Starting a new business can be an exciting but challenging endeavor. In fact, data from the U.S. Bureau of Labor Statistics (BLS) shows that 20% of businesses fail within the first year. And, 75% fail within 15 years.
Based on this alarming data, we set out to determine whether creating a business plan improves a business’ chances of success. The result: yes it does!
Below we will cite 20 scholarly research articles that prove the importance of business planning and how it is proven to increase business’ survival rates.
Definitive Proof of the Importance of Business Planning in Achieving Business Success
1. The Role of Pre-Start-Up Planning in New Small Business
According to the study by Kraus and Schwarz, pre-start-up planning significantly contributes to the success of small businesses. The research highlights that entrepreneurs who engage in pre-start-up planning activities are more likely to achieve higher levels of business performance. It emphasizes the importance of carefully designing and documenting a comprehensive business plan before commencing operations.
2. The Value of Business Planning Before Start-Up — A Decision-Theoretical Perspective
Chwolka and Raith provide a decision-theoretical perspective on the value of business planning. Their research demonstrates that entrepreneurs who engage in thorough planning are better equipped to make informed decisions, reducing uncertainties and increasing the likelihood of success. The study reveals that business planning serves as a decision-making tool that allows entrepreneurs to anticipate potential challenges, evaluate alternatives, and identify opportunities.
3. Perceiving the Value of Business Planning
Chwolka and Raith delve further into the perceived value of business planning among entrepreneurs. Their research uncovers that entrepreneurs who perceive business planning as highly valuable are more likely to achieve business success. The study emphasizes the psychological impact of business planning on entrepreneurs, indicating that a positive perception of planning contributes to motivation, goal clarity, and effective resource allocation.
4. Strategic Planning and Small Business Performance
The research conducted by Kohtamäki et al. explores the relationship between strategic planning and small business performance. The study reveals that small businesses that engage in strategic planning activities outperform their counterparts that lack formal planning processes. Strategic planning enables businesses to align their resources, capabilities, and market opportunities, resulting in improved performance and sustainable growth.
5. The Impact of Promotional Tools on Consumer Buying Behavior
While not directly focused on business planning, the study by Rizwan et al. provides relevant insights into the importance of planning in influencing consumer behavior. The research highlights that businesses that strategically plan their promotional activities and align them with customer preferences and market trends are more likely to achieve higher sales and customer satisfaction.
6. The Value of Business Plans for New Ventures: Company and Entrepreneur Outcomes
Becherer et al. examine the impact of business plans on new ventures. Their research demonstrates that the presence of a well-developed business plan positively influences venture performance, profitability, and long-term survival. Additionally, entrepreneurs who have a comprehensive business plan are more likely to secure external funding, which is vital for initial start-up and growth.
7. Small Business Performance: Business, Strategy, and Owner-Manager Characteristics
Blackburn et al. explore the factors influencing small business performance. The research highlights that effective business planning positively correlates with better financial performance and growth. It emphasizes the role of business strategy in shaping small business performance. Business planning acts as a critical component of strategy formulation, enabling entrepreneurs to set clear goals, identify competitive advantages, and make informed decisions regarding resource allocation and market positioning.
8. Rural Entrepreneurs: What are the Best Indicators of Their Success?
The study by Eschker et al. focuses on the success indicators for rural entrepreneurs. The research emphasizes that rural entrepreneurs who engage in comprehensive business planning are more likely to achieve higher levels of success. Business planning enables rural entrepreneurs to identify market opportunities, assess risks, and develop strategies tailored to their unique contexts, thereby increasing their competitive advantage and long-term viability.
9. Strategic Business Planning
Moss et al. delve into the concept of strategic business planning and its impact on organizational success. The study highlights that strategic business planning plays a crucial role in guiding business operations, resource allocation, and decision-making processes. It emphasizes the need for businesses to systematically analyze their internal and external environments, set strategic objectives, and develop action plans to achieve their goals.
10. Business Planning in Successful Small Firms
Baker et al. examine the importance of business planning in successful small firms. The research reveals that successful small firms engage in formal business planning processes to a greater extent compared to their less successful counterparts. The study emphasizes that business planning facilitates effective goal setting, resource allocation, and performance measurement, leading to improved business outcomes and long-term sustainability.
11. Entrepreneurial Formulas: Business Plans and the Formation of New Ventures
Doganova and Giraudeau provide insights into the formation of new ventures and the role of business plans. The research highlights that business plans act as instrumental tools in attracting external stakeholders, such as investors and partners. The study emphasizes that a well-crafted business plan enhances the credibility and viability of new ventures, increasing their access to financial and strategic resources.
12. Strategic Planning in Small and Medium-Sized Enterprises – Case of Cluj County
Gica’s study focuses on strategic planning in SMEs, specifically in Cluj County. The research highlights that SMEs that engage in strategic planning activities experience significantly higher levels of performance, innovation, and competitiveness. According to the findings, 84.2% of SMEs that implemented strategic planning reported improved financial performance, while 78.9% experienced increased market share. These statistics highlight the positive impact of business planning on SME success.
