Business Plans a Waste of Time? Maybe...

by Greg Cruey

PE Hub published an article earlier this month about a study at the University of Maryland's Robert H. Smith School of Business. Here it is in a nutshell:

Management and entrepreneurship professors David Kirsch and Brent Goldfarb, along with doctoral student Azi Gera, studied business plans and found quality had zero impact on the amount of VC funding raised.

Ouch!

To be fair, we should say a couple of things. First, the study looked at business plan quality and compared it to funding received for dot-com businesses. Do the results apply to start-up outside the tech sector? Your guess is as good as mine. Second, the study covered a period from the late 90's and early part of the current decade. So while a good business plan (as opposed to a crappy one) didn't seem to make a difference five to 15 years ago, that's different than saying it doesn't matter now.

So why write one? PE Hub's Joanna Glasner rightly points out that the study "doesn't mean writing one is an entirely worthless process, as it may be useful for organizing thoughts and details of a venture. However, it's not going to bring in the money."

If you don't get funding for your business plan, what does get you funded? Social connections trump business plans by a long shot, according to the study.