can a business plan guarantee success

🎧 Real entrepreneurs. Real stories.

Subscribe to The Hurdle podcast today!

Do You Need a Business Plan? Scientific Research Says Yes

Noah Parsons

13 min. read

Updated August 1, 2024

Should you spend some time developing a plan for your business, or just dive in and start, figuring things out as you go? There has been plenty of debate on this topic, but no one has pulled together the scientific evidence to determine if planning is worthwhile—until now .

With the help of my friend Jeff, from the University of Oregon, I’ve been looking at academic research on business planning—the actual science around planning and how it impacts both startups and existing businesses.

But, before we dive into the data, why do we even need to look at research on business planning? It seems like most advice on  starting a business  includes writing a business plan as a necessary step in the startup process. If so many people encourage you to write one, business plans must add value, right?

Well, over the past few years, there’s been a lot of controversy about the value of business plans. People look at certain companies that have been very successful but haven’t written business plans and conclude that planning is a waste of time.

After all, taking the time to plan is a bit of a trade-off. The time you spend planning could be time spent building your company. Why not just “get going” and learn as you build your company, instead of taking the time to formulate a strategy and understand your assumptions about how your business might grow?

Well, the research shows that it’s really not a “write a plan” or “don’t write a plan” conversation. What really  matters is what kind of planning you do  and how much time you spend doing it.

• Planning can help companies grow 30 percent faster

One study (1) published in 2010 aggregated research on the business growth of 11,046 companies and found that  planning improved business performance . Interestingly, this same study found that planning benefited existing companies even more than it benefited startups.

But, this study still doesn’t answer the question it raises:

Why would planning help a business that has a few years of history more than one that is just starting up?

The answer most likely lies in the fact that existing businesses know a bit more about their customers and what their needs are than a new startup does. For an existing business, planning involves fewer guesses or assumptions that need to be proven, so the strategies they develop are based on more information.

Another study (2) found that  companies that plan grow 30 percent faster  than those that don’t plan. This study found that plenty of businesses can find success without planning, but that businesses with a plan grew faster and were more successful than those that didn’t plan.

To reinforce the connection between planning and fast growth, yet another study (3) found that fast-growing companies—companies that had over 92 percent growth in sales from one year to the next—usually have business plans. In fact,  71 percent of fast-growing companies have plans . They create budgets, set sales goals, and document their marketing and sales strategies. These companies don’t always call their plans “business plans” but instead often refer to things like strategic plans, growth plans, and operational plans. Regardless of the name, it’s all forward-looking planning.

Action:  Carve out some time to set goals and build a plan for your business. More importantly,  re-visit your plan as you grow  and revise it as you learn more about your business and your customers.

Business planning is not an activity you undertake only when you’re getting your business up and running. It should be something you return to, time and time again, to revise and improve upon based on new knowledge.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• The quality of the plan matters

But, it’s not as simple as it might appear. Just having a plan doesn’t guarantee faster growth.  It’s the kind of plan you have and how you use it that really matters .

It turns out that startups, especially ones building highly innovative businesses, should create shorter, less detailed plans (4). That’s because these innovative startups are learning new things about their product and customers at a very fast pace and their strategies change more frequently. Simpler plans get updated more frequently and are more helpful to these companies because they can review their strategy at a glance.

Meanwhile, more established companies know a lot more about their products and customers and can craft more detailed strategies that are less likely to change as quickly. For these companies, more detailed planning is generally more helpful.

And it’s not just the size of the plan that matters. What you include in your plan is important as well.

The same study we talked about above—the one that found that businesses grow faster with a plan—also found that companies that did a good job defining their  value proposition  do even better than companies that have a hard time defining their customers’ needs.

These researchers also found that  having a plan is less about accurately predicting the future, and more about setting regular goals, tracking your actual progress toward those goals and making changes to your business as you learn more about your customers.  Silicon Valley businesses like to call the act of changing strategic direction “pivoting.” All it really means is that you need to stay nimble, keep your eyes open, and be willing to make changes in your business as you compare your actual results to your goals and gather additional feedback from your customers.

Action:  Skip the 40-page business plan and instead focus on simpler planning that defines your goals and documents your customers’ needs. Adjust your plan frequently as you learn more about your business.

Being prepared matters when you’re seeking funding

Over and over again, you hear venture capitalists talk about how much the team matters in a funding decision. Beyond just the team, you also hear them talk about passion—how much the entrepreneur believes in the idea.

But, it turns out that there is something that trumps passion when VCs make their decisions. Research shows (5) that how well an entrepreneur is prepared is much more important than how much passion they have.

This doesn’t mean that VCs will ask for a business plan. In fact, they probably won’t ask for one.

What it means is that entrepreneurs need to have done some planning, in some form, so that they can be prepared to talk intelligently about their idea, their target market, their sales and marketing strategies, and so on.

So, the formal 40-page business plan document may not be useful when you’re pitching VCs. But, you’d better have done some planning, so that you can communicate verbally or through a  pitch deck  what would normally have been found in that written document.

And, not only will business planning help you be more prepared, it will actually improve your chances of getting funded. A study at the University of Oregon (6) found that  businesses with a plan were far more likely to get funding than those that didn’t have a plan .

Action:  Know your business inside and out. Document your strategy in an internal document, but skip all the time and effort creating a well-crafted business plan document.

When you start planning is important—the earlier the better

So, if business planning increases your likelihood of success, and in fact helps you grow faster, when should you start working on a business plan?

