Writing a business plan within the first six months of launching a business can be worthless and even counterproductive.
Research from the University of Edinburgh Business School looked at the school of thought that advocates “learning by doing”. This is favoured by many entrepreneurs and lean startups who argue it is better to act, improvise, and pivot than to waste time and resources on a 20-page plan that won’t survive first contact with the customer.
Professor Francis Greene and his co-author found that the key to starting a successful business is being flexible and responsive to opportunities – not having a rigid plan.
The researchers discovered that the most successful entrepreneurs are those that write plans between six to 12 months into starting their business.
“Our research shows that writing a plan first is a really bad idea. It is much better to wait, not to devote too much time to writing it, and, crucially, to synchronise the plan with other key start-up activities,” says Greene.
“Writing a plan between six months to a year increased the probability of venture viability success by 8% – but writing one earlier or later than this proved to have no distinguishable impact on future success.”
However, the study did find that startups who write plans are more likely to achieve external funding.
Learning to adapt
Entrepreneurs often have to adapt their business dramatically once it becomes clear what their target market actually is, meaning a plan too early is often just a waste of valuable time.
When it came to writing a plan, the optimal time to spend on it was found to be three months. This increased the chances of creating a viable venture by 12%. Spending any longer than this was futile, mostly because the information used loses its currency.
These results come from studying over 1,000 would-be US entrepreneurs. The researchers charted the entrepreneurs’ attempts to create a viable new venture over a six-year period, from 2005 to 2011.