Entrepreneurs are wasting their time by writing a business plan in the early stages of their company, research suggests.
Researchers from the University of Edinburgh Business School studied over 1,000 ‘would-be’ US entrepreneurs which tracked their attempts to create a viable company from 2005 to 2011.
Co-author of the study, Professor Francis Greene said businesses needed to be flexible and open to opportunities rather than sticking to a rigid plan.
Write a business plan after six months
Entrepreneurs were advised to write a business plan between six to 12 months into starting their company as the research found it boosted the businesses success by 8 per cent while writing one earlier or later than this had no impact on future prospects.
Professor Greene said. ‘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.’
According to business book, Heart, Smart, Guts and Luck, published in 2012, 70 per cent of entrepreneurs who had navigated a successful exit in the form of an IPO or sale did not start with a business plan.
Business needs to adapt
The report found entrepreneurs often have to adapt their business dramatically once they fully understand what their target market is, meaning a plan written too early is often just a waste of valuable time.
When writing the plan, the ideal time to spend on it was three months; doing this increased the chances of creating a viable venture by 12 per cent. The report found that taking more than this was pointless mostly because the information used to inform the plan loses its currency.
Further reading on business plans