Research shows (7) that entrepreneurs who started the business planning process early were better at what the scientists call “establishing legitimacy.” That’s a fancy way of saying that these entrepreneurs used business planning to start the process of talking with potential customers, working with business partners, starting to look for funding, and gathering other information they needed to start their business.

Entrepreneurs that did a good job of using their business plan to “establish legitimacy” early were more likely to succeed and their businesses tended to last longer.

Not only that,  starting the planning process before starting marketing efforts and before talking to customers reduces the likelihood that a business will fail ( 8). 

That said, planning should never take the place of talking to customers. An ongoing planning process—one in which the plan is constantly revised as new information is gathered—requires that you talk to your potential customers so that you can learn more about what they need, what they are willing to pay, and how you can best reach them.

Action:  Start the planning process early. Even if all you do is build out a simple  elevator pitch  to try your idea on for size, it will help you begin the conversation with potential customers and kick-start your business.

• Planning makes you more likely to start your business

If you’re like me, and like most entrepreneurs, you like to dream up new business ideas. You constantly think of new ways to improve existing businesses and solve new problems.

But, most of those dreams never become a reality. They live on as ideas in your head while other entrepreneurs see the same opportunity and find a way to make it happen.

It turns out that there’s a way to turn more of your ideas into a viable business. A study published in  Small Business Economics  found that  entrepreneurs that take the time to create a plan for their business idea are 152 percent more likely to start their business ( 9). Not only that, those entrepreneurs with a plan are 129 percent more likely to push forward with their business beyond the initial startup phase and grow it. These findings are confirmed by another study that found that entrepreneurs with a plan are 260 percent more likely to start their businesses (10). 

Interestingly,  these same entrepreneurs who build plans are 271 percent more likely to close down a business . This seems counterintuitive to the stats above, but when you think about it a bit more, it makes a lot of sense.

Entrepreneurs with plans are tracking their performance on a regular basis. They know when things aren’t going to plan—when sales aren’t meeting projections and when marketing strategies are failing. They know when it’s time to walk away and try a different idea instead of riding the business into the ground, which could have disastrous results.

Action:  If you really want to start a business, start committing your goals and strategy to paper. Even if it’s just a simple  one-page business plan,  that will help you get started faster. And, once you do start, track your performance so you know when to change direction and try something different.

You’re less likely to fail if you have a plan

Nothing can absolutely prevent your company from failing, but it turns out that having a plan can help reduce your risks.

Yet another study of 223 companies found that having a plan reduced the likelihood that a business would fail. Having a plan didn’t guarantee success, unfortunately. But, those companies with a plan had better chances of success than those that skipped the planning process.

Having a plan and updating it regularly means that you are tracking your performance and making adjustments as you go. If things aren’t working, you know it. And, if things are going well, you know what to do more of.

Action:  Build a plan, but don’t just stick it in a drawer. Track your performance as you go so you can see if you’re reaching your goals. Your plan will help you discover what’s working so you can build your business.

• Your success depends on the type of planning you do

In the end, creating a business plan seems like common sense. You wouldn’t set out on a trip without a destination and a map, would you?

It’s great to see research back up these common-sense assumptions. The research also validates the idea that the value of business planning really depends on how you approach it.

It’s not a question of whether you should plan or not plan—it’s what kind of planning you do.  The best planning is iterative; it’s kept alive and it adapts.

It’s not about predicting the future as if you’re a fortune teller at a carnival. Instead, it’s a tool that you use to refine and adapt your strategy as you go, continuing to understand your market as it changes and refining your business to the ever-changing needs of your customers.

I recommend starting with a one-page plan. It’s a simpler form of planning where you can start by documenting your business concept on a single page. From there, iterate, gather feedback, and adjust your plan as needed. If you need some inspiration, check out our gallery of over  550 free sample business plans and download our free business plan template .

Finally, a big “thank you” to  Jeff Gish at the University of Oregon , who was immensely helpful in gathering and analyzing the research mentioned in this article.

What has your experience with business planning been like? Will you approach the planning process differently in the future? Tell me on Twitter @noahparsons.

References:

1 Brinckmann, J., Grichnik, D., & Kapsa, D. (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,  25(1), 24-40. doi: 10.1016/j.jbusvent.2008.10.007

2 Burke, A., Fraser, S., & Greene, F. J. (2010). The multiple effects of business planning on new venture performance.  Journal of Management Studies,  47(3), 391-415.

3 Upton, N., Teal, E. J., & Felan, J. T. (2001). Strategic and business planning practices of fast growth family firms.  Journal of Small Business Management, 39(1), 60-72.

4 Gruber, M. (2007). Uncovering the value of planning in new venture creation: A process and contingency perspective.  Journal of Business Venturing,  22(6), 782-807. doi: 10.1016/j.jbusvent.2006.07.001

5 Chen, X.-P., Yao, X., & Kotha, S. (2009). Entrepreneur passion and preparedness in business plan presentations: A persuasion analysis of venture capitalists’ funding decisions.  Academy of Management Journal,  52(1), 199-214.

6 Ding, E., & Hursey, T. (2010). Evaluation of the effectiveness of business planning using Palo Alto’s Business Plan Pro. Department of Economics. University of Oregon.

