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Startups

Research: Writing a Business Plan Makes Your Startup More Likely to Succeed

Source | Harvard Business Review : By Francis J. Greene & Christian Hopp

When asked about an opponent’s plan for their impending fight, former world heavyweight champion Mike Tyson once said: “Everyone has a plan until they get punched in the mouth.”

It is a school of thought now fashionable in entrepreneurship circles. Advocates of “learning by doing” approaches such as the lean startup say it is better to act, improvise, and pivot than to waste time and resources on a 20-page plan that won’t survive first contact with the customer.

In stark contrast, the “purposive planning” approach advises that a plan helps usefully map out, organize, and direct the startup. A plan answers central questions such as “Where are we know?” “Where do we want to get to?” and “How are we going to get there?”

A plan helps detail how the opportunity is to be seized, what success looks like, and what resources are required, and it can be key to the investment decisions of angel investors, banks, and venture capitalists.

The truth, though, is that we just don’t know if it pays to plan. For every study that shows it does, another study comes along and says that startups should learn by doing. This has done little to help the would-be entrepreneur decide whether to plan.

The starting point for our research was that insufficient attention has been given to why entrepreneurs plan. There is a range of contextual factors that prompt the decision to plan. This includes everything from past entrepreneurial experience to the need for external finance and the urge to grow the business or to innovate.

Not examining the context for planning has another side effect. An entrepreneur’s background and startup conditions have a big impact on the chances of that business becoming viable. Better-financed startups are more likely to succeed. So are more experienced entrepreneurs.

Read On….

 

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