New research from the University of Edinburgh Business school and RWTH Aachen University shows that entrepreneurs who write early stage business plans are 16% more likely to succeed.
The report examined more than 1,000 start-ups and the progress made over a six-year period. Conclusions show that entrepreneurs focused on high growth were significantly (7%) more likely to commit their vision to paper early on than their peers.
Early stage business plans are essential for success and start-ups that are successful in their quest to secure funding are more likely to plan ahead.
Business plans help secure investment
Entrepreneurs looking for finance from external sources were 19% more likely to write a detailed, specific business plan at the earliest possible stage. The report also showed that start-ups with disruptive and innovative ideas are 4% more likely to plan carefully for the future.
The study was published recently in the Strategic Entrepreneurship Journal, and the overall conclusion is that a business plan is vital for the successful development of a start-up. This is particularly important with businesses that face significant and ongoing challenges on their path to growth.
What makes a good business plan?
A strong business plan clearly outlines the structure of the start-up. It also explains the product or service offered, the market it’s entering, the customer it wants to attract, the potential for the company’s growth and the financial background.
Business plans should not only outline the plans, but also act as a motivator towards success. A comprehensive plan allows entrepreneurs to define and refine their strategy, making them more likely to reach their goals.
Professor Green, Edinburgh University says: “Writing a plan can make all the difference when it comes to making a start-up profitable.”
Improvisation not advisable
It is sometimes assumed that the most successful entrepreneurs work best ‘off the cuff’ and improvise their winning ideas, rather than spend time on something that can be perceived as routine. However, improvising as you go is more likely to lead to failure.
A business plan establishes robust ideas and steps to take to capitalise on opportunities that develop along the way. It’s important to be honest and specify what success will look like, and the resources needed to achieve it.
A professional, detailed early stage business plan will show legitimacy and build confidence for potential investors. It’s also reassuring for shareholders, employees, customers, suppliers and all other key stakeholders.
If you want to grow your business quickly, raise money and work towards your future success, then you need a business plan.