Preparing a Plan Increases the Chance of Success in Ventures

Entrepreneurship experts are divided: while some believe that a written business plan is vital for setting up a viable, profit-generating startup, others think it is better to skip this step and start by immediately testing ideas with consumers (as Steve Blank argues in 'When Founders Go Too Far'). In recent years, the second approach, popularized by the Lean Startup movement, has dominated. However, a new study reveals that written plans are more valuable than we thought. Researchers examined 1,088 American ventures that had been forming over a 6-year period. They separated founders with written plans from those without, and matched members of both groups by characteristics such as education and experience, in a way that would isolate the effects of having a plan. 'Planning is worth it,' the researchers conclude. 'Entrepreneurs who write formal plans are 16 percent more likely to achieve viability than typical entrepreneurs without a plan.' The research shows that written plans help the founder focus on achieving the goal and make better decisions about resource allocation and coordination. 

ABOUT THE RESEARCH 'Are Formal Planners More Likely to Achieve New Venture Viability? A Counterfactual Model and Analysis' by Francis J. Greene and Christian Hopp (Strategic Entrepreneurship Journal, 2017)

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