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Business Plans: Essential or Overrated?

Business plans are commonly described as an essential tool for startup success in entrepreneurship literature. However, some research has found that many successful businesses were launched without formal business plans. While business plans can provide guidance, especially for novice entrepreneurs, some studies have shown entrepreneurs lose interest in updating plans over time. Additionally, long-term planning can be detrimental when goals are too difficult or vague. Some companies may use business plans primarily for legitimacy rather than implementation, and many factors like weak plan implementation and pressure influence financial performance. Overall, the document discusses mixed research on the value of business plans for new ventures.

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Mice Dianne Monte Morta
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65 views2 pages

Business Plans: Essential or Overrated?

Business plans are commonly described as an essential tool for startup success in entrepreneurship literature. However, some research has found that many successful businesses were launched without formal business plans. While business plans can provide guidance, especially for novice entrepreneurs, some studies have shown entrepreneurs lose interest in updating plans over time. Additionally, long-term planning can be detrimental when goals are too difficult or vague. Some companies may use business plans primarily for legitimacy rather than implementation, and many factors like weak plan implementation and pressure influence financial performance. Overall, the document discusses mixed research on the value of business plans for new ventures.

Uploaded by

Mice Dianne Monte Morta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

READING 5 CRITIQUE

T. Karlsson, B. Honig / Journal of Business Venturing 24 (2009) 27–45

Business plans must be used as a roadmap for companies in order to attain


improvement and success. After reading the study of Karlsson and Honig entitled
"Judging a business by its cover: An institutional perspective on new ventures and
the business plan" I have learned that most of educational books in
entrepreneurship describes business plans as an essential tool in order to have a
successful start-up venture. These business plans are being spread amidst
businesses and are supported by universities, governmental assistance agencies,
management consultants and a wide array of literature. Business plans are not
really required in running a business, even before up to now there are businesses
that became successful without business plans. Though most of the well-known
business tycoon whom I look up to did not write a business plan before starting
their businesses, I still think that writing business plans can help entrepreneurs
especially for those who are beginners where they really need a guidance.
According to the study of Karlsson and Honig, they have found out that these
entrepreneurs writes extensive business plans with long-term forecasts but slowly
lose their interest and leads to discontinuation in updating their business plans.
According to the study of Gumpert, there are 10 million business plans written
each year world-wide and these activities is supported by many who values the
importance of business plans including venture capitalists who demand business
plans. As an IT student, I have witnessed how our university provide quality
education that they also engage in business plan teaching by having a subject that
will focus on idea generation and helping us nurture those ideas and help us
especially on the business side.
Talking about financial performance, according to the research of Delmar
and Shane, based on goal-setting theory business planning can positively impact
the performance of new venture managers by influencing their motivation, but
when goals are perceived as difficult and unspecific–as in the case of planning how
best

to run an emerging business for the next five years–long-term goal-setting


may become detrimental to the business. Therefore, if business plans is an
effective tool to improved financial performance then companies is expected to
follow those plans in order to have coordination and control. Based on the
conducted research, those companies that they have studied just used their business
plan for legitimacy to appear structured, well planned, and established. I am
convinced and I also agreed with their findings that there are a lot of factors that
should be realize and understand. One of those is the weak relationship between
plans and implementation and also pressure. The study doesn’t show if business
planning enhances the decision-making process of entrepreneurs before they start
their business because they focus more on businesses that had already started.
However, I have learned and realize a lot of things and I believe that this would
help me in creating a business plan for my idea.

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