Which Type of Business Plan Is Twice As Likely to Get Investment?

Let’s say you’re about to write your first Business Plan. Or maybe write another one for a new business. Or maybe re-write a Business Plan that didn’t work in the past. And you have a choice… You can trawl the web and download some free Business Plan or get out the credit card and buy one. Tricky, isn’t it? There is so much out there, it’s hard to resist. Ok, why am I rambling on about this?

Let’s say you’re about to write your first Business Plan. Or maybe write another one for a new business. Or maybe re-write a Business Plan that didn’t work in the past. And you have a choice… You can trawl the web and download some free Business Plan or get out the credit card and buy one. Tricky, isn’t it? There is so much out there, it’s hard to resist. Ok, why am I rambling on about this?

What Google Thinks of Business Plans

A quick search on Google shows us that the business community has some strong opinions on the value of business plans. Some deride them as antiquated whereas others see them as the foundation stone for a business growth. Who’s right? Well, it would be nice if someone did some research on the value of business plans. Actually, they have and Tim Berry presented the findings.

can Business Plan Software really Help your Business?

Business Chart

Here is a quote from a paper presented to the University of Oregon Department of Economics by Eason Ding and Tim Hursey:

Results suggest that planning with software is highly correlated with subsequent successes for a variety of firms.’

Business Plan Software, a closer look

Tim Berry is the founder of the well-respected Palo Alto Software (Business Plan Pro software firm) and, in fairness, flags this upfront.
He explains, “Palo Alto Software asked thousands of Business Plan Pro users a couple of dozen questions about their businesses, goals, type of business, years in existence, and business planning. Almost 3,000 people responded.”
The research findings suggests that those who finished their business plans were about twice as likely to:

  1. Successfully grow their business,
  2. Get investment, or
  3. Land a loan than those who didn’t.

You can see the numbers on the chart above

What’s the real reason Business Plan Software Makes A Difference.

The researchers used the completion of a business plan as the explanatory variable, the success of the business plan as the dependent variable, and a number of related results – original intent of the plan, type of company, stage of company growth, and so on – as controlling variables.
Tim’s interoperation, which I largely agree with, is that ‘

completing a business plan correlated with increased success in every one of the business objectives that came up in the study (which were: getting a loan, making a major purchase, getting investment, recruiting a new team member, thinking more strategically, and growing the company). In every one of these cases, well beyond the threshold of statistical validity, completing a business plan improved the proportion of respondents who achieved the goal.

The authors of the study said:

The analysis indicates that completion of a business plan is positively correlated with every success variable indicated, even when controlling for intent of using the business plan.

And here’s their conclusion:

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.

the problem with free

I’m not sure it’s to do with the software or the templates….
Why?
I feel that when you make an investment in something, for example, buying business planning software or templates out of your back pocket, then you’re more likely to follow through. It’s not guaranteed but no-one likes to buy something and then let it sit there on your hard drive doing nothing.
For example, the investments I make in my career, business and people ensure that I am more likely to follow through and less likely to take them for granted. I’ve invested in them financially or emotionally and dont want to see the investment wasted.
In a society where ‘Freemium’ is seen as a new business model, we may need to consider the true returns we get from paying for things.
If you get it for free, do you really value it? Does paying for something mean you value it more?
About the Author: Ivan Walsh provides Business Tips for Smart People on Klariti.com. His also runs the popular Business Plan Blog at http://www.ivanwalsh.com
PS: The Business Plan Template is here.Discloser: I work as a consultant for Klariti Ltd just so you know and all. I still think this template pack is the best ten bucks you’ll spend this week 🙂

4 thoughts on “Which Type of Business Plan Is Twice As Likely to Get Investment?”

  1. The Charles Dickens quote, “These were the “best of times, these were the worst of times” must have been looking into a crystal ball. Why is this the worst of times for some (BP, Tribune, Alcoa) and the best of times for others (Google, Apple, Virgin)? This blog seems to have some insight on this:
    http://bit.ly/aMJf6K

    1. Hi Ryan,

      Thanks for the pointer to this blog.

      “The history of business education has been to teach managers, usually by studying historical case experiences, the “best practices” employed by previous managers. But BPlans.com tells us in an article headlined “The Bad News About Best Practices” that this is a lousy way to make decisions. “..most of the time, they won’t work for you or me. They worked for somebody, some time, in some situation, in the past.”

      I read over the weekend that 'plans become useless when you meet the enemy.' The writer meant that as you cant predict what will happen in all future scenarios, looking at the past as an indicator or for direction is a flawed strategy.

  2. I enjoyed reading this article. My own personal view is that getting a professional like a chartered accountancy firm to produce the Business Plans, whilst costly will give you the most confidence that it is done to a standard where you are more likely to gain investment.

    1. I think Accountants can add value with the financials for sure but unless they know the industry then you may want to explore other alternatives. Maybe you guys are the exception 🙂

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