7 Delmar, F., & Shane, S. (2004). Legitimating first: Organizing activities and the survival of new ventures.  Journal of Business Venturing,  19(3), 385-410. doi: 10.1016/s0883-9026(03)00037-5

8 Shane, S., & Delmar, F. (2004). Planning for the market: Business planning before marketing and the continuation of organizing efforts.  Journal of Business Venturing,  19(6), 767-785. doi: 10.1016/j.jbusvent.2003.11.001

9 Hechavarria, D. M., Renko, M., & Matthews, C. H. (2011). The nascent entrepreneurship hub: Goals, entrepreneurial self-efficacy and start-up outcomes.  Small Business Economics,  39(3), 685-701. doi: 10.1007/s11187-011-9355-2

10 Liao, J., & Gartner, W. B. (2006). The effects of pre-venture plan timing and perceived environmental uncertainty on the persistence of emerging firms.  Small Business Economics,  27(1), 23-40. doi: 10.1007/s11187-006-0020-0

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Being prepared matters when you’re seeking funding
• When you start planning is important—the earlier the better
• You’re less likely to fail if you have a plan

Related Articles

7 Min. Read

5 Consequences of Skipping a Business Plan

10 Min. Read

14 Reasons Why You Need a Business Plan

3 Min. Read

5 Fundamental Principles of Business Planning

11 Min. Read

Use This Simple Business Plan Outline Example to Organize Your Plan

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

Small Business Trends

A business plan doubles your chances for success, says a new survey.

The value of writing a business plan is often debated in the entrepreneurial community.

For every successful business that was launched with a well-thought-out business plan, it seems you can find an equally successful one that was launched with nothing more than some scribbles on the back of a napkin. In fact, the contrarian approach may be the one you hear most about — i.e., entrepreneurs dismissing a business plan as something they wrote and then stuffed in the bottom of a drawer.

Palo Alto Software founder Tim Berry (a contributor here at Small Business Trends ) recently reported on some new data showing the value of business plans .  Palo Alto did a survey that asked thousands of its Business Plan Pro software users questions about their businesses, goals and business planning. The responses showed that those who completed business plans were nearly twice as likely to successfully grow their businesses or obtain capital as those who didn’t write a plan.

Tim gave this breakdown of the numbers:

2,877 people completed the survey. Of those, 995 had completed a plan.

• 297 of them (36%) secured a loan
• 280 of them (36%) secured investment capital
• 499 of them (64%) had grown their business

1,556 of the 2,877 had not yet completed their plan.

• 222 of them (18%) secured a loan
• 219 of them (18%) secured investment capital
• 501 of them (43%) had grown their business

Of course, as author of the original Business Plan Pro software program and founder of Palo Alto Software, Tim admits he’s a little biased in favor of business plans.  And people who respond to a survey by the company that made their software may be biased in favor of saying good things.  So Tim had the University of Oregon Department of Economics assess the validity of the data. Eason Ding and Tim Hursey wrote a report on the data with the supervision of Professor Joe Stone. “Results suggest that planning with software is highly correlated with subsequent successes for a variety of firms,” they wrote.

Regardless of the type of company, the growth stage of the company and the intent for the business plan, Ding and Hursey’s analysis found that writing a business plan correlated with increased success in every one of the business goals included in the study . These were:  obtaining a loan, getting investment capital, making a major purchase, recruiting a new team member, thinking more strategically and growing the company.

The authors concluded:

“Except in a small number of cases, business planning appeared to be positively correlated with business success as measured by our variables. While our analysis cannot say that completing a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.”

And if I correctly interpret the last sentence in the quote above, the act of going through the business planning process may make you a better entrepreneur.

So there you have it:  you’re better off WITH a business plan than without one.    In fact, based on the survey, you are twice as likely to grow your business or achieve funding if you have taken the time to write a business plan.

© Copyright 2003 - 2024, Small Business Trends LLC. All rights reserved. "Small Business Trends" is a registered trademark.

• Search Please fill out this field.
• Building Your Business
• Becoming an Owner
• Business Plans

5 Reasons You Need a Business Plan for Long-Term Success

Do You Really Need a Business Plan?

Entrepreneurs who are starting a new business often wonder, "Do I really need a business plan? Is writing a business plan really the best use of my time?" The answer to these questions is almost always, "Yes." A business plan is an integral part of starting a new business.

In reality, business plans can take a long time to write, require that you have a tremendous amount of data at your fingertips, depend in part on projections and often are responsible for creating a long list of research you still need to conduct and other work you need to complete.

Plus, not everyone is sold on the usefulness of a business plan. Consider the study of 116 new businesses conducted by Babson College. The study found that the presence of a formal business plan before starting a small business made no difference in the ultimate success of the business, assuming it was one that was not seeking outside funding.

Some also argue that taking the time required to create a business plan can stifle the startup process and cost precious opportunities for a small business.

On the other hand,  one study  found that entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs. Other  studies  have shown that while completing a business plan is not a guarantee of success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.

So why not arm yourself with one of the best tools a small business owner can have? If you're still on the fence, consider these five reasons you should write a business plan before doing anything else in your small business.

1. A Business Plan Is Simply a Must-Have for Some Businesses

If you plan to approach a financial institution for a loan, apply for a small business grant , pitch your business idea to investors, or enlist the support of a business partner, a business plan is required.

Potential investors and supporters want to see the true potential of your business idea clearly laid out in hard facts and numbers. A business plan is the best, and generally, the only acceptable way to provide this information.

2. A Business Plan Helps You Make Decisions

There are some sections in a traditional business plan that you simply cannot complete if you are on the fence, undecided, or not fully committed to a certain point. Business plans help you eliminate the gray area because you have to write specific information down in black and white. Making tough decisions is often one of the hardest and most useful parts of writing a business plan.

For example, if you have not decided on exactly what products you will sell at what price points, it will be very difficult for you to complete the Products and Services Section of your business plan. Identifying this and other vital information is a valuable end product of the business planning process.

