The value of writing a business plan is often debated in the entrepreneurial community.
For every successful business that was launched with a well-thought-out business plan, it seems you can find an equally successful one that was launched with nothing more than a few scribbles on the back of a napkin. In fact, the contrarian approach is perhaps the one you hear the most about – that is, entrepreneurs dismiss a business plan as something they wrote down and then stuffed to the bottom. from a drawer.
Palo Alto Software founder Tim Berry (a contributor here at Small Business Trends) recently reported on new data showing the value of business plans. Palo Alto conducted a survey that asked thousands of Business Plan Pro software users questions about their activities, goals, and business planning. Responses showed that those who had written business plans were almost twice as likely to be successful in growing their business or securing capital than those who had not written a plan.
Tim gave this breakdown of numbers:
2,877 people responded to the survey. Of these, 995 had completed a plan.
- 297 of them (36%) obtained a loan
- 280 of them (36%) obtained investment capital
- 499 of them (64%) had developed their activity
1,556 of the 2,877 had not yet completed their plan.
- 222 of them (18%) obtained a loan
- 219 of them (18%) obtained investment capital
- 501 of them (43%) had developed their activity
Of course, as the author of the original Business Plan Pro software and founder of Palo Alto Software, Tim admits he’s a bit biased in favor of business plans. And people who respond to a survey from the company that created their software may be biased towards saying the right things. So Tim asked the University of Oregon’s economics department to assess the validity of the data. Eason Ding and Tim Hursey wrote a report on the data under the supervision of Professor Joe Stone. “The results suggest that planning with software is strongly correlated with later success for a variety of companies,” they wrote.
Regardless of business type, business growth stage, and business plan intent, Ding and Hursey’s analysis found that writing a business plan correlates with increased success in each of the business goals included in the study. These were: get a loan, get investment capital, make a big purchase, hire a new team member, think more strategically, and grow the business.
The authors concluded:
“Except in a small number of cases, business planning appears to be positively correlated with business success as measured by our variables. Although our analysis cannot say that completing a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.
And if I interpret the last sentence of the above quote correctly, going through the business planning process can make you a better entrepreneur.
So here it is: you are better off WITH a business plan than without. In fact, according to the survey, you’re twice as likely to grow your business or get financing if you’ve taken the time to write a business plan.