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Pre-start-up formal business plans and post-start-up performance: A study of 116 new ventures

Author

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  • Julian E. Lange
  • Aleksandar Mollov
  • Michael Pearlmutter
  • Sunil Singh
  • William D. Bygrave

Abstract

This study examined whether writing a business plan before launching a new venture affects the subsequent performance of the venture. The dataset comprised new ventures started by Babson College alums who graduated between 1985 and 2003. The analysis revealed that there was no difference between the performance of new businesses launched with or without written business plans. The findings suggest that unless a would-be entrepreneur needs to raise substantial start-up capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan before opening a new business.

Suggested Citation

  • Julian E. Lange & Aleksandar Mollov & Michael Pearlmutter & Sunil Singh & William D. Bygrave, 2007. "Pre-start-up formal business plans and post-start-up performance: A study of 116 new ventures," Venture Capital, Taylor & Francis Journals, vol. 9(4), pages 237-256, April.
    • Handle: RePEc:taf:veecee:v:9:y:2007:i:4:p:237-256
    DOI: 10.1080/13691060701414840
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    Cited by:

    1. Boyoung Kim & Hyojin Kim & Youngok Jeon, 2018. "Critical Success Factors of a Design Startup Business," Sustainability, MDPI, vol. 10(9), pages 1-15, August.
    2. Marco Caliendo & Daniel Rodríguez, 2024. "Divergent thinking and post-launch entrepreneurial outcomes: non-linearities and the moderating role of experience," Small Business Economics, Springer, vol. 62(4), pages 1523-1553, April.
    3. Rodepeter, Elisa & Gschnaidtner, Christoph & Hottenrott, Hanna, 2024. "Big Data and Start-up Performance," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302358, Verein für Socialpolitik / German Economic Association.
    4. Dennis Lyth Frederiksen & Alexander Brem, 2017. "How do entrepreneurs think they create value? A scientific reflection of Eric Ries’ Lean Startup approach," International Entrepreneurship and Management Journal, Springer, vol. 13(1), pages 169-189, March.
    5. Yamakawa, Yasuhiro & Cardon, Melissa S., 2017. "How prior investments of time, money, and employee hires influence time to exit a distressed venture, and the extent to which contingency planning helps," Journal of Business Venturing, Elsevier, vol. 32(1), pages 1-17.
    6. Salisu Isyaku, 2014. "Mediating Effect of Uncertainty Avoidance on the Relationship between Entrepreneurial Talent and SMEs Performance in Nigeria: A Conceptual Analysis," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(6), pages 368-383, June.
    7. Panita Rachapaettayakom & Mongkolchai Wiriyapinit & Nagul Cooharojananone & Suparatana Tanthanongsakkun & Nuttirudee Charoenruk, 2020. "The need for financial knowledge acquisition tools and technology by small business entrepreneurs," Journal of Innovation and Entrepreneurship, Springer, vol. 9(1), pages 1-28, December.
    8. Jan Youtie & Philip Shapira, 2017. "Exploring public values implications of the I-Corps program," The Journal of Technology Transfer, Springer, vol. 42(6), pages 1362-1376, December.
    9. Christian Hopp & Francis J. Greene & Benson Honig & Tomas Karlsson & Mikael Samuelsson, 2018. "Revisiting the influence of institutional forces on the written business plan: a replication study," Management Review Quarterly, Springer, vol. 68(4), pages 361-398, November.
    10. Dimo Dimov, 2010. "Nascent Entrepreneurs and Venture Emergence: Opportunity Confidence, Human Capital, and Early Planning," Journal of Management Studies, Wiley Blackwell, vol. 47(6), pages 1123-1153, September.
    11. Anna Long & Matthew S. Wood & Daniel L. Bennett, 2023. "Entrepreneurial organizing activities and nascent venture performance," Small Business Economics, Springer, vol. 60(2), pages 433-461, February.
    12. Bastian, Bob & Zucchella, Antonella, 2023. "Nascent entrepreneurs during start-up competitions: Between beauty contests and co-created problematization," Journal of Business Venturing Insights, Elsevier, vol. 20(C).
    13. Léo-Paul Dana & Edoardo Crocco & Francesca Culasso & Elisa Giacosa, 2023. "Business plan competitions and nascent entrepreneurs: a systematic literature review and research agenda," International Entrepreneurship and Management Journal, Springer, vol. 19(2), pages 863-895, June.
    14. Elisa Rodepeter & Christoph Gschnaidtner & Hanna Hottenrott, 2024. "Big Data and Start-up Performance," Working Papers 232, Bavarian Graduate Program in Economics (BGPE).
    15. Brinckmann, Jan & Grichnik, Dietmar & Kapsa, Diana, 2010. "Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning-performance relationship in small firms," Journal of Business Venturing, Elsevier, vol. 25(1), pages 24-40, January.
    16. Stephen E. Lanivich, 2015. "The RICH Entrepreneur: Using Conservation of Resources Theory in Contexts of Uncertainty," Entrepreneurship Theory and Practice, , vol. 39(4), pages 863-894, July.
    17. Geiger, Mark, 2020. "A meta-analysis of the gender gap(s) in venture funding: Funder- and entrepreneur-driven perspectives," Journal of Business Venturing Insights, Elsevier, vol. 13(C).
    18. Chwolka, Anne & Raith, Matthias G., 2012. "The value of business planning before start-up — A decision-theoretical perspective," Journal of Business Venturing, Elsevier, vol. 27(3), pages 385-399.
    19. Mayer-Haug, Katrin & Read, Stuart & Brinckmann, Jan & Dew, Nicholas & Grichnik, Dietmar, 2013. "Entrepreneurial talent and venture performance: A meta-analytic investigation of SMEs," Research Policy, Elsevier, vol. 42(6), pages 1251-1273.
    20. Honig, Benson & Samuelsson, Mikael, 2021. "Business planning by intrapreneurs and entrepreneurs under environmental uncertainty and institutional pressure," Technovation, Elsevier, vol. 99(C).

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