3. A Business Plan Can Be a Reality Check

Writing a business plan is often the first real struggle for the small business owner who wants to launch a new venture, but doesn't want to consider that his or her business idea may be a bit flawed or is not yet fully developed.

While this is an unwelcome and terrifying thought for an impassioned entrepreneur, identifying gaps early on in the process gives business owners a chance to shore up their research, test their ideas and take steps to make the business stronger and more viable. This may initially be a step back, but any and all further work can bolster the entrepreneur's chance of success before he or she invests time and money in a business that is likely to fail.

4. A Business Plan Can Give You New Ideas

Discovering new ideas, different approaches and fresh perspectives are some of the best things that can happen from the depths of the business planning process. Despite the sometimes negative reputation, a business plan isn't just a long, stiff and structured document.

In fact, an effective business plan is the opposite; it's a flexible, growing and dynamic tool that can help you think creatively and come up with new solutions for some of your toughest business challenges. This is especially true when you consider the Marketing Strategy Section . Here, as you create a blueprint for your marketing activities, creativity and fresh ideas are invaluable.

5. A Business Plan Creates an Action Plan

A business plan is a useful document for any small business owner. But when you use your business plan as a tool to help you outline action items, next steps, and future activities, you are creating a living, breathing document that not only outlines where you are and where you want to be but also gives you the directions you need to get there.

Going back to the original question of whether or not you really need a business plan, you may still be able to build a successful business without a plan, but it is most certainly easier to do with a well-constructed business plan in your hands.

Keep in mind that if you are using your plan as a true business planning tool, you don't have to wait until you have all of the answers to get started. You can create an outline of your plan now, filling in all of the information you have at this point, and then work on the blanks as you learn more about the market. This type of fluid and flexible document can be invaluable to a new business.

For more on business plans, review this business plan outline . Then, for a quick and painless start to the business planning process, try this simple business plan template.

Related Articles

• Business Concepts
• Managing Growth

A business plan creates 30% greater chance of growth.

Find important factors for business success..

Does a business plan really add value to a business? Since every new business will find challenges along the way, there are those who say that a business plan is not necessary. Sometimes these challenges can be foreseen and most of the time, business issues arise without warning and they must be mitigated urgently for the business to continue to be successful. A business may well survive without a business plan , but there is evidence that a solid plan that is followed, will created even greater success. (TAULLI, 2009).

Subsequently, the following research work is aimed to create an understanding of the importance of a business plan and its role in organizational success. Statistics will be used to support the thesis that a Business Plan is contributory to the success of the business that implements it. Find here a list of businessplan success statistics.

A business plan is a significant key to the success of a business

A business plan is a written document by the entrepreneur that describes the relevant external and internal elements involved in starting that new business (ZIMMERMAN, 2014).  Each business has specific areas of focus and a business plan develops a more concentrated map toward the success of the business. Having a business plan doubles the chances of success of a new venture .

In the USA, every month about 543,000 new businesses start, but in the first two years only seven out of 10 is still in business, where as after five years 5 out of 10 are still around. Interestingly enough, the businesses that manage to survive for 5 years, about 70% follow a strategic business plan (Nazar, 2013).

A business plan triggers having a Long Term Strategy

Stick to strategy: strategic planning is setting a longer-term goal for the business and developing a plan to achieve it. In business planning making a business strategy develops a sense of where the business is right now, where you want your business to be in future and what you need to do to get there (Nazar, 2013).

A business plan doubles the Organizational Success Ratio

Strengths and weaknesses: every business has some weaknesses and well as some strengths. After making a detailed business plan, businesses will be able to identify the strengths and weaknesses and then the business will be able to mitigate its weaknesses by using its strengths as a success factor (ZIMMERMAN, 2014). Considering this, in an article, the writer has exposed that having a business plan doubled the organizational success ratio (SBT, 2017). At the starting stage, businesses that use business plans have 7% higher likeliness of high growth as compared to those who do not develop a business plan at the starting stage (Francis J. Greene & Hopp, 2017).

A business plan sets Priorities and creates Focus

Set priorities: According to its own priorities, a business will be able to focus on the areas where it thinks is best to focus. Aside from a business strategy, there are also business priorities like growth, sales, and financial health. According to a report, it is stated that the entrepreneurs that expect external financing are 19% more likely develop their vision into the paper form as compared to those not seeking external financing. (Francis J. Greene & Hopp, 2017).

A business plan helps Delegation & Communication

Better delegation: The Business plan is an ideal place to clarify who is responsible for what. The business will be able to delegate the authority and responsibility to the right person according to the demands of the job.

Manage change: With a strong plan a business can catch new business developments, track progress, as well as monitor technology and market changes, so the business can adjust its plan according to actual data. If a business has no plan about how to deal with sudden change, then sudden change can create great difficulty and chaos for the business.

A business plan drives better Target Achievement

Target achievement: Having a written businessplan available encourages meeting targets more effectively as they work as driving factor for performance. Targets may be of different classes, promotions or regarding financial objectives.

23% of UK businesses do not have a written business plan

Sometimes having a written (formal) business plan in place only seems to work for large businesses. A few small businesses have a formal written business plan, and even fewer have informal (verbal) business plan.  A new research from Barclays stated that in the UK one out of four small businesses (23%) do not have any business plan. Approximately half (47%) of the UK’s small businesses have formal (written) business plans in place while the remaining (25%) have informal (verbal) business plans in place (Talk Business, 2016).

More than 30% of the small businesses do not survive the first 3 years of operations if they do not have a business plan (Francis J. Greene & Hopp, 2017). The business plan success statistics are thus clear.