13. Translating Knowledge in New Entrepreneurial Ventures: The Role of Business Plan Development
Dal Mas et al. explore the role of business plan development in translating knowledge into action in new entrepreneurial ventures. The research highlights that business plans serve as a vehicle for entrepreneurs to articulate and communicate their knowledge, strategies, and goals to various stakeholders. By systematically organizing and documenting their ideas, entrepreneurs can effectively convey their vision, attract resources, and align their actions with their intended outcomes.
14. Strategy: A Big Challenge for a Small Business
Popa et al. investigate the challenges faced by small businesses in developing and implementing effective strategies. The research emphasizes that business planning plays a pivotal role in addressing these challenges. It provides small businesses with a structured approach to strategy formulation, implementation, and monitoring, enhancing their ability to adapt to market changes, seize opportunities, and achieve sustainable growth.
15. Does the Presence of a Formal Business Plan Increase Formal Financial Support?
Hopp explores the relationship between the presence of a formal business plan and obtaining formal financial support. The research reveals that the existence of a well-developed business plan significantly increases the likelihood of securing financial support from external sources, such as banks and investors. A comprehensive business plan serves as a signaling mechanism, demonstrating the entrepreneur’s commitment, competence, and potential for financial success.
16. The Interdependence of Planning and Learning among Internal Corporate Ventures
Covin et al. examine the interdependence between planning and learning in internal corporate ventures. The research highlights that effective business planning facilitates the learning process within organizations by providing a framework for experimentation, reflection, and adaptation. Business planning acts as a feedback loop, enabling internal corporate ventures to assess their progress, adjust their strategies, and continuously improve their performance and competitiveness.
17. Strategy in Small Growth-Oriented Firms in Finland: A Discourse Analysis Approach
Kohtamäki et al. analyze the strategic practices of small growth-oriented firms in Finland. The study highlights that successful firms prioritize strategic planning as a means to navigate uncertainty, foster innovation, and drive growth. Strategic planning enables these firms to identify and exploit opportunities, allocate resources efficiently, and adapt to changing market conditions, positioning them for sustained success and competitive advantage.
18. Emergent Perspectives toward the Business Plan among Nascent Entrepreneur Start-Up Competition Participants
Watson and McGowan explore the perspectives of nascent entrepreneurs participating in start-up competitions regarding the business plan. The research reveals that nascent entrepreneurs recognize the value of the business plan as a tool for articulating their vision, clarifying their goals, and presenting their venture to judges and potential investors. The study highlights that the business plan serves as a structured framework that enables participants to articulate their business concept, assess its feasibility, and communicate their value proposition effectively.
19. Strategic Management and Entrepreneurship: Friends or Foes?
Kraus and Kauranen explore the relationship between strategic management and entrepreneurship. The research emphasizes that effective business planning acts as a bridge between these two domains, facilitating the alignment of entrepreneurial actions with strategic objectives. Business planning enables entrepreneurs to integrate strategic thinking into their decision-making processes, ensuring that their ventures are both innovative and sustainable.
20. An Exploration of the Business Plan Competition as a Methodology for Effective Nascent Entrepreneurial Learning
Watson et al. investigate the effectiveness of business plan competitions as a methodology for nascent entrepreneurial learning. The research reveals that business plan competitions provide a valuable learning platform for aspiring entrepreneurs. Through the process of developing a business plan, participants gain knowledge in areas such as market analysis, financial planning, and feasibility assessment. This experiential learning enhances their entrepreneurial capabilities and increases their chances of success in real-world ventures.
The evidence presented in these scholarly articles demonstrates the significant role that developing a business plan plays in improving a company’s chances of success. Business planning serves as a decision-making tool, enabling entrepreneurs and executives to anticipate challenges, identify opportunities, and allocate resources effectively. It enhances strategic thinking, aligns actions with goals, and promotes innovation and adaptability. Moreover, business planning increases the likelihood of securing financial support (funding from banks, angel investors, venture capitalists, etc.), attracts stakeholders, and enhances the credibility and viability of new ventures.
By engaging in a comprehensive business planning process, entrepreneurs and executives can navigate uncertainties, capitalize on market opportunities, and achieve sustainable growth. It is evident that the benefits of business planning extend beyond the mere creation of a document; it fosters a proactive mindset, strategic orientation, and systematic approach to business development.
Entrepreneurs, executives and small business owners must recognize the importance of developing a well-structured business plan. By investing time and effort into business planning, they can significantly enhance their prospects for success and create a solid foundation for their ventures. As the saying goes, “Failing to plan is planning to fail,” and the research supports this notion by highlighting the positive impact of business planning on company performance, decision-making, financial support, and entrepreneurial learning.