News Flash: Research Shows Business Planning Pays Off for Start-Ups

How do you spell “no-duh?” New research just released by the SBA shows that Advance Planning Pays Off for Start-Ups. That’s the headline on a good piece of reporting by Kelly Spors of the Wall Street Journal‘s Independent Street. And, to be fair, she also offers background on why that’s news.

It’s the confusion between planning and the big fat formal business plan, frankly, that causes a lot of confusion in this area. You know: the people who confuse not needing a formal business plan document with not having or wanting to plan? Kelly Spors also wrote about that, a couple of years ago, when research showed that some successful businesses said they didn’t have a formal business plan. (Again, “no-duh”; that’s the same confusion. Added together with people who say they didn’t have a plan, which is the same dynamic as when some people say they never studied in school (but got straight A’s)).

What this research actually shows, in my first skimming of it, is that startups with formal business plans early, tended to get more things done sooner. Startups that did only informal planning later, not surprisingly, tended to get things done later.

I do like this review of the state of business planning, from the text of the study:

We believe there is a substantial body of empirical evidence that indicates that the presence of a business plan during the venture creation process significantly improves the odds of successfully starting a business. In addition, Gartner and Liao (2007) found that the formality of the business plan (e.g.,unwritten, informal, formally written) significantly influences the success of starting a
business.

So, given that as background, this new study looks at three characteristics of business planning: presence, formality, and timing. The conclusion:

We believe that the evidence from this study and evidence from previous studies using the Panel Study of Entrepreneurial Dynamics indicate that engaging in pre-venture business planning has significant benefits that appear to encourage action and success at getting into business.

Me too.

Comments

  • Tim Berry says:

    Hey Jared, how about who's going to do what, when, for how much? And if "solid plan" means to you follow the plan no matter what, without review or revision or management, then I can see why not having one gives you flexibility. How about starting with a solid plan as the first step, and then watching, managing changing assumptions, reviewing, and revising, so you keep both long-term and short-term in the right context, and prioritize?

    Don't make fun of people for planning; save it for people who think having a plan means you have to follow it without revision or review of managing it.

  • Jared O'Toole says:

    I think there's no doubt there should be planning when your starting a business. I don't like the idea of a formal business plan, I think its a huge waste of time. I like the way of an executive summary.

    But this is also my personal preference. I move things forward and am better without a solid plan because it gives me flexibility. But again this is my preference just because I feel I handle things well this way. I know some people can't put one foot in front of the other without a plan haha.

  • Jared O'Toole says:

    I think there's no doubt there should be planning when your starting a business. I don't like the idea of a formal business plan, I think its a huge waste of time. I like the way of an executive summary.

    But this is also my personal preference. I move things forward and am better without a solid plan because it gives me flexibility. But again this is my preference just because I feel I handle things well this way. I know some people can't put one foot in front of the other without a plan haha.

  • Jared O'Toole says:

    I think there's no doubt there should be planning when your starting a business. I don't like the idea of a formal business plan, I think its a huge waste of time. I like the way of an executive summary.

    But this is also my personal preference. I move things forward and am better without a solid plan because it gives me flexibility. But again this is my preference just because I feel I handle things well this way. I know some people can't put one foot in front of the other without a plan haha.

  • Jared O'Toole says:

    I think there's no doubt there should be planning when your starting a business. I don't like the idea of a formal business plan, I think its a huge waste of time. I like the way of an executive summary.

    But this is also my personal preference. I move things forward and am better without a solid plan because it gives me flexibility. But again this is my preference just because I feel I handle things well this way. I know some people can't put one foot in front of the other without a plan haha.

  • Jared O'Toole says:

    I think there's no doubt there should be planning when your starting a business. I don't like the idea of a formal business plan, I think its a huge waste of time. I like the way of an executive summary.

    But this is also my personal preference. I move things forward and am better without a solid plan because it gives me flexibility. But again this is my preference just because I feel I handle things well this way. I know some people can't put one foot in front of the other without a plan haha.

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