50% of new businesses fail in 5 years

This is a frequently quoted statistic. 50% of new businesses die within five years. It is often because they did not follow a set business plan. Businesses who do not have a business plan 25% of the them will die within two years of startup. 10% of businesses die within five years of formation, and only 6% businesses die withinin 10 years (SBT, 2017).  Like large business, small businesses should also have a formal business plan for the success of their business. 52% of the businesses in the south and east are most likely to have a business plan while only 38% in the midlands have a formal business plan (Koulopoulos, 2016).

A business plan creates 30% greater chance of growth and a chance to double the business

If a large business has a formal written business plan, then there is a 30% chance of growth in sales and also the chance to double the business. Indeed, business plans have a lot of importance on the success of the business and for the going concern (Henricks, 2008).

References:

Francis J. Greene, & Hopp, C. (2017). Research: Writing a Business Plan Makes Your Startup More Likely to Succeed . Retrieved from https://hbr.org/2017/07/research-writing-a-business-plan-makes-your-startup-more-likely-to-succeed

Henricks, M. (2008). Do You Really Need a Business Plan? Retrieved from https://www.entrepreneur.com/article/198618

Koulopoulos, T. (2016). 5 of the Most Surprising Statistics About Startups . Retrieved from https://www.inc.com/thomas-koulopoulos/5-of-the-most-surprising-statistics-about-start-ups.html

Nazar, J. (2013). 16 Surprising Statistics About Small Businesses in USA . Retrieved from https://www.forbes.com/sites/jasonnazar/2013/09/09/16-surprising-statistics-about-small-businesses/#62dbac535ec8

SBT. (2017). Business Plan Success Twice as Likely . Retrieved from https://smallbiztrends.com/2010/06/business-plan-success-twice-as-likely.html

Talk Business. (2016). 1 in 4 UK SMEs don’t use a business plan . Retrieved from https://www.talk-business.co.uk/2015/01/29/1-4-uk-smes-dont-use-business-plan/

TAULLI, T. (2009, september 2). The Basics of Starting a Business . Retrieved from http://www.nytimes.com/2009/09/03/business/smallbusiness/03sbizguide.html

ZIMMERMAN, E. (2014, December 3). As Start-Up Strategies Evolve, So Does Role of a Business Plan . Retrieved from https://www.nytimes.com/2014/12/04/business/smallbusiness/business-plans-for-start-ups.html

Recent Posts

10 important elements of a good business plan., are you an entrepreneur do the test., business concepts and definitions., the benefits of being an entrepreneur..

We help you with creating excellent business plans for your business with great resources, ideas, templates, downloads and tips!

User Rating

Follow us on social media, subscribe to free newsletter, popular articles, 25 small business facts to make you think., 10 proven ways to craft an insightful trend analysis, what are the top 10 most started and successful businesses, the top 10 of the best and highest ranked business books., 10 rules of writing successful business plans., optimizing your business to increase performance..

• Business Books (6)
• Business Concepts (36)
• Business Idea (28)
• Courses (6)
• Definitions (3)
• Finance (19)
• Human Resources (2)
• Leadership (19)
• Managing Growth (16)
• Marketing (19)
• Organization / Team (9)
• Personal Development (17)
• Personal Health (1)
• Resources (9)
• Running a Business (33)
• Sales Force (4)
• Startup (20)
• Technology (14)

© 2024 - Excellent Business Plans

• Business Idea
• Business Plan – Template

Welcome Back!

Login to your account below

Remember Me

Create New Account!

Fill the forms below to register

Retrieve your password

Please enter your username or email address to reset your password.

Does a Business Plan Guarantee Success?

Having a business plan will equip you with a clearer understanding of your business strategy and the current market. Whilst it doesn’t guarantee success on its own, a business plan will give you a much better chance to succeed and prepare for any risks that may arise.

New business owners often go into their new ideas without any research and simply rely on their intuition or confirmation bias to assume that it will be successful. However, no matter how confident you are about your business and its success, a prudent business owner will always create a business plan to outline how that success will be achieved. 

In this article, we will look at the reasons to create a business plan to increase your chances of success.

Reasons to Write a Business Plan

Understand your market.

A survey by CBInsights found that 35% of all failed businesses did so because there was no market need for their business. This suggests that a large number of businesses do not even consider where they fit within the market or if there are any opportunities for their services or products.

Before you begin your business venture, you must carry out the necessary market research within a business plan to understand where you fit and what the current market is doing. 

Failing to do so will result in you being blind to the risks that may lie ahead. Market research is an essential aspect of any business plan and is one of the 8 key areas of a business plan .

Understanding Your Finances

Without any clear financial information it can be tough to understand the capital needs and the likely cash flow forecast for your business. 

A business plan should include financial information from your research before starting your business. This includes the costs of capital expenditure, ongoing cost of sales, and staff costs. 

This information helps you build a cash flow forecast that shows you how much money you need to make from your business venture to break even and eventually make a profit. Understanding this will help you have a clear idea of how to price your product or service and how much you need to sell per day, week and month.

Understand The Risks

Understanding risks is vital in a business plan; this outlines any problems that could arise that impact whether you can continue to trade. Some areas that to consider are:

• Economic downturns
• Competition
• Loss of staff or premises

By creating risk forecasts and looking at the impact they may have, you will be able to mitigate these risks should they arise.

With a new business, you may overestimate the number of sales you will make, and a good business plan will form “what if?” scenarios to create a forecast of earnings should these goals not be met.

A Good Idea Doesn’t Equal a Successful Business

Having a great business idea is one thing but turning that into a profitable business is another. You may have all the credentials to build the perfect business, but without a business plan, you may still fail.

