business encounters a major shift, consider addressing your business plan.
You don't have to change your business plan to be successful, but it certainly helps you preserve your direction and accommodate the unexpected shifts that are sure to develop.