Entrepreneurs who write early-stage business plans are more likely to succeed
Start-up owners who are seeking funding, motivated by high growth or have an innovative business idea have been revealed as more likely to plan ahead
Entrepreneurs who put their vision on paper and write formal business plans at an early stage are 16% more likely to succeed in their business, according to new research from the University of Edinburgh Business School and RWTH Aachen University.
Studying over 1,000 entrepreneurs and their start-ups’ progress over a six-year period, the research found that entrepreneurs with their sights set on high growth were 7% more likely to plan ahead than their less growth-oriented counterparts.
Entrepreneurs who planned to seek external finance were found to be 19% more likely to create a business plan, while those with innovative and disruptive ideas for their business were 4% more likely to put plans for the future in place.
Recently published in the Strategic Entrepreneurship Journal, the study’s findings suggest that writing a business plan is beneficial to a start-up’s development – especially when the business faces significant challenges and barriers to growth.
A good business plan outlines the structure of the business, the product or service it offers, the market it is entering, the customer it aims to attract, its potential for growth and its financials. It acts as a motivator, enabling entrepreneurs to define their strategy in order to reach the goals outlined.
Professor Francis Green of Edinburgh University commented: “Writing a plan can make all the difference when it comes to making a start-up profitable.
“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.
“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.”