A good business idea isn’t the only thing investors and bank managers look for in a startup business. They want to see that you have considered the financial implications of your business, and they also want to see that the business will still make money should anything go slightly wrong.

There is always some risk involved in business, whether you have a business plan or not, but having a well-researched business plan will mitigate many issues and help you understand what is needed to make sure it is a success.

Should You Hire an Expert?

A professional business plan writer could be an option for you if you have a great business idea but are unsure of how to showcase this in a business plan to an investor or bank manager.

Professional business plan writers understand what needs to be included in a business plan so that the key aspects of the business are highlighted, and the financials are appealing.

Looking for a Business Plan For Your Business or Startup?

Privacy Policy

Terms & Conditions

What is a business plan & why do we need it?

A business plan is a comprehensive document that outlines your business goals, the strategy to achieve them, and the steps to bring your vision to life. It serves as your roadmap to success, from the startup phase through growth. It provides clarity on your objectives, attracts investors, and keeps your business on course. The main purpose of a business plan is to offer a strategic guide that helps you navigate challenges, capitalize on opportunities, and ensure long-term sustainability.

Table of Contents

Why are business plans important.

A business plan is more than just a document—it’s the foundation of your business strategy. It outlines how your business will start, grow, and thrive, serving as a strategic guide that helps you set clear objectives and navigate market conditions, competition, and customer needs.

Attracting Investors and Securing Financing

A well-structured business plan is crucial for attracting investors and securing financing. It demonstrates your understanding of the business and convinces potential backers that their investment will be well-managed.

Guiding Decision-Making and Operations

Beyond securing funding, a business plan serves as a reference for making informed decisions about your business structure, management, and strategies. This organized approach ensures that every action you take aligns with your long-term goals, helping to streamline operations and reduce risks.

Do You Have a Destination In Mind

Launchroad can help you find the perfect country for your startup. Schedule a free demo today.

Are Business Plans Necessary?

Yes, business plans are essential tools for guiding your venture through its various stages, from startup to growth. They serve as a roadmap, helping you navigate challenges and seize opportunities.

Key Situations Where Business Plans Are Essential

• Startup Phase : A business plan lays the foundation, helping you secure initial funding and define your business direction.
• Seeking Investment : Investors and lenders require a detailed business plan to assess your business’s viability and repayment potential.
• Growth and Expansion : As your business grows, updating your plan helps manage this growth, set new targets, and strategize for sustainable expansion.
• Market Shifts : Significant market changes may require revising your plan to ensure your business remains relevant and competitive.
• Strategic Partnerships : Partners look for a clear plan to confirm that collaboration will be mutually beneficial and strategically sound.

Are Business Plans Still Relevant?

Absolutely. Business plans have evolved to meet modern demands, becoming more flexible and adaptive to changing environments.

The Evolution of Business Plans

Today’s business plans are dynamic, living documents that allow for agile planning. Entrepreneurs can easily adjust them as the market and business landscape shift.

Digital vs. Traditional Business Plans

• Traditional Plans : Detailed and often lengthy, covering all aspects of the business in depth.
• Digital Plans : Concise and flexible, often presented in formats like slideshows, making them easier to update and share. Digital tools streamline the process and encourage collaboration.

Components of a Business Plan

What should a business plan include.

A solid business plan has several key sections:

• Executive Summary: This is a brief overview of your business, its mission, and what you hope to achieve. It’s the elevator pitch of your business plan.
• Company Description: Here, you detail what your business does, its structure, the market needs it addresses, and its competitive advantages.
• Market Analysis: This section includes research on your industry, market size, expected growth, and a competitive analysis.
• Organization and Management: Describe your business’s organizational structure, details about the ownership, and profiles of your management team.
• Products or Services: Outline your offerings and how they benefit customers. Include information on the product lifecycle, intellectual property, and research and development.
• Marketing and Sales Strategy: Detail how you plan to attract and retain customers, pricing strategy, and sales tactics.
• Funding Request: If you’re seeking funding, clearly state your requirements, future funding plans, and how you’ll use the capital.
• Financial Projections: Provide income statements, cash flow statements, and balance sheets for the next three to five years. Use this section to convince the reader that your business is financially viable.
• Appendix: This can include resumes, permits, lease agreements, legal documentation, and other pertinent documents.

Where is SWOT Analysis in a Business Plan?

The SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) typically finds its place within the Market Analysis or Strategic Planning sections. This analysis helps to give a balanced view of the internal and external factors that can impact your business. Identifying your business’s strategic position and planning future actions is crucial.

📌 Must Read: How to Write a CV or Resume as a Startup Founder 👈

Language and Style

Are business plans written in the first person or third person.

Business plans are typically written in the third person. This formal tone provides a professional and objective perspective, which is crucial when presenting to investors, lenders, or other stakeholders. However, small businesses or solo ventures may use the first person to convey a more personal touch and passion for the project.

• Third Person Example: “The company aims to increase its market share by 20% over the next year.”
• First Person Example: “I aim to increase my market share by 20% over the next year.”

Common Conventions in Business Writing

• Clarity and Conciseness: Avoid jargon and communicate clearly and concisely.
• Professional Tone: Maintain a professional and respectful tone throughout the document.
• Consistency: Use consistent language and format to ensure readability.
• Active Voice: Write in the active voice to make the plan more engaging and dynamic.

Maintenance and Adaptation

Should business plans be revised.

