Pre-Startup Formal Business Plans and Post-Startup Performance: A Study of 116 New Ventures

Abstract

This study examined whether writing a business plan before launching a new venture affects the subsequent performance of the venture. The data set 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 startup capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan before opening a new business.

Keywords: New venture, Business plan, Performance, Entrepreneur, Business plan competition, Education, Gender, Experience

JEL Classification: M13