Entrepreneurs who write a formal start-up business plan are 16 percent more likely to be successful, new research from University of Edinburgh Business School and RWTH Aachen University reveals.
Edinburgh’s Professor Francis Greene and Aachen’s Christian Hopp studied the characteristics of over 1,000 entrepreneurs and their start-ups over a six-year period.
It pays to plan
The findings suggest that it pays to plan, and that planning is more beneficial when the challenges are greatest. High-growth oriented entrepreneurs are 7 percent more likely to plan. Those with innovative, disruptive ideas are 4 percent more inclined to plan then their peers.
Entrepreneurs seeking external finance are also 19 percent more likely to commit their vision to paper.
Plans contributes to profitability
“Writing a plan can make all the difference when it comes to making a start-up profitable,” says Greene. “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. Notwithstanding, a plan helps detail the opportunity to be seized, what success looks like, and what resources are needed.
Vital for fundraising
“Business 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.”
Caribbean-American businesses
Brandon Whittingham, Caribbean-American consultant in Miami, Florida endorses the research study. “While there is a push to start and operate businesses within South Florida’s Caribbean community, the failure rate among these businesses is too high. Over 30 percent of businesses in the Caribbean-American community fail annually. The reason for this is too many entrepreneurs go into business without having even a crude business plan. It’s important that before an entrepreneur starts a business, he invests in a business plan. It’s imperative that spending on a business plan be the first expenditure of the entrepreneur.”