Yes, business plans should be regularly updated to stay aligned with dynamic business environments. Revising your plan ensures it remains relevant and useful for strategic decision-making as market conditions, financial performance, and internal developments shift.

Why Revisions Are Important

• Adapting to Market Changes : Regular updates allow you to adjust strategies based on market trends and shifts in customer behavior.
• Reflecting Business Growth : As your business evolves, so do your goals and strategies. Revisions help capture this growth and prepare for future challenges.
• Financial Alignment : Updating financial projections ensures they remain accurate and reflect the current financial situation.
• Strategic Planning : Revisions align your long-term strategy with current business capabilities and market realities.

How Often Should You Update Your Business Plan?

Ideally, business plans should be reviewed at least once a year or whenever significant market changes, financial shifts, or internal developments occur. Regular reviews ensure your plan remains a vital tool for guiding decisions and planning for growth.

📌 Must Read: What is a Startup Visa? 👈

Length and Complexity

How long should a business plan be.

The length of a business plan varies based on several factors:

• Business Size: A small startup may have a shorter plan, around 10-20 pages, while larger enterprises might need a more detailed document.
• Purpose: The plan’s purpose also influences its length. A plan intended for internal use might be shorter and more concise, while one aimed at securing large investments will need to be comprehensive, sometimes exceeding 30 pages.

Does a Business Plan Need References?

Yes, references are important. Citations and sources:

• Enhance Credibility: Citing reliable sources, such as market research reports and industry studies, adds credibility to your plan.
• Support Claims: References back up your statements and projections, making your plan more convincing to stakeholders.

Who Should Develop Business Plans?

You have two main options:

• In-house Development: If you have the expertise, creating your own plan ensures it aligns closely with your vision and understanding of the business.
• Outsourcing to Professionals: Hiring consultants or using business plan services can provide a polished and professional document, especially if you lack the time or expertise. This can be particularly valuable for complex plans or when seeking significant investment.

Types and Examples

What are examples of business plans.

Business plans can vary greatly depending on the industry and purpose. Here are some examples:

• Tech Startup: A detailed plan focused on innovation, product development, market research, and funding needs.
• Retail Store: Includes location analysis, inventory management, customer service strategies, and sales forecasts.
• Restaurant: Covers menu planning, location, staffing, customer experience, and marketing.
• Non-Profit Organization: Focuses on mission, programs, fundraising strategies, and volunteer management.

For case studies and templates, check out resources from:

Which Business Plan is the Best?

Different formats serve different purposes:

• Traditional Business Plan: This is the most detailed, typically around 20-40 pages. It includes all sections like executive summary, market analysis, financial projections, and more.
• Lean Business Plan: A one-page plan that focuses on key elements. It’s useful for fast-moving startups and businesses that need to pivot quickly.
• Startup Business Plan: This is a more streamlined version of the traditional plan, often used by startups looking to attract initial investors.

There’s no one-size-fits-all; the best format depends on your specific needs and audience.

📌 Must Read: What is U.S. EB-5 visa and how to apply? 👈

Effectiveness of Business Plans

Do business plans work.

Yes, business plans are beneficial. They provide direction, help secure funding, and improve decision-making. According to the Harvard Business Review, businesses with a plan grow 30% faster than those without one.

Does a Business Plan Guarantee Success?

A business plan is not a magic bullet. It doesn’t guarantee success, but it significantly increases your chances by providing a structured approach to business development. Execution, adaptability, and market conditions play critical roles in a business’s success.

Business Plan Failures

Why do business plans fail.

Business plans can fail for several reasons:

• Lack of Research: If you don’t thoroughly research your market, competitors, and customer needs, your plan may be based on incorrect assumptions. Avoid this by investing time in comprehensive research.
• Unrealistic Financial Projections: Overly optimistic sales forecasts or underestimated expenses can lead to failure. Ensure your financial projections are realistic and based on solid data.
• Vague Goals and Objectives: Goals that are not clear and measurable can make it difficult to track progress. Set specific, achievable goals and regularly review them.
• Poor Marketing Strategy: Without a well-defined marketing plan, your business may struggle to reach customers. Develop a clear strategy to attract and retain customers.
• Ignoring Risks and Challenges: Failing to identify potential risks can leave your business unprepared. Conduct a SWOT analysis and plan for contingencies.

A solid business plan is an indispensable tool for any entrepreneur. It provides a clear roadmap for your business, outlines goals and strategies, and is a vital communication tool for attracting investors and securing funding.

Regularly updating your plan ensures it evolves with your business, adapts to market changes, and continues to guide your decisions and growth.

Whether you’re in the startup phase, seeking investment, or planning expansion, a well-crafted business plan can significantly increase your chances of success.

Role of Launchroad in The Seccess of Your Startup Visa

LaunchRoad is your trusted partner for starting a business abroad. We guide you in choosing the right country, understanding visa requirements, and getting your startup off the ground. As an experienced startup visa consultant, we offer expert startup visa consultation to help you navigate the complexities of international expansion. Our team provides the support, mentorship, and resources you need to succeed in the global market.

• Share on Facebook
• Share on Twitter

Related Articles

Minimum Viable Product (MVP): All You Need to Know

Business Models: B2B vs. B2C vs. C2C + Real-World Examples

Financial Projections Tips for Entrepreneurs and Startups

Leave a reply cancel reply.

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

Inspiration

What Is the Estonia Startup Visa? How to Apply

Denmark’s Startup Visa: All You Need To Know

Our Services

Program List

Startup Visa Guide

Country Info

Terms & Conditions

© LaunchRoad 2024

Do You Really Need a Business Plan?

The art of storytelling, from net margin to sales.

