Do Business Plans Add Value?

19/03/2012

By Andrew Burke, Director of the Bettany Centre for Entrepreneurial Performance and Economics at Cranfield School of Management

There is much controversy as to whether a business plan adds value or not. A lot of people observe high performing ventures that don’t have one and conclude, why bother to plan? It raises an important issue for many businesses, particularly those in the early stages of growth: is it worthwhile putting together a business plan at all? In the joint research that I have carried out with Stuart Fraser and Francis Greene of Warwick Business School (published in the Journal of Management Studies...

...in 2010) , we have sought to answer this question.

Do business plans add value?

At one level, the results of our research could be interpreted to mean that business planning looks like a bad thing, since we confirmed that a lot of high performing ventures select not to write business plans.
Certainly business planning doesn’t come free – it is a time consuming exercise and any business has to weigh up the value that is generated from spending time writing a business plan versus simply going out there and trying to sell. This can be particularly beneficial when a venture is launching a product or service in a very uncertain market, where even after carrying out plenty of analysis, uncertainty still remains.

However, what we found was that business plans do indeed add a lot of value to the businesses that choose to write them, including high quality ventures, and these effects are quite dramatic. Growth in the venture is increased by a factor of around 30% as a result of writing business plans. This benefit cannot be ignored. But particularly it is the quality of the business planning process which counts, and this article will look at what singles out a... continued on page two >

 

 

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