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.