Why is a business plan important?

• Who will the reader be?
• What do you want their response to be?

Four Reasons to Write a Business Plan

1. To raise money for your business

2. To make sound decisions

3. To help you identify any potential weaknesses

4. To communicate your ideas with stakeholders

More by this contributor:

• Challenges Become Opportunities
• Discontinuing Healthy Workplace Consultancy
• Financial Planning for the Pandemic

Comments (0)

You may like.

How to Write a Business Plan for Your Small Business

(888) 660-3481

Will a business plan guarantee success.

Updated: Aug 24, 2020

While there are no guarantees in life, having a business plan is as close as you’re gonna get.

A business plan is needed because one, a lender or investor will ask for it and two, it’s really good to have a plan that will show you your industry, market, target market, competitors, goals, objectives and strategies to reach those goals.

A business plan serves three purposes:

To present to lenders/investors

As a roadmap to success

To help you better understand your industry, market, competition

Present to Lenders/Investors

When you go to a bank to ask for a business loan, the majority of the time they will ask for your business plan. They want to see that:

You are capable at running your business

You know the business you are getting into.

You have collateral

Good credit

The thing you have to remember is that lenders are people. They are going to make the ultimate decision. So you have to present a clear and concise document that will convince them, that is a business plan. That’s why the majority of them ask you for a business plan. They want to see that there is a process in place to help prove your businesses viability. This includes the management, your personal ability, education, knowledge in running and making this business a success. They want to see your plan of action. And keep in mind that a bank is a business too, their product is money. So they want to see that their product is going to be bringing in sales and a profit. For this reason, if you go to a small bank, they’ll help you out as much as they can. They’ll help you with your paperwork, filing, a little mentoring. Why? Because it benefits them too. Just like any other business they are providing value with their product!

This is true for an investor or equity partner. They need to see that you are capable of getting a return on their investment. That you are the right person for the job. You can do this with a properly written business plan. A well written business plan takes experience. I have seen business plans that just miss the mark completely. And trust me, if you get bored or don’t understand the business plan, then an investor will too. So make sure to have a properly written business plan. That means writing a business plan that:

Captivates the reader (not boring),

Has the proper, accurate, and up-to-date industry and market information,

Accurate or realistic financials

And proof that you are the right person, because actually they are investing in your ability to make the business a success.

As A Roadmap to Success

A business plan works like a map, going from point A to point B. If you’re a start-up, you are starting at the very beginning and you want to launch, grow, and eventually make a nice profit from your business. For others it is already having a business profitable business and wanting to expand it. Wherever your point A is you need a plan, a viable plan that you can implement to where you want to be.

A properly written business plan will be able to describe your business to the point where anyone reading can understand it. They will be able to take away from it your business description, industry, market, goals, objectives, milestones, mission, vision, value, your skills, experience, education, and how you are going to be first, best, or innovative.

If you have an amazing innovative product/service that no one else is has, being first on the scene will be so advantageous. You’ll be able to tap into a market that’s being neglected and most likely see profitability right away. If you can provide a product/services better than your competitor you can actually steal their clients and get a strong start. Or if you can do what your competitors can just innovatively, than you might just be able to tap into a part of the market or consumers that they can’t. And with a business plan this can be mapped out and used as a decision making tool.

Understanding the Industry, Market, and Competition

Having a clear picture of what you are getting yourself into is crucial.

The Industry

The industry is the classification of a group of businesses that produce related activities based on their product or services. By understanding the industry you can see the groups major source of revenue, how the economy has affected the group. The industry will show you the performance as a whole of all the businesses you are competing with. So you will be able to see if the industry is expected to continue to grow, what its growth is, how the revenue is doing, etc. Ultimately, whether or not it's a good time to enter the industry.

The market will help you understand who is buying the products/services. About ten years ago, consumers weren’t really spending money. The country was in a recession because of the housing crisis and consumers couldn’t or wouldn’t spend their money on discretionary things because they either didn’t have any disposable income or they were being frugal. If you wanted to start a business 10 years ago you would need to know this and understand how it would affect your business. Things have changed a lot since that time, and you need to know why and how that will affect your business.

The Competition

By knowing your competitors you can exploit their weaknesses. Competitors are similar businesses to yours. There are direct competitors or indirect competitors. An example of this would be, let’s say you want to open a hamburger restaurant, your direct competitor would be another hamburger restaurant like Dukes and your indirect competitor would be a hot dog restaurant like Portillo's. They both serve fast food just one is exactly the same and the other one can be substituted for yours.

You also should know how they are performing in the market. Are they succeeding, do they have complaints, sub-par food or services, what are they missing? Does the market want organic farm to table food and they serve frozen? Knowing their strengths and weaknesses will help you provide better value to your market. And knowing what your market wants will help you capture a market segment that is being underserved.

Here’s a final example to help you better understand the industry, market, and competition. Let’s say you want to open up a Hamburger fast food establishment.

Your industry would be the Fast Food Restaurant Industry,

Your market would be consumers who enjoy going out to eat

And your competition would be other hamburger or similar establishments

By having a business plan you can reach your goals of getting that start-up capital or that financing to expand your business and the relevant information you need to succeed as an entrepreneur. And like I said there are no guarantees in life but having a business plan is as close as you’re gonna get!

Let me know if this helped and if you need more information feel free to contact me or book a call.

Recent Posts

Mastering the Art of Writing a Business Plan: Your Roadmap to Success

Unleash Your Coffee Shop's Potential with a Business Plan for a Coffee Shop

The Power of a Business Plan and How it Will Help You Expand Your Business