A study has shown that entrepreneurs who write a formal startup business plan are 16% more likely to succeed than those who do not.
University of Edinburgh Business School Professor, Francis Greene and RWTH Aachen University‘s Christian Hopp studied data gotten from 1,088 entrepreneurs and their start-ups over a six year period.
They discovered that the founder, venture, and environmental factors are things that matter in the decision to plan, and that planning does help the business.
The findings also suggest that planning is more beneficial when the challenges are greatest.
“Plans are vital for fundraising because it builds legitimacy and confidence among potential investors. It reassures staff, suppliers, customers, and other key stakeholders. If an entrepreneur wants to raise money and grow quickly, they’ll want to write a plan,” Greene said.
On the type of entrepreneurs who go ahead to write a business plan, the study found that better-educated entrepreneurs, entrepreneurs seeking growth and innovation, and those with disruptive ideas are inclined to plan then their peers.
Entrepreneurs seeking external finance are also 19% more likely to commit their vision to paper.
“Writing a plan can make all the difference when it comes to making a start-up profitable,” says Greene.
He continued: “In some entrepreneurship circles, it is fashionable to act, improvise, and pivot than to waste time on a plan that won’t survive first contact with the customer, but a plan helps detail the opportunity to be seized, what success looks like, and what resources are needed.
These findings were recently published in the Strategic Entrepreneurship Journal.
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