In our last Look Into Business blog post, we looked at the Startup Activity Index — a yearly report that measures business startup activity across the top metropolitan areas in the U.S. According to the Index, entrepreneurs who are still employed or in school are more likely to succeed in their business venture.
This prompts a question: what other factors may be early indicators of entrepreneurial success?
In a recent Harvard Business Review article, researchers Francis J. Greene and Christian Hopp, examined the Panel Study of Entrepreneurial Dynamics, a research program that tracked more than 1,000 would-be U.S. entrepreneurs over a six-year period (2005 to 2011). Their analysis separated would-be entrepreneurs into two groups: those who started with writing a formal business plan and those who did not. Their analysis showed that “Entrepreneurs who write formal plans are 16 percent more likely to achieve viability than the otherwise identical non-planning entrepreneurs.”
This finding is of particular significance considering recent criticisms of business plan writing in entrepreneurial circles. Greene and Hopp point to some advocates of a learn-by-doing approach who say that writing a business plan is a waste of time and resources particularly given an entrepreneur’s need to adapt and pivot as they go along.
Through their analysis, Green and Hopp also gleaned factors that contribute to why potential entrepreneurs decided to write a business plan. For example, those who seek external financing are 19 percent more likely to write a business plan. This is likely because business plans can demonstrate entrepreneurs’ seriousness and increase investor confidence.
Green and Hopp conclude that while writing a business plan may not be best for all entrepreneurs, “[it] can make the difference when it comes to realizing startup success. Plans support the process of turning an entrepreneur’s vision into tangible actions by promoting the organization and direction of startup activities.”
For this reason, students earning an MBA in Entrepreneurial Leadership at William Woods take BMT 590 – Applied Case Project. This course represents the capstone course for the MBA in Entrepreneurial Leadership program and requires each student to complete, and then defend, their written business plan. Students also have an opportunity to present their plan to a panel of business professionals.