Start-ups with business plans “more likely to succeed”
New research suggests that entrepreneurs who produce formal start-up business plans are 16% more likely to survive and thrive
Over a six-year period, Professor Francis Greene of the University of Edinburgh Business School and Christian Hopp of RWTH Aachen University studied more than 1,000 entrepreneurs and their new businesses. Their findings, which were published in the Strategic Entrepreneurship Journal, suggest that those who plan are more likely to succeed when starting a business, with planning even more beneficial when faced with more significant challenges.
High-growth oriented entrepreneurs are 7% more likely to plan, they found, and those with innovative, disruptive ideas are 4% more likely to plan than their peers. Those seeking external finance are 19% more likely to create a formal business plan.
Professor Greene said: “Writing a plan can make all the difference when it comes to making a start-up profitable. In some entrepreneurship circles, it’s fashionable to act, improvise and pivot, rather than to waste time on a plan that won’t survive first contact with the customer. But a plan helps to detail the opportunity, [establish] what success looks like and what resources are needed.
Green believes business plans are vital for fundraising, because they “build legitimacy and confidence among potential investors”, while “reassuring staff, suppliers, customers, and other key stakeholders”. He added: “If an entrepreneur wants to raise money and grow quickly, they’ll want to write a plan.”