Thursday, May 24, 2018

Timing Matters in the Entrepreneurial Process

For those who did not catch Richard Bennett’s recent insightful blog post, he provided a link to a great article aimed at helping entrepreneurs navigate the “do’s and don’ts” of starting a business. I thought about his post when I came across the article, “When Should Entrepreneurs Write Their Business Plans?” during my weekend reading (yes, I’m an entrepreneurial geek).

Using a 2016 survey of over 1,000 entrepreneurs, researchers Francis J. Greene and Christian Hopp studied the relationship between the timing of certain business tasks and the likelihood of success. Their study found that the probability of launching a successful business not only hinges on whether an entrepreneur undertakes (or does not undertake) certain activities, but at what point in the process such activities take place. 

Take drafting a business plan, for example. Greene and Hopp noted that most entrepreneurs write a business plan at the outset of their enterprise because the process helps them answer basic questions about the business and develop strategies and plan for the future—a reasonable approach by any estimation. I was, however, surprised to learn that this mindset actually diminishes the overall likelihood of success.

Greene and Hopp found that entrepreneurs who wrote business plans six to 12 months after endeavoring to start a business had a higher probability of venture viability. In fact, writing a business plan in this timeframe increased the probability of success by a whopping 8 percent! In explaining this phenomena, they concluded that the real key to succeeding as an early stage business is remaining flexible and responsive to opportunities, being able to pivot if need be, and focusing time on the evaluation of opportunities, rather than strictly adhering to a preconceived plan. 

So, no matter where you are in the business formation process, and whether or not drafting a business plan was your first objective, I highly suggest you read Greene and Hopp’s article/study for some interesting insights on why timing matters. If you developed your plan some time ago, it may be time to pull it out and see how it should change, given what you know now.

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