Our results, using data on 1,088 founders, identify two key results: selection effects matter in the decision to plan; and it pays to plan. This study assesses if founders that write a formal plan are more likely to achieve new venture viability. This is important because, despite its popularity, there is considerable debate about the value of plans. One root reason for this is that what prompts a founder to plan also impacts on their chances of creating a viable new venture. The study's novelty is to separate out influences on the decision to plan from the plan-venture viability relationship. Our results show that better educated founders, those wanting to grow and innovate, and those needing external finance are more likely to plan. Subsequently, having isolated what prompts planning, we assess if writing a plan actually promotes venture viability. We find that it pays to plan.
Friday, April 28, 2017
It Pays to Plan
You are an aspiring entrepreneur. You would like to launch a startup. You've been hearing that writing a business plan is over-rated. You just need to do it. Mistakenly, some have counseled you that adopting a learning by doing approach somehow means not planning at all. New research by Francis Greene and Christian Hopp explores the question of whether it "pays to plan" as an entrepreneur. Their paper, published in the Strategic Entrepreneurship Journal, is titled, "Are formal planners more likely to achieve new venture viability?: A counterfactual model and analysis." Greene and Hopp summarize their findings in the abstract of their paper: