business planning articles

Table of Contents

What is a business plan, the advantages of having a business plan, the types of business plans, the key elements of a business plan, best business plan software, common challenges of writing a business plan, become an expert business planner, business planning: it’s importance, types and key elements.

Every year, thousands of new businesses see the light of the day. One look at the  World Bank's Entrepreneurship Survey and database  shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.   

According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.

Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.

Several  other statistics  expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.

This isn’t surprising at all. 

Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%)  don't have a formal business plan in place. 

It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.  

But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.  

Now before we begin with the details of business planning, let us understand what it is.

No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.  

More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.

A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained. 

However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes. 

Before getting into learning more about business planning, let us learn the advantages of having one.

Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.

• Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals. 
• Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
• Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
• Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
• Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
• Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest. 

Now let's look at the various types involved in business planning.

Become a Business and Leadership Professional

• Top 10 skills in demand Business Analysis As A Skill In 2020
• 14% Growth in Jobs Of Business Analysis Profile By 2028

Business Analyst

• Industry-recognized certifications from IBM and Simplilearn
• Masterclasses from IBM experts

Post Graduate Program in Business Analysis

• Certificate from Simplilearn in collaboration with Purdue University
• Become eligible to be part of the Purdue University Alumni Association

Here's what learners are saying regarding our programs:

Assistant Consultant at Tata Consultancy Services , Tata Consultancy Services

My experience with Simplilearn has been great till now. They have good materials to start with, and a wide range of courses. I have signed up for two courses with Simplilearn over the past 6 months, Data Scientist and Agile and Scrum. My experience with both is good. One unique feature I liked about Simplilearn is that they give pre-requisites that you should complete, before a live class, so that you go there fully prepared. Secondly, there support staff is superb. I believe there are two teams, to cater to the Indian and US time zones. Simplilearn gives you the most methodical and easy way to up-skill yourself. Also, when you compare the data analytics courses across the market that offer web-based tutorials, Simplilearn, scores over the rest in my opinion. Great job, Simplilearn!

I was keenly looking for a change in my domain from business consultancy to IT(Business Analytics). This Post Graduate Program in Business Analysis course helped me achieve the same. I am proficient in business analysis now and am looking for job profiles that suit my skill set.

Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.  

Here’s an overview of a few fundamental types of business plans. 

• Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
• Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments. 
• Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
• Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
• Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.

There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them. 

Here are the key elements of a good business plan:

• Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.  
• Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
• Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
• Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time. 
• Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.

The importance of business planning is it simplifies the planning of your company's finances to present this information to a bank or investors. Here are the best business plan software providers available right now:

• Business Sorter

The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:

• Create a business plan to determine your company's direction, obtain financing, and attract investors.
• Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
• Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
• You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.

Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success. 

Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.

While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.   

Simpliearn’s Executive Certificate Program in General Management will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive general management program by IIM Indore can serve as a career catalyst, equipping professionals with a competitive edge in the ever-evolving business environment.

What Is Meant by Business Planning?

Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.

What Are the 4 Types of Business Plans?

The following are the four types of business plans:

Operational Planning

This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.

Strategic Planning

Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.

Tactical Planning

Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.

Contingency Planning

When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.

What Are the 7 Steps of a Business Plan?

The following are the seven steps required for a business plan:

Conduct Research

If your company is to run a viable business plan and attract investors, your information must be of the highest quality.

Have a Goal

The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.

Create a Company Profile

Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.

Describe the Company in Detail

Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.

Create a marketing plan ahead of time.

A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.

Be Willing to Change Your Plan for the Sake of Your Audience

Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.

Incorporate Your Motivation

Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.

What Are the Basic Steps in Business Planning?

These are the basic steps in business planning:

Summary and Objectives

Briefly describe your company, its objectives, and your plan to keep it running.

Services and Products

Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.

Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.

Operations are the process of running your business, including the people, skills, and experience required to make it successful.

How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.

Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.

Our Business And Leadership Courses Duration And Fees

Business And Leadership Courses typically range from a few weeks to several months, with fees varying based on program and institution.

Get Free Certifications with free video courses

Business and Leadership

Business Analysis Basics

Data Science & Business Analytics

Business Intelligence Fundamentals

Learn from Industry Experts with free Masterclasses

The Nike Way: The Modern-Day Product Management Approach

Career Information Session: Find Out How to Become a Business Analyst with IIT Roorkee

From Concept to Market - How to Excel at Product Management in 2024 with SP Jain Program

Recommended Reads

Business Intelligence Career Guide: Your Complete Guide to Becoming a Business Analyst

Corporate Succession Planning: How to Create Leaders According to the Business Need

Top Business Analyst Skills

Business Analytics Basics: A Beginner’s Guide

Financial Planning for Businesses Across the Globe

How to Become a Business Analyst

Get Affiliated Certifications with Live Class programs

• PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

A better way to drive your business

Managing the availability of supply to meet volatile demand has never been easy. Even before the unprecedented challenges created by the COVID-19 pandemic and the war in Ukraine, synchronizing supply and demand was a perennial struggle for most businesses. In a survey of 54 senior executives, only about one in four believed that the processes of their companies balanced cross-functional trade-offs effectively or facilitated decision making to help the P&L of the full business.

That’s not because of a lack of effort. Most companies have made strides to strengthen their planning capabilities in recent years. Many have replaced their processes for sales and operations planning (S&OP) with the more sophisticated approach of integrated business planning (IBP), which shows great promise, a conclusion based on an in-depth view of the processes used by many leading companies around the world (see sidebar “Understanding IBP”). Assessments of more than 170 companies, collected over five years, provide insights into the value created by IBP implementations that work well—and the reasons many IBP implementations don’t.

Understanding IBP

Integrated business planning is a powerful process that could become central to how a company runs its business. It is one generation beyond sales and operations planning. Three essential differentiators add up to a unique business-steering capability:

• Full business scope. Beyond balancing sales and operations planning, integrated business planning (IBP) synchronizes all of a company’s mid- and long-term plans, including the management of revenues, product pipelines and portfolios, strategic projects and capital investments, inventory policies and deployment, procurement strategies, and joint capacity plans with external partners. It does this in all relevant parts of the organization, from the site level through regions and business units and often up to a corporate-level plan for the full business.
• Risk management, alongside strategy and performance reviews. Best-practice IBP uses scenario planning to drive decisions. In every stage of the process, there are varying degrees of confidence about how the future will play out—how much revenue is reasonably certain as a result of consistent consumption patterns, how much additional demand might emerge if certain events happen, and how much unusual or extreme occurrences might affect that additional demand. These layers are assessed against business targets, and options for mitigating actions and potential gap closures are evaluated and chosen.
• Real-time financials. To ensure consistency between volume-based planning and financial projections (that is, value-based planning), IBP promotes strong links between operational and financial planning. This helps to eliminate surprises that may otherwise become apparent only in quarterly or year-end reviews.

An effective IBP process consists of five essential building blocks: a business-backed design; high-quality process management, including inputs and outputs; accountability and performance management; the effective use of data, analytics, and technology; and specialized organizational roles and capabilities (Exhibit 1). Our research finds that mature IBP processes can significantly improve coordination and reduce the number of surprises. Compared with companies that lack a well-functioning IBP process, the average mature IBP practitioner realizes one or two additional percentage points in EBIT. Service levels are five to 20 percentage points higher. Freight costs and capital intensity are 10 to 15 percent lower—and customer delivery penalties and missed sales are 40 to 50 percent lower. IBP technology and process discipline can also make planners 10 to 20 percent more productive.

When IBP processes are set up correctly, they help companies to make and execute plans and to monitor, simulate, and adapt their strategic assumptions and choices to succeed in their markets. However, leaders must treat IBP not just as a planning-process upgrade but also as a company-wide business initiative (see sidebar “IBP in action” for a best-in-class example).

IBP in action

One global manufacturer set up its integrated business planning (IBP) system as the sole way it ran its entire business, creating a standardized, integrated process for strategic, tactical, and operational planning. Although the company had previously had a sales and operations planning (S&OP) process, it had been owned and led solely by the supply chain function. Beyond S&OP, the sales function forecast demand in aggregate dollar value at the category level and over short time horizons. Finance did its own projections of the quarterly P&L, and data from day-by-day execution fed back into S&OP only at the start of a new monthly cycle.

The CEO endorsed a new way of running regional P&Ls and rolling up plans to the global level. The company designed its IBP process so that all regional general managers owned the regional IBP by sponsoring the integrated decision cycles (following a global design) and by ensuring functional ownership of the decision meetings. At the global level, the COO served as tiebreaker whenever decisions—such as procurement strategies for global commodities, investments in new facilities for global product launches, or the reconfiguration of a product’s supply chain—cut across regional interests.

To enable IBP to deliver its impact, the company conducted a structured process assessment to evaluate the maturity of all inputs into IBP. It then set out to redesign, in detail, its processes for planning demand and supply, inventory strategies, parametrization, and target setting, so that IBP would work with best-practice inputs. To encourage collaboration, leaders also started to redefine the performance management system so that it included clear accountability for not only the metrics that each function controlled but also shared metrics. Finally, digital dashboards were developed to track and monitor the realization of benefits for individual functions, regional leaders, and the global IBP team.

A critical component of the IBP rollout was creating a company-wide awareness of its benefits and the leaders’ expectations for the quality of managers’ contributions and decision-making discipline. To educate and show commitment from the CEO down, this information was rolled out in a campaign of town halls and media communications to all employees. The company also set up a formal capability-building program for the leaders and participants in the IBP decision cycle.

Rolled out in every region, the new training helps people learn how to run an effective IBP cycle, to recognize the signs of good process management, and to internalize decision authority, thresholds, and escalation paths. Within a few months, the new process, led by a confident and motivated leadership team, enabled closer company-wide collaboration during tumultuous market conditions. That offset price inflation for materials (which adversely affected peers) and maintained the company’s EBITDA performance.

Our research shows that these high-maturity IBP examples are in the minority. In practice, few companies use the IBP process to support effective decision making (Exhibit 2). For two-thirds of the organizations in our data set, IBP meetings are periodic business reviews rather than an integral part of the continuous cycle of decisions and adjustments needed to keep organizations aligned with their strategic and tactical goals. Some companies delegate IBP to junior staff. The frequency of meetings averages one a month. That can make these processes especially ineffective—lacking either the senior-level participation for making consequential strategic decisions or the frequency for timely operational reactions.

Finally, most companies struggle to turn their plans into effective actions: critical metrics and responsibilities are not aligned across functions, so it’s hard to steer the business in a collaborative way. Who is responsible for the accuracy of forecasts? What steps will be taken to improve it? How about adherence to the plan? Are functions incentivized to hold excess inventory? Less than 10 percent of all companies have a performance management system that encourages the right behavior across the organization.

By contrast, at the most effective organizations, IBP meetings are all about decisions and their impact on the P&L—an impact enabled by focused metrics and incentives for collaboration. Relevant inputs (data, insights, and decision scenarios) are diligently prepared and syndicated before meetings to help decision makers make the right choices quickly and effectively. These companies support IBP by managing their short-term planning decisions prescriptively, specifying thresholds to distinguish changes immediately integrated into existing plans from day-to-day noise. Within such boundaries, real-time daily decisions are made in accordance with the objectives of the entire business, not siloed frontline functions. This responsive execution is tightly linked with the IBP process, so that the fact base is always up-to-date for the next planning iteration.

A better plan for IBP

In our experience, integrated business planning can help a business succeed in a sustainable way if three conditions are met. First, the process must be designed for the P&L owner, not individual functions in the business. Second, processes are built for purpose, not from generic best-practice templates. Finally, the people involved in the process have the authority, skills, and confidence to make relevant, consequential decisions.

Design for the P&L owner

IBP gives leaders a systematic opportunity to unlock P&L performance by coordinating strategies and tactics across traditional business functions. This doesn’t mean that IBP won’t function as a business review process, but it is more effective when focused on decisions in the interest of the whole business. An IBP process designed to help P&L owners make effective decisions as they run the company creates requirements different from those of a process owned by individual functions, such as supply chain or manufacturing.

One fundamental requirement is senior-level participation from all stakeholder functions and business areas, so that decisions can be made in every meeting. The design of the IBP cycle, including preparatory work preceding decision-making meetings, should help leaders make general decisions or resolve minor issues outside of formal milestone meetings. It should also focus the attention of P&L leaders on the most important and pressing issues. These goals can be achieved with disciplined approaches to evaluating the impact of decisions and with financial thresholds that determine what is brought to the attention of the P&L leader.

The aggregated output of the IBP process would be a full, risk-evaluated business plan covering a midterm planning horizon. This plan then becomes the only accepted and executed plan across the organization. The objective isn’t a single hard number. It is an accepted, unified view of which new products will come online and when, and how they will affect the performance of the overall portfolio. The plan will also take into account the variabilities and uncertainties of the business: demand expectations, how the company will respond to supply constraints, and so on. Layered risks and opportunities and aligned actions across stakeholders indicate how to execute the plan.

Would you like to learn more about our Operations Practice ?

Trade-offs arising from risks and opportunities in realizing revenues, margins, or cost objectives are determined by the P&L owner at the level where those trade-offs arise—local for local, global for global. To make this possible, data visible in real time and support for decision making in meetings are essential. This approach works best in companies with strong data governance processes and tools, which increase confidence in the objectivity of the IBP process and support for implementing the resulting decisions. In addition, senior leaders can demonstrate their commitment to the value and the standards of IBP by participating in the process, sponsoring capability-building efforts for the teams that contribute inputs to the IBP, and owning decisions and outcomes.

Fit-for-purpose process design and frequency

To make IBP a value-adding capability, the business will probably need to redesign its planning processes from a clean sheet.

First, clean sheeting IBP means that it should be considered and designed from the decision maker’s perspective. What information does a P&L owner need to make a decision on a given topic? What possible scenarios should that leader consider, and what would be their monetary and nonmonetary impact? The IBP process can standardize this information—for example, by summarizing it in templates so that the responsible parties know, up front, which data, analytics, and impact information to provide.

Second, essential inputs into IBP determine its quality. These inputs include consistency in the way planners use data, methods, and systems to make accurate forecasts, manage constraints, simulate scenarios, and close the loop from planning to the production shopfloor by optimizing schedules, monitoring adherence, and using incentives to manufacture according to plan.

Determining the frequency of the IBP cycle, and its timely integration with tactical execution processes, would also be part of this redesign. Big items—such as capacity investments and divestments, new-product introductions, and line extensions—should be reviewed regularly. Monthly reviews are typical, but a quarterly cadence may also be appropriate in situations with less frequent changes. Weekly iterations then optimize the plan in response to confirmed orders, short-term capacity constraints, or other unpredictable events. The bidirectional link between planning and execution must be strong, and investments in technology may be required to better connect them, so that they use the same data repository and have continuous-feedback loops.

Authorize consequential decision making

Finally, every IBP process step needs autonomous decision making for the problems in its scope, as well as a clear path to escalate, if necessary. The design of the process must therefore include decision-type authority, decision thresholds, and escalation paths. Capability-building interventions should support teams to ensure disciplined and effective decision making—and that means enforcing participation discipline, as well. The failure of a few key stakeholders to prioritize participation can undermine the whole process.

Decision-making autonomy is also relevant for short-term planning and execution. Success in tactical execution depends on how early a problem is identified and how quickly and effectively it is resolved. A good execution framework includes, for example, a classification of possible events, along with resolution guidelines based on root cause methodology. It should also specify the thresholds, in scope and scale of impact, for operational decision making and the escalation path if those thresholds are met.

Transforming supply chains: Do you have the skills to accelerate your capabilities?

In addition to guidelines for decision making, the cross-functional team in charge of executing the plan needs autonomy to decide on a course of action for events outside the original plan, as well as the authority to see those actions implemented. Clear integration points between tactical execution and the IBP process protect the latter’s focus on midterm decision making and help tactical teams execute in response to immediate market needs.

An opportunity, but no ‘silver bullet’

With all the elements described above, IBP has a solid foundation to create value for a business. But IBP is no silver bullet. To achieve a top-performing supply chain combining timely and complete customer service with optimal cost and capital expenditures, companies also need mature planning and fulfillment processes using advanced systems and tools. That would include robust planning discipline and a collaboration culture covering all time horizons with appropriate processes while integrating commercial, planning, manufacturing, logistics, and sourcing organizations at all relevant levels.

As more companies implement advanced planning systems and nerve centers , the typical monthly IBP frequency might no longer be appropriate. Some companies may need to spend more time on short-term execution by increasing the frequency of planning and replanning. Others may be able to retain a quarterly IBP process, along with a robust autonomous-planning or exception engine. Already, advanced planning systems not only direct the valuable time of experts to the most critical demand and supply imbalances but also aggregate and disaggregate large volumes of data on the back end. These targeted reactions are part of a critical learning mechanism for the supply chain.

Over time, with root cause analyses and cross-functional collaboration on systemic fixes, the supply chain’s nerve center can get smarter at executing plans, separating noise from real issues, and proactively managing deviations. All this can eventually shorten IBP cycles, without the risk of overreacting to noise, and give P&L owners real-time transparency into how their decisions might affect performance.

P&L owners thinking about upgrading their S&OP or IBP processes can’t rely on textbook checklists. Instead, they can assume leadership of IBP and help their organizations turn strategies and plans into effective actions. To do so, they must sponsor IBP as a cross-functional driver of business decisions, fed by thoughtfully designed processes and aligned decision rights, as well as a performance management and capability-building system that encourages the right behavior and learning mechanisms across the organization. As integrated planning matures, supported by appropriate technology and maturing supply chain–management practices, it could shorten decision times and accelerate its impact on the business.

Elena Dumitrescu is a senior knowledge expert in McKinsey’s Toronto office, Matt Jochim is a partner in the London office, and Ali Sankur is a senior expert and associate partner in the Chicago office, where Ketan Shah is a partner.

Explore a career with us

Related articles.

To improve your supply chain, modernize your supply-chain IT

Supply-chain resilience: Is there a holy grail?

• Search Search Please fill out this field.

What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

• A business plan is a document describing a company's business activities and how it plans to achieve its goals.
• Startup companies use business plans to get off the ground and attract outside investors.
• For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
• There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

• Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
• Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
• Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
• Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
• Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

• How to Start a Business: A Comprehensive Guide and Essential Steps 1 of 25
• How to Do Market Research, Types, and Example 2 of 25
• Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
• Marketing in Business: Strategies and Types Explained 4 of 25
• What Is a Marketing Plan? Types and How to Write One 5 of 25
• Business Development: Definition, Strategies, Steps & Skills 6 of 25
• Business Plan: What It Is, What's Included, and How to Write One 7 of 25
• Small Business Development Center (SBDC): Meaning, Types, Impact 8 of 25
• How to Write a Business Plan for a Loan 9 of 25
• Business Startup Costs: It’s in the Details 10 of 25
• Startup Capital Definition, Types, and Risks 11 of 25
• Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
• Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
• Starting a Business with No Money: How to Begin 14 of 25
• A Comprehensive Guide to Establishing Business Credit 15 of 25
• Equity Financing: What It Is, How It Works, Pros and Cons 16 of 25
• Best Startup Business Loans for May 2024 17 of 25
• Sole Proprietorship: What It Is, Pros and Cons, and Differences From an LLC 18 of 25
• Partnership: Definition, How It Works, Taxation, and Types 19 of 25
• What Is an LLC? Limited Liability Company Structure and Benefits Defined 20 of 25
• Corporation: What It Is and How To Form One 21 of 25
• Starting a Small Business: Your Complete How-to Guide 22 of 25
• Starting an Online Business: A Step-by-Step Guide 23 of 25
• How to Start Your Own Bookkeeping Business: Essential Tips 24 of 25
• How to Start a Successful Dropshipping Business: A Comprehensive Guide 25 of 25

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

The road to entrepreneurial success: business plans, lean startup, or both?

New England Journal of Entrepreneurship

ISSN : 2574-8904

Article publication date: 19 February 2021

Issue publication date: 18 June 2021

The goal of this research is to investigate the relationship between two different sets of practices, lean startup and business planning, and their relation to entrepreneurial performance.

Design/methodology/approach

The authors collected data from 120 entrepreneurs across the US about a variety of new venture formation activities within the categories of lean startup or business planning. They use hierarchical regression to examine the relationship between these activities and new venture performance using both a subjective and objective measure of performance.

The results show that talking to customers, collecting preorders and pivoting based on customer feedback are lean startup activities correlated with performance; writing a business plan is the sole business planning activity correlated with performance.

Research limitations/implications

This research lays the foundation for understanding the components of both lean startup and business planning. Moreover, these results demonstrate that the separation of lean startup and business planning represents a false dichotomy.

Practical implications

These findings suggest that entrepreneurs should engage in some lean startup activities and still write a business plan.

Originality/value

This article offers the first quantitative, empirical comparison of lean startup activities and business planning. Furthermore, it provides support for the relationship between specific lean startup activities and firm performance.

Business planning

• Entrepreneurship

Lean Startup

Welter, C. , Scrimpshire, A. , Tolonen, D. and Obrimah, E. (2021), "The road to entrepreneurial success: business plans, lean startup, or both?", New England Journal of Entrepreneurship , Vol. 24 No. 1, pp. 21-42. https://doi.org/10.1108/NEJE-08-2020-0031

Emerald Publishing Limited

Copyright © 2021, Chris Welter, Alex Scrimpshire, Dawn Tolonen and Eseoghene Obrimah

Published in New England Journal of Entrepreneurship . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at http://creativecommons.org/licences/by/4.0/legalcode

Introduction

No business plan survives first contact with a customer – Steve Blank

This quote represents the differing perspectives on the value of business planning relative to the value of lean startup methods proposed by Blank and others ( Blank and Dorf, 2012 ). Much of traditional entrepreneurial training centers on the business plan ( Honig, 2004 ). Collective research on business planning's antecedents ( Brinckmann et al. , 2019 ) and its performance outcomes have found nuanced results ( Brinckmann et al. , 2010 ), but there seem to be at least some instances where business planning reliably increases performance ( Welter and Kim, 2018 ). Studies suggest that the majority of prominent business schools offer business planning courses ( Honig, 2004 ; Katz et al. , 2016 ), and bookstores are filled with books detailing how to write a business plan ( Karlsson and Honig, 2007 ). Nonetheless, the research is fragmented at best, and often results in equivocal findings with regard to its relationship with firm performance ( Brinckmann et al. , 2010 , Delmar and Shane, 2003 ; Gruber, 2007 ). This lack of clear indication from researchers opens the door for critique of business planning from proponents of the lean startup ( Ghezzi et al. , 2015 ).

Lean startup methods have drawn increasing attention in entrepreneurial communities ( Ries, 2011 ). In accelerators, incubators and other spaces within startup ecosystems the wisdom of Eric Ries (2011) and Steve Blank ( Blank and Dorf, 2012 ) can be heard in training sessions and everyday conversations. Some entrepreneurial programs have adopted lean startup methods as well ( Bliemel, 2014 ). On one hand, conceptual articles have described how lean startup fits adjacent to current and past academic conversations ( Contigiani and Levinthal, 2019 ). On the other hand, practitioner articles have discussed the benefits and limitations of the models ( Ladd, 2016 ). In both cases, existing literature describes how these processes aim to avoid the pitfall of launching products that no one actually wants ( Blank, 2013 ).

Despite all the popular attention given to lean startup methods, little empirical research has been completed (see Trimi and Berbegal-Mirabent (2012) , Ghezzi et al. (2015) , and Ghezzi (2019) for exceptions). Some researchers (e.g. Frederickson and Brem, 2017 ) have drawn the parallels between lean startup methods and effectuation ( Sarasvathy, 2001 ), but these parallels do not sufficiently support the use of lean startup methods. While practitioners seem to embrace lean startup methods, academics have offered little in terms of direct investigation into those methods ( Shepherd and Gruber, 2020 ). Most of the research on lean startup methods focuses on cognitive processes ( Yang et al. , 2018 ; York and Danes, 2014 ). Recent critique ( Felin et al. , 2019 ) coupled with the dearth of empirical research calls into question the efficacy of lean startup methods. To that end, more research is needed to see how lean startup methods relate to new venture success especially in comparison to business planning. This is particularly important as new venture formation activities are the practices that can legitimize the firm ( De Clercq and Voronov, 2009 ).

As such, we propose the following question: which individual aspects of business planning and lean startup methods are related to success? We study the components of both business planning and lean startup methods as there is some academic support for aspects of lean startup such as experimentation ( Carmuffo et al. , 2019 ), but limited empirical investigation into lean startup more broadly. We specifically focus on the underlying activities that make up the processes of lean startup and business planning since our initial surveying showed that entrepreneurs often employ aspects of each. To examine this question, we created a survey that captured the various activities – both from lean startup and business planning – that entrepreneurs used in pursuing their new venture and compared those with measures of success.

Our findings suggest that certain lean startup activities and the act of writing a business plan are correlated with success. These findings help to undo a false dichotomy of either lean startup or business planning by suggesting that some activities from each side can lead to success. We contribute to business planning research by offering a possible explanation for the existing equivocal findings. Namely, that the act of writing a business plan may be important, but that the uses of a business plan for feedback or financing are not necessarily associated with success. We contribute to research on lean startup by offering the first quantitative support for specific lean startup activities. Taken together, this research lays the foundation for a more nuanced understanding of the value of business planning and lean startup methods.

Theoretical framework and hypotheses

The literature on business planning is vast focusing on both antecedents to business planning ( Brinckmann et al. , 2019 ) and outcomes of it ( Brinckmann et al. , 2010 ). Honig and colleagues have driven much of the research into business planning since the turn of the century ( Honig, 2004 ; Honig and Karlsson, 2004 ; Honig and Samuelsson, 2012 , 2014 ; Karlsson and Honig, 2009 ). They have challenged prior planning-performance paradigms that suggested planning would naturally increase performance ( Ajzen, 1985 ; Mintzberg and Waters, 1985 ; Ansoff, 1991 ). This debate about the value of planning has underscored the recent research into selection effects associated with business planning ( Burke et al. , 2010 ; Greene and Hopp, 2017 ).

Brinckmann et al. (2010) address this debate directly. Their meta-analytic review of business planning literature suggests that three contingencies need to be considered in terms of the effectiveness of business planning: uncertainty, limited prior information, and the lack of business planning structures. The presence of these three suggest that business planning may be less effective. We look at each of these three contingencies in more depth next.

For uncertainty, planning scholars (e.g. Priem et al. , 1995 ) suggest that unstable and uncertain environments would benefit most from planning as planning can reduce uncertainty through facilitating faster decision-making ( Dean and Sharfman, 1996 ). However, emergent strategies seem to be more effective at controlling uncertainty ( Mintzberg, 1994 ; Sarasvathy, 2001 ). Brinckmann et al. (2010) confirms the latter intuition suggesting that uncertainty makes planning efforts less effective. This logic falls in line with research on effectuation ( Sarasvathy, 2001 ), where planning is described as the appropriate strategy for risky environments and effectuation, in contrast, is appropriate for uncertain environments. Recent work has confirmed this logic depending on how accurate the entrepreneur can be when predicting the future ( Welter and Kim, 2018 ).

Turning to the concept of limited prior information, planning proponents suggest that the shorter feedback cycles in new and small firms combined with the positive motivational effects of planning will make it more effective ( Delmar and Shane, 2003 ). In essence, despite the lack of history for de novo firms, short cycle times create history quickly and planning itself serves to motivate these fledgling organizations. However, Brinckmann et al. (2010) find that these firms lack the information necessary to make such plans effective. As firms pursue novel strategies, planning seems to be less effective or firms abandon plans all together as they move forward ( Karlsson and Honig, 2009 ).

Finally, for plans to be effective firms need to have the structures in place to both plan and make use of those plans ( Brinckmann et al. , 2010 ). New firms tend to lack the organizational structures relevant to create and use plans ( Forbes, 2007 ). While Karlsson and Honig (2009) found that firms typically ignore or abandon plans after they have been made, often due to insufficient support structures, Honig and Samuelsson (2012) show that even when firms change their plans over time there is little impact on firm performance. In general, the literature on business planning suggests that planning has more benefits for established firms with data and history to support both the plan and the planning process.

Business planning activities improve the likelihood of success for new ventures.

Typically, business planning has been analyzed as the single act of writing a business plan (e.g. Honig and Karlsson, 2004 ). However, business planning is made up of a variety of activities ( Gruber, 2007 ), which entrepreneurs may utilize as a whole, or simply choose parts of the business planning process. It is worth noting that these specific activities are not mutually exclusive with lean startup activities that we will detail later. One source of the gap between the prevalence of business planning use and research supporting the efficacy of business plans may be this holistic perspective. The constituent parts of business planning may be executed as a whole, or may be chosen a la carte. Examining the various activities that make up business planning offers insight into which aspects of the process are related to firm performance.

Arguably the first step in the business planning process is the work that precedes the actual writing of a business plan. First, entrepreneurs must collect data – typically external data ( Brinckmann et al. , 2010 ). This data collection process may or may not result in an actual business plan being written and, therefore, can be treated as a separate step itself.

Beyond the data collection and writing, the planning process can play a role in routinizing the initial practices of entrepreneurs. While entrepreneurs may engage in social resourcing ( Keating et al. , 2014 ) and collective sense-making ( Wood and McKinley, 2010 ), the act of codifying the results of these activities can objectify these practices. Entrepreneurs engage socially on a number of dimensions in the pursuit of a venture, but physically writing down a business plan that can be shared externally can serve as a commitment mechanism. Entrepreneurs may share this plan with external stakeholders simply for feedback ( Wood and McKinley, 2010 ) or they may use it to seek funding ( Richbell et al. , 2006 ).

Writing a business plan improves the likelihood of success for new ventures.

Gathering secondary data improves the likelihood of success for new ventures.

Sharing a business plan with potential stakeholders in order to get feedback improves the likelihood of success for new ventures.

Sharing a business plan with potential financiers in order to obtain funding improves the likelihood of success for new ventures.

Lean startup

The concept and the phrase “Lean Startup” stem from Eric Ries (2011) and his popular press book by the same name. The phrase borrows from the idea of lean manufacturing in the sense of eliminating waste and pushing production and supply as late in the process as possible to delay purchasing until the last moment. The book draws primarily on Ries's personal experience in founding a company along with some consulting work. Further development of the ideas around lean startup methods comes from Steve Blank ( Blank and Dorf, 2012 ). Blank (2013) described three principles of lean startup: hypothesis creation, customer development, and agile development. Hypothesis creation represents the belief that founders begin with little more than untested hypotheses. Customer development represents the approach of interviewing and interacting with customers in order to verify or discard the aforementioned hypotheses. Finally, agile development conceptualizes that minimally viable products (MVPs) are deployed quickly to verify the hypotheses that are believed to be true.

These concepts are often practiced by entrepreneurs and taught at incubators and accelerators ( Ladd, 2016 ), but there is little academic research to support these practices. Ghezzi et al. (2015) offer one of the only comparative empirical studies between lean startup and business planning. Their findings from a four-case study suggest that lean startup methods lead to superior outcomes. The majority of other papers are conceptual explorations of lean startup methods focusing on the decision-making of entrepreneurs ( Frederickson and Brem, 2017 ; Yang et al. , 2018 ; York and Danes, 2014 ). These conceptual pieces draw parallels between lean startup and effectuation ( Sarasvathy, 2001 ).

The literature on effectuation is much larger than that of lean startup (see recent reviews and retrospectives by Arend et al. (2015) and Reymen et al. (2015) ). Effectuation has been defined as entrepreneurial expertise that utilizes heuristics to make decisions focused on the means available rather than on desired ends ( Sarasvathy, 2001 ). One heuristic, in particular, has driven the comparison between lean startup and effectuation: experimentation ( Camuffo et al. , 2019 ). However, the comparisons may stem from the lack of clear boundaries in effectuation (see Welter et al. , 2016 ). While some researchers might argue that effectuation is a more robust articulation of lean startup ( Frederickson and Brem, 2017 ), there are significant departures. Effectuation makes no mention of MVPs or agile development, but instead focuses on the means at hand ( Sarasvathy and Dew, 2008 ). These means direct the venture as opposed to a focus on a specific end in mind ( Sarasvathy, 2001 ). This is in contrast to lean startup methods that create specific tests in order to verify a predetermined path ( Blank, 2013 ). Thus, researchers have suggested that lean startup intersects with effectuation, as well as other research streams ( Contigiani and Levinthal, 2019 ; Ghezzi, 2019 ).

Utilizing lean startup methods improves the likelihood of success for new business ventures.

Similar to business planning, lean startup is a process with several component parts from which an entrepreneur may select without needing to accomplish each task. Moreover, these component parts may be used in conjunction with business planning activities. Since lean startup has been developed more by practitioners than academics, there is not a clearly-defined, comprehensive list of activities that constitutes lean startup. Bortolini et al. (2018) review the academic and popular press literature on lean startup and describe the process at a more theoretical level than the work of Blank (2013) and Ries (2011) . Between these two perspectives, a specific list of six lean startup activities can be derived.

The lean startup process begins with customer discovery ( Blank and Dorf, 2012 ). In its most basic sense, the process of customer discovery begins with interviewing potential customers to surface their problems. Blank (2013) describes how lean startups “get out of the building” throughout the process to validate customer assumptions regarding all aspects of a potential business model. This validation process involves a variety of different forms of potential customer interviews.

From there, entrepreneurs craft hypotheses and build experiments as Bortolini et al. (2018) describe. This part of the process can be deconstructed into developing prototypes, showing those prototypes to customers, and running experiments. These sub-processes are discrete steps that may depend on each other, but may also occur independently. For instance, entrepreneurs may develop prototypes in their own quest to improve the product without actually showing a given prototype to potential customers. Alternatively, entrepreneurs may run experiments that do not necessarily involve the use of a prototype. These experiments may include observing customers in their daily routine to better understand customer problems. Each of these processes, however, align with the practitioner perspectives and the theoretical perspectives ( Blank and Dorf, 2012 ; Bortolini et al. , 2018) .

Beyond these specific activities, we examine two other activities within lean startup: collecting preorders and pivoting. Collecting preorders for new products has been suggested by Ries (2011) , but also aligns with research on enrolling external stakeholders ( Burns et al. , 2016 ) and the principles of effectuation ( Sarasvathy, 2001 ). By seeking out early stakeholders to make commitments like preorders or input on prototypes, entrepreneurs seek social resources to enable and direct their progress ( Keating et al. , 2014 ).

Interviewing potential customers improves the likelihood of success for new business ventures.

Developing a prototype improves the likelihood of success for new business ventures.

Showing a prototype to potential customers improves the likelihood of success for new business ventures.

Experimenting to test business model assumptions improves the likelihood of success for new business ventures.

Collecting preorders improves the likelihood of success for new business ventures.

Pivoting based on customer feedback improves the likelihood of success for new business ventures.

We began our study by conducting semi-structured interviews with five entrepreneurs to guide the construction of the survey. These entrepreneurs were selected from the authors' personal networks to represent a variety of perspectives and experiences. The group included two female founders and three male founders; two of the founders created high-tech scalable businesses and three represented small businesses. The interviews lasted 75 min on average.

All interviewees were familiar with business plans. All interviewees had heard of “lean startup” but only one entrepreneur had any education on the subject – they had read Eric Ries's book ( Ries, 2011 ). Nonetheless, none of the entrepreneurs could articulate specific aspects of lean startup or how it would be different from or related to writing a business plan.

The data collected from these interviews was used to develop a survey for distribution to a wider group of entrepreneurs. Within the qualitative data we noted how both business planning and lean startup represented groups of activities to the entrepreneurs. In discussing business planning, all of the entrepreneurs discussed more than simply producing a formal business plan. While four of the five entrepreneurs created formal business plans, each discussed a slightly different process. Some included financial planning while others mentioned secondary research. On the lean startup approach, the entrepreneurs did not specifically state which activities they pursued that were in line with lean startup, but multiple entrepreneurs mentioned each of the aspects of lean startup that we included in the survey.

This qualitative investigation altered our survey design to focus more on the activities that entrepreneurs completed rather than focusing on their understanding of the different approaches. Before distributing the survey, we tested it with two entrepreneurs to obtain feedback on its understandability – one from the original interviewees and one unfamiliar with the research project. Based on these tests, minor modifications to word choice were made.

We reached out to the startup ecosystem in a major Midwestern city. The online survey was emailed to incubators, accelerators, individual entrepreneurs, and organizations that reach outside the Midwest. Participation in the study was voluntary. Participants received a $1 USD donation to a non-profit organization of their choice for completing the survey. A total of 41 entrepreneurs responded to the initial survey request. We excluded seven of these cases because they did not adequately describe their business.

To bolster the sample size, we enlisted the Qualtrics panel development team to collect approximately 100 additional survey responses from entrepreneurs. Qualtrics, in addition to providing online survey tools, is a research panel aggregator with the ability to recruit hard-to-reach demographics. Qualtrics utilizes specialized recruitment campaigns to assemble niche survey panels based on pre-specified criteria. To fit in this group, entrepreneurs must own a business that they have started within the last ten years. Respondents in this group were compensated with $25 USD for their participation and were not offered any donation option. A total of 106 completed surveys were returned from this group. We excluded 20 of these cases because they were unable to adequately describe their business. See the Appendix for the complete survey instrument.

Participants and procedures

The participants completed an online questionnaire with thirty-two questions on the details of how they started their business, the success of the business, activities they conducted while starting the business, and demographic variables. The sample was recruited via a snowball sample method as well as through a Qualtrics panel as described above.

The majority of our sample is comprised of Caucasians (81.7%), followed by Black/African Americans (11.7%), then Hispanics (3.3%), then Asians (1.7%). The median age of our sample was 46.5 years old and the sample was 49.2% female. The majority of our dataset is currently married (61.7%) with 55.8% having at least a bachelor's degree. Table 1 shows the means and standard deviations for each of the variables as well as the correlations between them.

Dependent variables

There are various difficulties in obtaining concrete objective measures of success from entrepreneurs. Reasons stem from factors such as small business owners not always running their businesses to maximize financial performance ( Jacobs et al. , 2016 ) or running a business because it allows for a preferred lifestyle ( Jennings and Beaver, 1997 ; Walker and Brown, 2004 ). Because of this, there are a few ways researchers can gain acceptable insight into the success of an entrepreneurial venture. One approach is to use subjective measures when other types of information are unavailable ( Dawes, 1999 ). Thus, following previous research ( Besser, 1999 ; Jacobs et al. , 2016 ) which has noted that entrepreneurial success may not always mean optimal financial measures and instead may be more along the lines of maintaining an acceptable level of income for themselves and their employees ( Beaver, 2002 ) or sustaining a lifestyle more aimed at being part of a creative output than being financially successful ( Chaston, 2008 ), we first analyzed the entrepreneurs' perceived organizational success. A second approach is to ask about objective success measures. We strengthened our study by asking entrepreneurs about objective measures of their firm's success via focusing on their firm's growth, specifically, asking about objective growth indicators in terms of increased number of employees, increased number of customers, or increased revenue as previous research has used these measures to indicate success ( Walker and Brown, 2004 ). Therefore, we analyzed the full model for both the subjective and objective dependent variables.

Given that entrepreneurial motivations can vary widely ( Shane et al. , 2003 ), defining success can vary based on the individual. To address this, studies have surveyed entrepreneurs for their subjective perception of their venture's success ( Fisher et al. , 2014 ; Keith et al. , 2016 ). Walker and Brown (2004 , p. 585) find that “Personal satisfaction, pride and a flexible lifestyle were the most important considerations for these business owners.” They argue that objective, financial measures that are often used in research offer objectivity and accessibility, but may not capture the true value of success for many entrepreneurs. These alternative motivations make success difficult to quantify objectively, leading researchers to utilize more subjective measures. Therefore, in line with prior research on entrepreneurial success perceptions ( Jacobs et al. , 2016 ; Besser, 1999 ), we asked respondents “How strongly do you agree or disagree with the following statement? My business is a success.” Respondents rated their agreement on a five-point Likert scale (1 = Strongly Agree, 5 = Strongly Disagree).

Firm Growth:

To strengthen the findings from our subjective measure of success we also asked respondents about objective measures of firm growth. By asking respondents about obvious measures of growth we can offer a more objective view on the success of the firm. We asked respondents if their firm had grown by any of the following three metrics: number of employees, number of customers, or total revenue (cf. Jacobs et al. , 2016 ). Given the variety of motivations of entrepreneurs, we chose not to limit the type of growth that would reflect success. In some cases, an entrepreneur may seek to increase the impact of the business by providing services to a greater number of customers, while maintaining a lean staff to control pricing. Alternatively, an entrepreneur may be seeking autonomy, and therefore choose not to hire in order to create greater autonomy. However, it is likely that some firm growth – in revenue, employees, or customers – is likely to occur in successful firms. Therefore, we combined these three types of growth as a dichotomous variable, wherein growth in any one or more of these areas would be coded as a “1” for growth and an answer of no growth in all of these areas would be coded as a “0” for no growth.

Independent variables

Business planning.

We defined business planning using four activities. We asked respondents if they (1) wrote a business plan [ Write BPlan ]; (2) gathered secondary data on industry statistics or trends [ Secondary Data ]; (3) shared your business plan with people outside the company for feedback [ BPlan Feedback ]; and (4) shared your business plan with people outside the company for funding [ BPlan Funding ]. These were not loaded as a factor as these do not represent an underlying factor, but rather are individual activities that all represent a variety of activities pertaining to the use of business plans.

We defined lean startup using six activities. We asked respondents if they (1) interviewed potential customers [ Interview ]; (2) created a prototype [ Prototype ]; (3) showed a prototype to potential customers for feedback [ Show Proto ]; (4) conducted an experiment to better understand some portion of your business [ Experiment ]; (5) used customer feedback to alter the direction of your business (“pivoted”) [ Pivot ]; and (6) accepted money for preorders [ Preorders ]. Similar to business planning activities, these were not loaded as a factor, as these activities do not represent an underlying factor, but rather a collection of potential activities.

For each of the IVs, respondents were first asked which of the above activities they engaged in during their venture startup process. The order of the activities was randomized. For each activity that was selected, respondents were asked to rate “how much did each of those activities positively impact the performance of this venture?” Respondents were given a five-point Likert scale (1 = “Not at all” to 5 = “A great deal”) and if the respondent did not do the activity, the response was coded as a 0. To calculate the IVs, each response was weighted by the level of impact. For example, if the respondent rated Experiment as a 5 for a great deal of impact, then it would be coded 5. If it was rated 3, then it would be coded 3. Any activity not completed was not rated (or effectively coded a 0).

We used the ratings to allow for variance in the impact of any activity. In our preliminary interviews, we heard that entrepreneurs may have performed the same activity, such as interviewing customers, but some placed a greater emphasis on this activity whereas others performed it only cursorily. We also performed a robustness check on the data using non-weighted values for the IVs and found similar results (these are available from the corresponding author upon request).

Control variables

We controlled for the following variables: (1) the firm's age in years [Firm Age] ; (2) the entrepreneur's prior startup experience [Ent XP] ; (3) the entrepreneur's age in years [Age] ; (4) the entrepreneur's education level [Education] ; (5) the case sample [case Sample]; and (6) if the firm was a high-tech growth firm [Hi-tech growth firms] . Firm age is likely related to perceptions of success in the minds of entrepreneurs. If an entrepreneur perceives themselves as unsuccessful, they are likely to quit pursuing their venture. Thus, entrepreneurs with older businesses are more likely to have higher perceptions of their own success. Ent XP, Age , and Education have all been investigated in the past for their relationship to entrepreneurial firm performance (e.g. Hechavarría and Welter, 2015 ). We also control for the case sample since our sample was collected in two different processes. Finally, we control for Hi-tech growth firms since some firms in our sample are oriented toward accelerated growth and others may be content with stable returns, which may impact the use and effectiveness of business planning ( Brinckmann et al. , 2010 ).

Regression results for success DV

We tested our hypotheses using hierarchical regression [ 3 ]. In Step 1, we entered Firm Age (in years), the entrepreneur's prior startup experience, the entrepreneur's age, the entrepreneur's education level, the case source, and whether the firm was a hi-tech growth firm as controls ( Van Dyne and LePine, 1998 ). In Step 2, we entered our independent variables that relate to the business plan approach: writing a business plan, gathering secondary data on the industry, sharing the business plan to receive feedback, and sharing the business plan to obtain funding. We also included the variables related to the lean startup approach: interviewing potential customers, creating prototypes, showing prototypes to potential customers for feedback, conducting an experiment to better understand a portion of the business, pivoting based on customer feedback, and accepting money for preorders.

Table 1 reports descriptive statistics and correlations, whereas Table 2 presents the hierarchical regression results for the success dependent variable. As can be seen in Table 2 , consistent with H1a , writing a business plan was related to success ( β  = 0.09, p  = 0.09). However, we do not find support for our other hypotheses: gathering secondary data on the industry, sharing the business plan to receive feedback, and sharing the business plan to obtain funding were all not significantly related to success.

When we looked at the activities that contribute to lean startup methods, we found that interviewing potential customers ( β  = 0.09, p  = 0.08) and accepting money for preorders ( β  = 0.15, p  = 0.03) supported H2a and H2e respectively, suggesting these are correlated with success. Similar to the business plan approach there was not sufficient support for all our hypotheses: creating prototypes, showing prototypes to potential customers for feedback, conducting an experiment to better understand a portion of the business, and pivoting were not supported. The findings with regard to each hypothesis are summarized in Table 3 .

Regression results for growth DV

Similar to the subjective success dependent variable, we tested our hypotheses using logistic regression for our objective growth dependent variable [ 4 ]. A logistic regression was performed for each of our approaches, the business plan and lean startup since our growth DV is dichotomous ( Mason et al. , 2018 ).

Table 1 reports descriptive statistics and correlations, whereas Table 4 presents the logistic regression results for the effects of writing a business plan, gathering secondary data on the industry, sharing the business plan to receive feedback, and sharing the business plan to obtain funding had on our growth dependent variable. The logistic regression model was statistically significant, χ 2 (10) = 39.16, p  < 0.005. The model explained 39.2% (Nagelkerke R 2 ) of the variance in business growth and correctly classified 69.2% of cases. As can be seen in Table 4 , consistent with H1a , writing a business plan was related to success ( β  = 0.30, p  = 0.036). As before we did not find support for our other hypotheses: gathering secondary data on the industry, sharing the business plan to receive feedback, and sharing the business plan to obtain funding.

Next, we looked at the actions that constitute lean startup, interviewing potential customers, creating prototypes, showing prototypes to potential customers for feedback, conducting an experiment to better understand a portion of the business, and pivoting based on customer feedback had on our growth dependent variable. The logistic regression model was statistically significant, χ 2 (12) = 53.82, p  < 0.005. The model explained 51.0% (Nagelkerke R 2 ) of the variance in business growth and correctly classified 85% of cases. Our logistic regression results found that interviewing potential customers ( β  = 0.25, p  = 0.08), accepting money for preorders ( β  = 0.89, p  = 0.04), and pivoting based on customer feedback ( β  = 0.34, p  = 0.03), provided support for H2a , H2e , and H2f respectively, suggesting these are correlated with success in terms of growth. We did not find support for our other hypotheses about lean startup activities. These were, creating prototypes, showing prototypes to potential customers for feedback, conducting an experiment to better understand a portion of the business, and pivoting. The findings with regard to each hypothesis are summarized in Table 5 .

In this paper, we sought to understand the relationship between lean startup activities and success as well as the relationship between business planning activities and success. To answer this question, we began by gathering qualitative data from entrepreneurs to better understand their perspective and language regarding these two approaches. From there, we created a survey and collected responses from 120 entrepreneurs about their activities and their perception of success and the growth of their firms. Controlling for common influencers of success, we found that the act of writing a business plan ( H1a ), interviewing potential customers ( H2a ), and taking preorders ( H2e ) were all correlated with subjective perceptions of success. For the firm growth dependent variable, we found that the act of writing a business plan ( H1a ), taking preorders ( H2e ), and pivoting based on customer feedback ( H2f ) were all correlated with objective measures of firm growth. Interestingly, these results represent a combination of lean startup and business planning activities. What is more, the two activities that are supported by both dependent variables, represent the most well-researched activities. As mentioned, the literature on business planning is well developed ( Honig and Karlsson, 2004 ), and the use of preorders is most directly tied to research on enrolling stakeholders ( Burns et al. , 2016 ) as well as effectuation ( Sarasvathy, 2001 ).

Our results give some understanding to the prior equivocal findings on business planning ( Brinkmann et al. , 2010 ). The qualitative data we gathered suggests that entrepreneurs complete different activities in their business planning process. In the past, there has not been much discussion about separate aspects of business planning or the impact they may have. Our findings suggest that the act of writing a business plan is related to success, but the other business planning activities – gathering secondary data, sharing the business plan for feedback or funding – are not related. This suggests that the planning process itself may mean more than the uses of a business plan. Even if a business plan is not revised or revisited as an entrepreneur pursues their venture ( Karlsson and Honig, 2009 ), the act of writing the plan is still connected with success. Entrepreneurs going through the exercise of planning are likely to gain a better understanding of the entire endeavor of launching a new business. This would give entrepreneurs a better grasp of what the range of possible outcomes would be and likely temper any overly optimistic and unfounded hopes. Therefore, it is likely that simply writing the business plan helps calibrate entrepreneur expectations, which, in turn, helps entrepreneurs achieve success.

Rather than viewing lean startup as a cohesive whole, our qualitative data suggests that entrepreneurs make use of differing combinations of lean startup activities. This discovery informed our survey which offers some of the first direct quantitative evidence of the efficacy of lean startup methods. What we find, however, is that not all activities are linked to success. Perhaps the most straightforward finding is that taking preorders is correlated with both subjective and objective measures of success. If entrepreneurs are able to complete their first sales prior to actually creating their products or services, then success seems much more likely. Venture success, in this case, is agnostic toward the level of innovation in the firm. As such, the critique of lean startup from Felin et al. (2019) as a method that helps orient entrepreneurs to ideas that can be quickly and transparently tested still requires further investigation.

The other relevant activities are those most aligned with customers. Interviewing customers ensures that entrepreneurs design businesses that serve customers rather than building something that no one wants ( Blank and Dorf, 2012 ). However, it is worth noting that interviewing customers must be done with an awareness of the entrepreneur's own cognitive biases ( Chen et al. , 2015 ). Furthermore, pivoting as a result of these discussions with customers also shows a response to customers' desires.

The most interesting aspect of our findings is likely the combination of activities across business planning and lean startup. While lean startup proponents might argue that “no business plan survives its first contact with customers” ( Blank and Dorf, 2012 , p. 53), the act of writing a business plan is correlated with success. It is worth noting that the separation between lean startup and business planning may be a false dichotomy. The underlying activities are not mutually exclusive and do not seem to be detrimental to each other. It is entirely possible, and based on these results advisable, that an entrepreneur would interview customers throughout the process of creating a business plan and use customer feedback to alter both the plan and the business itself. Furthermore, taking customer preorders serves to solidify the relationship between customers and the firm which would only improve that communication.

Limitations

In order to create one of the first quantitative, empirical investigations of business planning and lean startup practices, some tradeoffs needed to be made. We believe that while these limitations may restrict the strength of some of our findings, the direct nature of our approach offers a contribution to the ongoing conversations among scholars and practitioners.

Our sample size is 120. Obviously, a larger sample may lead to more robust and generalizable results. Furthermore, we gathered the sample using two different methods and controlling for the sample method was a significant predictor. We leave it to further research to expand upon our findings and investigate various entrepreneurial samples for differences that may arise.

One of our dependent variables was a subjective measure of success, which may be considered a weakness. We used this measure given the variety of preferred outcomes an entrepreneur may be pursuing – financial objectives, personal objectives, or mission-based objectives. Our other dependent variable was an objective measure of growth across three categories and serves to bolster confidence in the subjective measure.

Another area of concern may be common method variance given that we collected both independent variables and dependent variables from the same instrument. To address this concern, we collected data from individual entrepreneurs that all represented different companies and utilized two different samples so as to minimize the issues that may arise from common method variance ( Chang et al. , 2010 ). Lastly, our independent variables are more objective. For example, writing a business plan is a discrete event as is creating a prototype. For these reasons, we do not believe the common method variance is a major concern for this study.

One other potential weakness is the degree to which entrepreneurs actually utilized the activities of lean startup or business planning. The weighting scheme we employed aims to address this issue by weighting the degree to which entrepreneurs found each activity useful. However, we cannot be sure whether or not an entrepreneur executed the given activity well and this variability goes uncaptured in our study. Quantitative studies like this one will typically suffer from this limitation but case studies may be able to overcome these weaknesses (see Ghezzi et al. , 2015 ).

Finally, our design is cross sectional and does not allow us to make causal inferences. We can only imply the relationship between our independent and dependent variables. Our hope is this is a first step to future research which may be better able to test the causality of the various aspects of business planning and lean startup as they relate to entrepreneurial success.

Implications for research and practice

This manuscript has important implications for research and practice. With respect to research, we have demonstrated that aspects of business planning and lean startup both are associated with success. Furthermore, entrepreneurs seem unlikely to enact either business planning or lean startup wholesale but are likely to pursue individual aspects of these concepts. Future research can investigate how entrepreneurs select between activities as well as how training and education regarding these practices impact the entrepreneurs' choice. The training and education surrounding the entrepreneur represent aspects of the organizing context ( Johannisson, 2011 ), which influence how entrepreneurs construct their firms. Therefore, future research could add further institutional aspects or conduct randomized controlled trials to see the impact of these practices in the organizing context.

In terms of implications for practice, this research highlights the use of a variety of activities when it comes to entrepreneurial success. Some of the activities from both lean startup and business planning are useful for entrepreneurs. This also offers insight for educators as they seek to equip the next generation of entrepreneurs. Educators can offer potential entrepreneurs a wide range of activities without prognosticating one aspect of the false dichotomy between lean startup and business planning.

In this paper, we provide one of the first quantitative empirical studies investigating lean startup methods and business planning. In breaking down these areas, we undermine the false dichotomy between these two startup tools. Our findings demonstrate that truly understanding customers through preorders and interviews can lead to better business plans and better pivots. Ultimately, this results in firms with a greater chance of success. Understanding the variety of activities that entrepreneurs can pursue helps entrepreneurs and educators increase the chances of success for new businesses.

Correlations

Summary regression results for the growth DV

We do not believe that business planning exists as a latent construct necessarily comprised of these activities, but rather each of these activities are potential components of the concept referred to as “business planning” in prior research.

Similar to business planning activities, we believe that lean startup is not a latent construct but rather these activities in some combination is what is meant when practitioners and scholars refer to lean startup. As such we test each of the activities individually rather than as a construct.

Following the extant guidelines on regression assumptions ( Osborne and Waters, 2002 ), we tested our model to ensure the regression assumptions were met. First, to check if our error terms ( Flatt and Jacobs, 2019 ) are normally distributed, the P - P plot suggests normality as the plot is largely linear. Second, to check for a linear relationship between the independent and dependent variable, our residual plot showed a linear relationship. Third, as our variables were not latent, there is no concern for measurement error for this approach. However, we did follow best practices suggested by Flatt and Jacobs (2019) and tested the Durbin–Watson statistic. Our value for this measure is 1.5 and their guidelines are that this statistic should be close to 2. Values between 1.2 and 1.6 represent only a minor violation of the statistical independence of error terms. Finally, to address the assumption of homoscedasticity, inspection of our standardized residuals showed our residuals scattered around the 0 (horizontal line). Therefore, for our dependent variable of success, we can feel comfortable our data meets the assumptions of linear regression.

As this dependent variable was analyzed using logistic regression, we analyzed our data following best practices from Garson (2012) . First, our dependent variable is dichotomous. Second our scatterplot showed no outliers in our data. Third, the correlation table showed no evidence for multicollinearity as no correlations were above 0.9 ( Tabachnick et al. , 2007 ). Hence, we feel our data meets the assumptions for logistic regression.

Appendix Qualtrics Survey

[Business Background]

Started (or am starting it) myself

When you first started pursuing the business, how many people were on the founding team (including yourself)?

High Tech Startup (External/Venture funded)

Steady Growth Business (Internally/Self-funded)

Lifestyle Business

Business Idea

Decision to Start a Business

Occurred Together

Month (1–12)

Year (YYYY)

[Lean Start Up, Business Planning Practices]

Interviewed potential customers

Created a prototype

Showed a prototype to potential customers for feedback

Conducted an experiment to better understand some portion of your business

Wrote a business plan

Accepted money for pre-orders

Used customer feedback to alter the direction of your business ("pivoted")

Gathered secondary data on industry statistics or trends

Shared your business plan with people outside the company for feedback

Shared your business plan with people outside the company for funding

[Demographics]

How old are you? 0.5

Prefer not to answer

Black or African American

American Indian or Alaska Native

Native Hawaiian or Pacific Islander

Living with a partner

Never married

Up to 8th grade

Some High School

High School Diploma

Some College

Associate's Degree

Bachelor's Degree

Some Graduate School

Master's Degree

More than 1

[Success Criteria]

My business is a success

Increased Annual Revenue

Increased Annual Customers

Increased Number of Employees

Thank you for completing the survey!

Ajzen , I. ( 1985 ), “ From intentions to actions: a theory of planned behavior ”, Action Control , Springer , Berlin, Heidelberg , pp. 11 - 39 .

Ansoff , H.I. ( 1991 ), “ Critique of Henry Mintzberg's ‘The design school: reconsidering the basic premises of strategic management’ ”, Strategic Management Journal , Vol. 12 No. 6 , pp. 449 - 461 .

Arend , R. , Sarooghi , H. and Burkemper , A. ( 2015 ), “ Effectuation as ineffectual? Applying the 3E theory-assessment framework to a proposed new theory of entrepreneurship ”, Academy of Management , Vol. 40 No. 4 , pp. 630 - 651 .

Beaver , G. ( 2002 ), Small Business, Entrepreneurship and Enterprise Development , Pearson Education , Harlow .

Besser , T.L. ( 1999 ), “ Community involvement and the perception of success among small business operators in small towns ”, Journal of Small Business Management , Vol. 37 No. 4 , pp. 16 - 29 .

Blank , S. ( 2013 ), “ Why the lean start-up changes everything ”, Harvard Business Review , Vol. 91 No. 5 , pp. 64 - 72 .

Blank , S. and Dorf , B. ( 2012 ), “ The startup owner's manual ”, The Step-by-step Guide for Building a Great Company , Vol. 1 .

Bliemel , M. ( 2014 ), “ Getting entrepreneurship education out of the classroom and into students’ heads ”, Entrepreneurship Research Journal , Vol. 4 No. 2 , pp. 237 - 260 .

Bortolini , R.F. , Nogueira Cortimiglia , M. , Danilevicz , A.D.M.F. and Ghezzi , A. ( 2018 ), “ Lean startup: a comprehensive historical review ”, Management Decision . doi: 10.1108/MD-07-2017-0663 .

Brinckmann , J. , Grichnik , D. and Kapsa , D. ( 2010 ), “ Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning–performance relationship in small firms ”, Journal of Business Venturing , Vol. 25 No. 1 , pp. 24 - 40 .

Brinckmann , J. , Dew , N. , Read , S. , Mayer-Haug , K. and Grichnik , D. ( 2019 ), “ Of those who plan: a meta-analysis of the relationship between human capital and business planning ”, Long Range Planning , Vol. 52 No. 2 , pp. 173 - 188 .

Burke , A. , Fraser , S. and Greene , F. ( 2010 ), “ The multiple effects of business planning on new venture performance ”, Journal of Management Studies , Vol. 47 No. 3 , pp. 391 - 415 .

Burns , B.L. , Barney , J.B. , Angus , R.W. and Herrick , H.N. ( 2016 ), “ Enrolling stakeholders under conditions of risk and uncertainty ”, Strategic Entrepreneurship Journal , Vol. 10 No. 1 , pp. 97 - 106 .

Camuffo , A. , Cordova , A. , Gambardella , A. and Spina , C. ( 2019 ), “ A scientific approach to entrepreneurial decision making: evidence from a randomized control trial ”, Management Science . doi: 10.1287/mnsc.2018.3249 .

Chang , S.J. , Van Witteloostuijn , A. and Eden , L. ( 2010 ), “ From the editors: common method variance in international business research ”, Journal of International Business Studies , Vol. 41 No. 2 , pp. 178 - 184 .

Chaston , I. ( 2008 ), “ Small creative industry firms: a development dilemma? ”, Management Decision , Vol. 46 No. 6 , pp. 819 - 831 .

Chen , T. , Simon , M. , Kim , J. and Poploskie , B. ( 2015 ), “ Out of the building, into the fire: an analysis of cognitive biases during entrepreneurial interviews ”, New England Journal of Entrepreneurship , Vol. 18 No. 1 , pp. 59 - 70 .

Contigiani , A. and Levinthal , D. ( 2019 ), “ Situating the construct of lean startup: adjacent ‘Conversations’ and possible future directions ”, Industrial and Corporate Change , Vol. 28 No. 3 , pp. 551 - 564 .

Dawes , J. ( 1999 ), “ The relationship between subjective and objective company performance measures in market orientation research: further empirical evidence ”, Marketing Bulletin - Department of Marketing Massey University , Vol. 10 , pp. 66 - 75 .

De Clercq , D. and Voronov , M. ( 2009 ), “ Toward a practice perspective of entrepreneurship entrepreneurial legitimacy as habitus ”, International Small Business Journal , Vol. 27 No. 4 , pp. 395 - 419 .

Dean , J. and Sharfman , M. ( 1996 ), “ Does decision process matter? A study of strategic decision-making effectiveness ”, Academy of Management Journal , Vol. 39 No. 2 , pp. 368 - 392 .

Delmar , F. and Shane , S. ( 2003 ), “ Does business planning facilitate the development of new ventures? ”, Strategic Management Journal , Vol. 24 No. 12 , pp. 1165 - 1185 .

Felin , T. , Gambardella , A. , Stern , S. and Zenger , T. ( 2019 ), “ Lean startup and the business model: experimentation revisited ”, Forthcoming in Long Range Planning (Open Access), available at SSRN: https://ssrn.com/abstract=3427084 (accessed 29 June 2019) .

Fisher , R. , Maritz , A. and Lobo , A. ( 2014 ), “ Evaluating entrepreneurs' perception of success: development of a measurement scale ”, International Journal of Entrepreneurial Behavior and Research , Vol. 20 No. 5 , pp. 478 - 492 .

Flatt , C. and Jacobs , R.L. ( 2019 ), “ Principle assumptions of regression analysis: testing, techniques, and statistical reporting of imperfect data sets ”, Advances in Developing Human Resources , Vol. 21 No. 4 , pp. 484 - 502 .

Forbes , D.P. ( 2007 ), “ Reconsidering the strategic implications of decision comprehensiveness ”, Academy of Management Review , Vol. 32 No. 2 , pp. 361 - 376 .

Frederiksen , D. and Brem , A. ( 2017 ), “ How do entrepreneurs think they create value? A scientific reflection of Eric Ries' lean startup approach ”, International Entrepreneurship and Management Journal , Vol. 13 No. 1 , pp. 169 - 189 .

Garson , G.D. ( 2012 ), Logistic Regression: Binomial and Multinomial , Statistical Associates Publishers , Asheboro, NC .

Ghezzi , A. ( 2019 ), “ Digital Startups and the adoption and implementation of Lean Startup approaches: effectuation, bricolage and opportunity creation in practice ”, Technological Forecasting and Social Change , Vol. 146 , pp. 945 - 960 , doi: 10.1016/j.techfore.2018.09.017 .

Ghezzi , A. , Cavallaro , A. , Rangone , A. and Balocco , R. ( 2015 ), “ On business models, resources and exogenous (dis) continuous innovation: evidences from the mobile applications industry ”, International Journal of Technology Management , Vol. 68 Nos 1-2 , pp. 21 - 48 .

Greene , F. and Hopp , C. ( 2017 ), “ Are formal planners more likely to achieve new venture viability? A counterfactual model and analysis ”, Strategic Entrepreneurship Journal , Vol. 11 No. 1 , pp. 36 - 60 .

Gruber , M. ( 2007 ), “ Uncovering the value of planning in new venture creation: a process and contingency perspective ”, Journal of Business Venturing , Vol. 22 No. 6 , pp. 782 - 807 .

Hechavarría , D.M. and Welter , C. ( 2015 ), “ Opportunity types, social entrepreneurship and innovation: evidence from the panel study of entrepreneurial dynamics ”, The International Journal of Entrepreneurship and Innovation , Vol. 16 No. 4 , pp. 237 - 251 .

Honig , B. ( 2004 ), “ Entrepreneurship education: toward a model of contingency-based business planning ”, The Academy of Management Learning and Education , Vol. 3 No. 3 , pp. 258 - 273 .

Honig , B. and Karlsson , T. ( 2004 ), “ Institutional forces and the written business plan ”, Journal of Management , Vol. 30 No. 1 , pp. 29 - 48 .

Honig , B. and Samuelsson , M. ( 2012 ), “ Planning and the entrepreneur: a longitudinal examination of nascent entrepreneurs in Sweden ”, Journal of Small Business Management , Vol. 50 No. 3 , pp. 365 - 388 .

Honig , B. and Samuelsson , M. ( 2014 ), “ Data replication and extension: a study of business planning and venture-level performance ”, Journal of Business Venturing Insights , Vols 1-2 Nos 1-2 , pp. 18 - 25 .

Jacobs , S. , Cambre , B. , Huysentruyt , M. and Schramme , A. ( 2016 ), “ Multiple pathways to success in small creative businesses: the case of Belgian furniture designers ”, Journal of Business Research , Vol. 69 No. 11 , pp. 5461 - 5466 .

Jennings , P. and Beaver , G. ( 1997 ), “ The performance and competitive advantage of small firms: a management perspective ”, International Small Business Journal , Vol. 15 No. 2 , pp. 63 - 75 .

Johannisson , B. ( 2011 ), “ Towards a practice theory of entrepreneuring ”, Small Business Economics , Vol. 36 No. 2 , pp. 135 - 150 .

Karlsson , T. and Honig , B. ( 2007 ), “ Norms surrounding business plans and their effect on entrepreneurial behavior ”, Frontier of Entrepreneurship Research , Vol. 27 No. 22 , pp. 1 - 22 .

Karlsson , T. and Honig , B. ( 2009 ), “ Judging a business by its cover: an institutional perspective on new ventures and the business plan ”, Journal of Business Venturing , Vol. 24 No. 1 , pp. 27 - 45 .

Katz , J.A. , Hanke , R. , Maidment , F. , Weaver , K.M. and Alpi , S. ( 2016 ), “ Proposal for two model undergraduate curricula in entrepreneurship ”, International Entrepreneurship and Management Journal , Vol. 12 No. 2 , pp. 487 - 506 .

Keating , A. , Geiger , S. and McLoughlin , D. ( 2014 ), “ Riding the practice waves: social resourcing practices during new venture development ”, Entrepreneurship: Theory and Practice , Vol. 38 , pp. 1207 - 1235 .

Keith , N. , Unger , J.M. , Rauch , A. and Frese , M. ( 2016 ), “ Informal learning and entrepreneurial success: a longitudinal study of deliberate practice among small business owners ”, Applied Psychology , Vol. 65 No. 3 , pp. 515 - 540 .

Ladd , T. ( 2016 ), “ The limits of the lean startup method ”, Harvard Business Review , Vol. 94 No. 3 , pp. 2 - 3 .

Mason , C. , Twomey , J. , Wright , D. and Whitman , L. ( 2018 ), “ Predicting engineering student attrition risk using a probabilistic neural network and comparing results with a backpropagation neural network and logistic regression ”, Research in Higher Education , Vol. 59 No. 3 , pp. 382 - 400 .

Mintzberg , H. ( 1994 ), “ The fall and rise of strategic planning ”, Harvard Business Review , Vol. 72 No. 1 , pp. 107 - 114 .

Mintzberg , H. and Waters , J.A. ( 1985 ), “ Of strategies, deliberate and emergent ”, Strategic Management Journal , Vol. 6 No. 3 , pp. 257 - 272 .

Osborne , J.W. and Waters , E. ( 2002 ), “ Four assumptions of multiple regression that researchers should always test ”, Practical Assessment, Research, and Evaluation , Vol. 8 No. 1 , pp. 1 - 5, 2 , doi: 10.7275/r222-hv23 .

Priem , R.L. , Rasheed , A.M.A. and Kotulic , A.G. ( 1995 ), “ Rationality in strategic decision processes, environmental dynamism and firm performance ”, Journal of Management , Vol. 21 No. 5 , pp. 913 - 929 .

Reymen , I.M.M.J. , Andries , P. , Berends , H. , Mauer , R. , Stephan , U. and Burg , E. ( 2015 ), “ Understanding dynamics of strategic decision making in venture creation: a process study of effectuation and causation ”, Strategic Entrepreneurship Journal , Vol. 9 No. 4 , pp. 351 - 379 .

Richbell , S.M. , Watts , H.D. and Wardle , P. ( 2006 ), “ Owner-managers and business planning in the small firm ”, International Small Business Journal , Vol. 24 No. 5 , pp. 496 - 514 .

Ries , E. ( 2011 ), The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses , Crown Business , New York: New York .

Sarasvathy , S.D. ( 2001 ), “ Causation and effectuation: toward a theoretical shift from economic inevitability to entrepreneurial contingency ”, The Academy of Management Review , Vol. 26 No. 2 , pp. 243 - 263 .

Sarasvathy , S.D. and Dew , N. ( 2008 ), “ Effectuation and over-trust: debating goel and karri ”, Entrepreneurship: Theory and Practice , Vol. 32 No. 4 , pp. 727 - 737 .

Shane , S. , Locke , E.A. and Collins , C.J. ( 2003 ), “ Entrepreneurial motivation ”, Human Resource Management Review , Vol. 13 No. 2 , pp. 257 - 279 .

Shepherd , D. and Gruber , M. ( 2020 ), “ The lean startup framework: closing the academic-practitioner divide ”, Entrepreneurship: Theory and Practice . doi: 10.1177/1042258719899415 .

Tabachnick , B.G. , Fidell , L.S. and Ullman , J.B. ( 2007 ), Using Multivariate Statistics , Pearson , Boston, MA , Vol. 5 , pp. 481 - 498 .

Trimi , S. and Berbegal-Mirabent , J. ( 2012 ), “ Business model innovation in entrepreneurship ”, International Entrepreneurship and Management Journal , Vol. 8 No. 4 , pp. 449 - 465 .

Van Dyne , L. and LePine , J.A. ( 1998 ), “ Helping and voice extra-role behaviors: evidence of construct and predictive validity ”, Academy of Management Journal , Vol. 41 No. 1 , pp. 108 - 119 .

Walker , E. and Brown , A. ( 2004 ), “ What success factors are important to small business owners? ”, International Small Business Journal , Vol. 22 No. 6 , pp. 577 - 594 .

Welter , C. and Kim , S. ( 2018 ), “ Effectuation under risk and uncertainty: a simulation model ”, Journal of Business Venturing , Vol. 33 No. 1 , pp. 100 - 116 .

Welter , C. , Mauer , R. and Wuebker , R.J. ( 2016 ), “ Bridging behavioral models and theoretical concepts: effectuation and bricolage in the opportunity creation framework ”, Strategic Entrepreneurship Journal , Vol. 10 No. 1 , pp. 5 - 20 .

Wood , M.S. and McKinley , W. ( 2010 ), “ The production of entrepreneurial opportunity: a constructivist perspective ”, Strategic Entrepreneurship Journal , Vol. 4 No. 1 , pp. 66 - 84 .

Wood , M.S. , Palich , L.E. and Browder , R.E. ( 2018 ), “ Full steam ahead or abandon ship? An empirical investigation of complete pivot decisions ”, Journal of Small Business Management , Vol. 17 No. 4 , pp. 351 - 24 .

Yang , X. , Sun , S.L. and Zhao , X. ( 2018 ), “ Search and execution: examining the entrepreneurial cognitions behind the lean startup model ”, Small Business Economics , pp. 1 - 13 .

York , J. and Danes , J. ( 2014 ), “ Customer development, innovation, and decision-making biases in the lean startup ”, Journal of Small Business Strategy , Vol. 24 No. 2 , pp. 21 - 39 .

Acknowledgements

A portion of this research was funded by the Downing Scholars research grant at Xavier University.

Corresponding author

Related articles, we’re listening — tell us what you think, something didn’t work….

Report bugs here

All feedback is valuable

Please share your general feedback

Join us on our journey

Platform update page.

Visit emeraldpublishing.com/platformupdate to discover the latest news and updates

Questions & More Information

Answers to the most commonly asked questions here

Plan Your Business

A well-written business plan is your path to a successful business. Learn to write, use, and improve your business plan with exclusive guides, templates, and examples.

What is a business plan?

• Types of plans
• How to write

Industry business plans

Explore Topics

How to Write a Business Plan

Noah Parsons

May. 7, 2024

Learn to write a detailed business plan that will impress investors and lenders—and provide a foundation to start, run, and grow a successful business.

May. 11, 2024

May. 10, 2024

Angelique O'Rourke

Free Download

Business Plan Template

A lender-approved fill-in-the-blanks resource crafted by business planning experts to help you write a great business plan.

Simple Business Plan Outline

Follow this detailed outline for a business plan to understand what the structure, details, and depth of a complete plan looks like.

550+ Sample Business Plans

Explore our industry-specific business plan examples to understand what details should be in your own plan.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

How to Write a Nonprofit Business Plan

While a nonprofit business plan isn’t all that different from a traditional plan—there are unique considerations around fundraising, partnerships, and promotions that must be made.

How to Write a One-Page Business Plan

Jan. 30, 2024

How to Write a Franchise Business Plan + Template

Elon Glucklich

Feb. 7, 2024

New to business planning? Start here

What should i include in my business plan.

You must have an executive summary, product/service description, market and competitive analysis, marketing and sales plan, operations overview, milestones, company overview, financial plan, and appendix.

Why should I write a business plan?

Businesses that write a business plan typically grow 30% faster because it helps them minimize risk, establish important milestones, track progress, and make more confident decisions.

What are the qualities of a good business plan?

A good business plan uses clear language, shows realistic goals, fits the needs of your business, and highlights any assumptions you’re making.

How long should my business plan be?

There is no target length for a business plan. It should be as long as you need it to be. A good rule of thumb is to go as short as possible, without missing any crucial information. You can always expand your business plan later.

How do I write a simple business plan?

Use a one-page business plan format to create a simple business plan. It includes all of the critical sections of a traditional business plan but can be completed in as little as 30 minutes.

What should I do before writing a business plan?

If you do anything before writing—figure out why you’re writing a business plan. You’ll save time and create a far more useful plan.

What is the first step in writing a business plan?

The first thing you’ll do when writing a business plan is describe the problem you’re solving and what your solution is.

What is the biggest mistake I can make when writing a business plan?

The worst thing you can do is not plan at all. You’ll miss potential issues and opportunities and struggle to make strategic decisions.

Business planning guides

Learn what a business plan is, why you need one, when to write it, and the fundamental elements that make it a unique tool for business success.

Types of business plans

Explore different business plan formats and determine which type best suits your needs.

How to write a business plan

A step-by-step guide to quickly create a working business plan.

Tips to write your business plan

A curated selection of business plan writing tips and best practices from our experienced in-house planning experts.

Explore industry-specific guides to learn what to focus on when writing your business plan.

Create your plan the paint by numbers way.

Business planning FAQ

What is business planning?

Business planning is the act of sitting down to establish goals, strategies, and actions you intend to take to successfully start, manage, and grow a business.

What are the 7 steps of a business plan?

The seven steps to write a business plan include:

• Craft a brief executive summary
• Describe your products and services
• Conduct market research and compile data into a market analysis
• Describe your marketing and sales strategy
• Outline your organizational structure and management team
• Develop financial projections for sales, revenue, and cash flow
• Add additional documents to your appendix

What should a business plan include?

A traditional business plan should include:

• An executive summary
• Description of your products and services
• Market analysis
• Competitive analysis
• Marketing and sales plan
• Overview of business operations
• Milestones and metrics
• Description of your organization and management team
• Financial plan and forecasts

Do you really need a business plan?

You are more likely to start and grow into a successful business if you write a business plan.

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Browse All Articles
• Newsletter Sign-Up

• 12 Dec 2023
• Cold Call Podcast

Can Sustainability Drive Innovation at Ferrari?

When Ferrari, the Italian luxury sports car manufacturer, committed to achieving carbon neutrality and to electrifying a large part of its car fleet, investors and employees applauded the new strategy. But among the company’s suppliers, the reaction was mixed. Many were nervous about how this shift would affect their bottom lines. Professor Raffaella Sadun and Ferrari CEO Benedetto Vigna discuss how Ferrari collaborated with suppliers to work toward achieving the company’s goal. They also explore how sustainability can be a catalyst for innovation in the case, “Ferrari: Shifting to Carbon Neutrality.” This episode was recorded live December 4, 2023 in front of a remote studio audience in the Live Online Classroom at Harvard Business School.

• 12 Sep 2023

Can Remote Surgeries Digitally Transform Operating Rooms?

Launched in 2016, Proximie was a platform that enabled clinicians, proctors, and medical device company personnel to be virtually present in operating rooms, where they would use mixed reality and digital audio and visual tools to communicate with, mentor, assist, and observe those performing medical procedures. The goal was to improve patient outcomes. The company had grown quickly, and its technology had been used in tens of thousands of procedures in more than 50 countries and 500 hospitals. It had raised close to $50 million in equity financing and was now entering strategic partnerships to broaden its reach. Nadine Hachach-Haram, founder and CEO of Proximie, aspired for Proximie to become a platform that powered every operating room in the world, but she had to carefully consider the company’s partnership and data strategies in order to scale. What approach would position the company best for the next stage of growth? Harvard Business School associate professor Ariel Stern discusses creating value in health care through a digital transformation of operating rooms in her case, “Proximie: Using XR Technology to Create Borderless Operating Rooms.”

• 07 Jan 2019
• Research & Ideas

The Better Way to Forecast the Future

We can forecast hurricane paths with great certainty, yet many businesses can't predict a supply chain snafu just around the corner. Yael Grushka-Cockayne says crowdsourcing can help. Open for comment; 0 Comments.

• 30 Nov 2018
• What Do You Think?

What’s the Best Administrative Approach to Climate Change?

SUMMING UP: James Heskett's readers point to examples of complex environmental problems conquered through multinational cooperation. Can those serve as roadmaps for overcoming global warming? Open for comment; 0 Comments.

• 04 May 2017

Leading a Team to the Top of Mount Everest

In a podcast, Amy Edmondson describes how students learn about team communication and decision making by making a simulated climb up Mount Everest. Open for comment; 0 Comments.

• 15 Mar 2017
• Lessons from the Classroom

More Than 900 Examples of How Climate Change Affects Business

MBA students participating in Harvard Business School’s Climate Change Challenge offer ideas on how companies can negate impacts from a changing environment. Open for comment; 0 Comments.

• 07 Apr 2014

Negotiation and All That Jazz

In his new book The Art of Negotiation, Michael Wheeler throws away the script to examine how master negotiators really get what they want. Open for comment; 0 Comments.

• 04 Sep 2013

How Relevant is Long-Range Strategic Planning?

Summing Up: Jim Heskett's readers argue that long-range planning, while necessary for organizational success, must be adaptable to the competitive environment. What do YOU think? Open for comment; 0 Comments.

• 16 Jul 2012

Are You a Strategist?

Corporate strategy has become the bailiwick of consultants and business analysts, so much so that it is no longer a top-of-mind responsibility for many senior executives. Professor Cynthia A. Montgomery says it's time for CEOs to again become strategists. Closed for comment; 0 Comments.

• 21 Dec 2011

The Most Common Strategy Mistakes

In the book, Understanding Michael Porter: The Essential Guide to Competition and Strategy, Joan Magretta distills Porter's core concepts and frameworks into a concise guide for business practitioners. In this excerpt, Porter discusses common strategy mistakes. Closed for comment; 0 Comments.

• 09 May 2011

Moving From Bean Counter to Game Changer

New research by HBS professor Anette Mikes and colleagues looks into how accountants, finance professionals, internal auditors, and risk managers gain influence in their organizations to become strategic decision makers. Key concepts include: Many organizations have functional experts who have deep knowledge but lack influence. They can influence high-level strategic thinking in their organizations by going through a process that transforms them from "box-checkers" to "frame-makers." Frame-makers understand how important it is to attach the tools they create to C-level business goals, such as linking them to the quarterly business review. Frame-makers stay relevant by becoming personally involved in the analysis and interpretation of the tools they create. Open for comment; 0 Comments.

• 22 Nov 2010

Seven Strategy Questions: A Simple Approach for Better Execution

Successful business strategy lies not in having all the right answers, but rather in asking the right questions, says Harvard Business School professor Robert Simons. In an excerpt from his book Seven Strategy Questions, Simons explains how managers can make smarter choices. Closed for comment; 0 Comments.

• 02 Jun 2010

How Do You Weigh Strategy, Execution, and Culture in an Organization’s Success?

Summing up: Respondents who ventured to place weights on the determinants of success gave the nod to culture by a wide margin, says HBS professor Jim Heskett. (Online forum now closed. Next forum opens July 2.) Closed for comment; 0 Comments.

• 22 Mar 2010

One Strategy: Aligning Planning and Execution

Strategy as it is written up in the corporate playbook often becomes lost or muddled when the team takes the field to execute. In their new book, Professor Marco Iansiti and Microsoft's Steven Sinofsky discuss a "One Strategy" approach to aligning plan and action. Key concepts include: The book combines practical experience at Microsoft with conceptual frameworks on how to develop strategies that are aligned with execution in a rapidly changing competitive environment. "Strategic integrity" occurs when the strategy executes with the full, aligned backing of the organization for maximum impact. The chief impediment to strategy execution is inertia. The One Strategy approach is less about formal reviews and more about one-on-one conversation. Blogs can be a powerful asset in managing an organization. Closed for comment; 0 Comments.

• 11 Aug 2008

Strategy Execution and the Balanced Scorecard

Companies often manage strategy in fits and starts, with strategy execution lost along the way. A new book by Balanced Scorecard creators Robert S. Kaplan and David P. Norton aims to make strategy a continual process. Key concepts include: An excellent strategy often fades from memory as the organization tackles day-to-day operations issues. The operational plan and budget should be driven from the revenue targets in the strategic plan. The senior management team needs to have regular, probably monthly, meetings that focus only on strategy. The Office of Strategy Management is a small cadre of professionals that orchestrate strategy management processes for the executive team. Closed for comment; 0 Comments.

• 11 Apr 2007

Adding Time to Activity-Based Costing

Determining a company's true costs and profitability has always been difficult, although advancements such as activity-based costing (ABC) have helped. In a new book, Professor Robert Kaplan and Acorn Systems' Steven Anderson offer a simplified system based on time-driven ABC that leverages existing enterprise resource planning systems. Key concepts include: The activity-based costing system developed in the 1980s fell out of favor for a number of reasons, including the need for lengthy employee interviews and surveys to collect data. The arrival of enterprise resource planning systems allows crucial data to be pumped automatically into a TDABC system. Managers must answer two questions to build an effective TDABC system: How much does it cost to supply resource capacity for each business process in our organization? How much resource capacity (time) is required to perform work for each of our company's transactions, products, and customers? Profit improvements of up to 2 percent of sales generally come in less than a year. Closed for comment; 0 Comments.

• 24 Apr 2006

Managing Alignment as a Process

"Most organizations attempt to create synergy, but in a fragmented, uncoordinated way," say HBS professor Robert S. Kaplan and colleague David P. Norton. Their new book excerpted here, Alignment, tells how to see alignment as a management process. Closed for comment; 0 Comments.

• 02 Feb 2004

Mapping Your Corporate Strategy

From the originators of the Balanced Scorecard system, Strategy Maps is a new book that explores how companies can best their competition. A Q&A with Robert S. Kaplan. Closed for comment; 0 Comments.

• 12 Oct 1999

A Perfect Fit: Aligning Organization & Strategy

Is your company organizationally fit? HBS Professor Michael Beer believes business success is a function of the fit between key organizational variables such as strategy, values, culture, employees, systems, organizational design, and the behavior of the senior management team. Beer and colleague Russell A. Eisenstat have developed a process,termed Organizational Fitness Profiling, by which corporations can cultivate organizational capabilities that enhance their competitiveness. Closed for comment; 0 Comments.

We've detected unusual activity from your computer network

To continue, please click the box below to let us know you're not a robot.

Why did this happen?

Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy .

For inquiries related to this message please contact our support team and provide the reference ID below.

• Share full article

Advertisement

Supported by

Sony and Apollo’s Plan for Paramount: Break It Up

CBS and other well-known properties would be sold if Sony and Apollo were able to buy Paramount. But the new owners would keep the movie studio.

By Benjamin Mullin and Lauren Hirsch

Shari Redstone helped build Paramount Global into a media empire, but if Sony Pictures Entertainment and the private-equity giant Apollo Global Management succeed in acquiring it, they plan to break it all up, according to three people familiar with the matter.

The plan would include auctioning off CBS, cable channels like MTV and the Paramount Plus streaming service, said the people, who asked not to be identified sharing private details. Paramount Pictures — home to blockbusters like “The Godfather,” “Top Gun” and the “Mission: Impossible” franchise — would be combined with Sony’s business.

Sony and Apollo, which made a nonbinding expression of interest in acquiring Paramount for $26 billion last week, are also likely to keep Paramount’s library of films and TV shows and the rights to well-known characters, including the Teenage Mutant Ninja Turtles and SpongeBob SquarePants. They have not yet outlined this plan to Paramount or its advisers.

A breakup of Paramount would represent a major changing of the guard in the entertainment industry. CBS and Paramount have been controlled by the Redstone family for decades, since the media mogul Sumner Redstone assembled the conglomerate in a series of audacious deals. His daughter, Ms. Redstone, championed a 2019 deal to reunite it, and she remains Paramount’s controlling shareholder.

Sony and Apollo are now engaging with Paramount’s financial advisers on next steps in their proposal, the people said. The two companies have not yet signed formal nondisclosure agreements or begun due diligence reviews, a process that could take weeks.

Though it’s still early, the two bidders have already begun to envision how a deal for Paramount could unfold. The two would likely operate the company as a joint venture controlled by Sony, with a minority stake owned by Apollo, the people said. Sony would look to combine the marketing and distribution functions of the Paramount movie studio with its own operations, and divest the rest of the properties.

Over time, Apollo could sell its stake in the joint venture back to Sony or to another buyer. It’s not yet clear just how large a stake Apollo would hold in the business, though the company plans to invest billions in the deal, one person said.

A breakup of Paramount is not a preferred outcome for Ms. Redstone, who would prefer the company to pass on to another buyer intact, a person familiar with her thinking said. But it wouldn’t necessarily be a dealbreaker if the offer was compelling, the person said.

There are other suitors. Skydance, a media company founded by the tech scion David Ellison, has been in discussions with Paramount for months about a potential deal. Exclusive negotiations between Skydance and Paramount lapsed last week, shortly after Sony and Apollo put in their expression of interest. But Skydance remains interested.

Sony and Paramount have different approaches to the entertainment business, and a deal would probably result in a U-turn for Paramount. Unlike Paramount, which streams its content on Paramount+, Sony licenses its movies and TV shows to companies like Netflix and Disney. Sony would probably not change that approach in a deal with Paramount and would most likely look to combine Paramount+ with a rival service, such as Comcast’s Peacock or Warner Bros. Discovery’s Max.

Sony has long pursued Paramount’s movie studio. Several years ago, Sony executives reached out to Paramount to see if the company would be willing to sell Paramount Pictures or merge it into a joint venture, but Paramount signaled it was interested only in a deal for the whole company. So when Apollo made a bid for all of Paramount this year, Sony decided to team up.

Any deal by Sony would face regulatory hurdles. Regulations restrict foreign owners from holding licenses for U.S. broadcast stations, which could prevent Sony — which is owned by the Japanese-based Sony Group — from owning CBS-affiliated TV stations. But they could divest the stations immediately, or have Apollo apply for the license. They are also considering other options for the stations.

The deal would also most likely require clearance from the Committee on Foreign Investment in the United States, the panel in Washington that scrutinizes acquisitions by foreign owners.

Sony and Apollo believe that when they decide to sell the Paramount assets , there could be many logical buyers, the three sources said. Warner Bros. Discovery, which does not own a broadcast network, could be a suitor for CBS. TV station groups like Nexstar and Tegna could be logical buyers for CBS’s owned and operated TV stations.

The hardest asset to sell would most likely be Paramount’s cable networks, like MTV and Nickelodeon, but those could be sold to a TV programmer looking for greater scale in negotiations with cable companies like Charter and Comcast.

Benjamin Mullin reports on the major companies behind news and entertainment. Contact Ben securely on Signal at +1 530-961-3223 or email at [email protected] . More about Benjamin Mullin

Lauren Hirsch joined The Times from CNBC in 2020, covering deals and the biggest stories on Wall Street. More about Lauren Hirsch

The US Army's new plan to counter Russia and China has a glaring problem, experts say

• The US Army's new structure responds to drones and guided missiles and artillery.
• But the Army plans to stand up new units at a time its recruiting is struggling.
• The Army is also basing its plans on untried weapons, the Congressional Research Service warned.

The US Army is reorganizing to fight against major powers like Russia and China, but it lacks the troops and new recruits to carry it out, congressional analysts contend.

The 2024 Army Force Structure Transformation would be the Army's fifth major reorganization since 2003. Judging by details laid out in an Army white paper , the emphasis will be on responding to technological changes in warfare, such as the threat of drones and long-range guided munitions, while trying to economize on scarce manpower.

But that may be easier said than done. "It is one thing to establish the authorizations for new and existing units discussed in the Army's white paper, yet another to fill those authorizations with qualified soldiers," warns a new report by the Congressional Research Service, which analyzes issues for Congress.

The most striking aspect of the Army's plan is the large number of new units, for counter-drone protection as well as air and missile defense. These units, assigned to corps- and division-level formations, would include four more "indirect fire protection capability" battalions intended to shoot down cruise missiles, rockets, and artillery and mortar shells. In addition, there would be nine counter-small UAS batteries tasked with destroying small drones, and four more Maneuver Short Range Air Defense (M-SHORAD) battalions to stop manned aircraft, helicopters and drones.

These would help flesh out the Army's five Multi-Domain Task Forces, theater-level units with exotic capabilities such as hypersonic missiles, cyberwarfare, jamming, and integrating intelligence data. At the same time, the Army is trying to address a recruiting crisis that has left some units undermanned. The transformation plan would reduce authorized strength — the maximum number of soldiers allowed — from 494,000 to 470,000. The Army currently has about 450,000 active-duty troops. In contrast, the US Army had 770,000 soldiers in the latter stages of the Cold War, when it was structured to counter the Soviet Union.

"The Army will shrink excess, largely unmanned 'hollow' force structure and build new formations equipped with new capabilities needed for large scale combat operations," the Army white paper explained. This would include 3,000 fewer authorized special operations forces personnel. Some functions will also be consolidated, such as reassigning engineers from brigade combat teams to divisions, which would allow fewer engineer slots.

Related stories

But even with consolidation and a boost to recruitment — including new warrant officers who specialize in recruiting — the Army may not be able to find enough personnel to fill out its existing units and create new air defense formations. In 2023, the Army came up 10,000 short in its quest for 65,000 new recruits.

"Given past recruiting shortfalls and preliminary FY2024 recruiting data, it is difficult to predict if the Army will be able rectify its recruiting challenges in the near and long term," CRS said.

The Army may also be focusing too much on cutting-edge "soft" technologies rather than old-fashioned kinetic weapons that have proven quite relevant and lethal in the Ukraine war. "The Army white paper appears to address technology-based, non-kinetic space and cyber effects, long-range precision fires, and force protection more than it does conventional close-combat force capabilities, Army Special Operations Forces capabilities, and Security Force Assistance capabilities," said CRS.

The Army is also basing its plans on untried weapons, such as the Long-Range Hypersonic Missile and air defense lasers. "Some units, such as LRHW batteries and Directed Energy (DE) SHORAD units, do not have mature weapons and technologies," CRS warned. Nor does the Army — or Congress — have a good idea of how much the reorganization would cost.

Inevitably, there will also be disruptions caused by yet another Army metamorphosis. In 2003, the Army switched from a Cold War force structure of heavy mechanized divisions, to smaller, lighter brigades more suitable for counterinsurgency. Now, the Army has gone full circle as it reconfigures for Cold War-style mechanized conflict against big opponents like Russia and China. At the same time, it must also incorporate new technologies such as drones and long-range artillery, which have demonstrated their power in the Ukraine war.

The reorganization does address some of the Army's problems, Mark Cancian, a senior advisor at the Center for Strategic and International Studies, told Business Insider. "The new units are appropriate for a great power conflict. China and Russia have much stronger air and missile forces than the regional opponents the army has faced for the last generation."

Creating units armed with hypersonic missiles also makes sense, especially since Russia and the US withdrew in 2019 from the Intermediate-Range Nuclear Forces treaty, signed in 1987 to curb cruise missiles and other medium-range nuclear weapons.

"The long-range fires are an opportunity that has opened up with the end of the INF," Cancian said. Nonetheless, the reorganization doesn't address the real issue. "The Army's major problem is that it is too small overall to meet all of its likely peacetime and wartime commitments," said Cancian.

Michael Peck is a defense writer whose work has appeared in Forbes, Defense News, Foreign Policy magazine, and other publications. He holds an MA in political science from Rutgers Univ. Follow him on Twitter and LinkedIn .

Watch: Ukrainian army tests new Western weapons as NATO boosts supplies

• Main content

• SUGGESTED TOPICS
• The Magazine
• Newsletters
• Managing Yourself
• Managing Teams
• Work-life Balance
• The Big Idea
• Data & Visuals
• Reading Lists
• Case Selections
• HBR Learning
• Topic Feeds
• Account Settings
• Email Preferences

Strategic planning

• Strategy formulation

Five Questions to Identify Key Stakeholders

• Graham Kenny
• March 06, 2014

The Former CEO of Guardian on Using Values to Drive Strategic Planning

• Deanna Mulligan
• From the January–February 2021 Issue

Marketing Malpractice: The Cause and the Cure

• Clayton M. Christensen
• From the December 2005 Issue

How One Family Business Found Its Sweet Spot

• George Stalk, Jr.
• April 05, 2013

Give My Regrets to Wall Street (HBR Case Study and Commentary)

• Mark L. Frigo
• Joel Litman
• Tom Copeland
• John J. Mulherin
• From the February 2004 Issue

Making Planning Strategic

• Richard G. Hamermesh
• From the July 1986 Issue

Living in the Futures

• Angela Wilkinson
• Roland Kupers
• From the May 2013 Issue

Today's Innovation Can Rise from Yesterday's Failure

• Vijay Govindarajan
• March 29, 2011

Every CEO Should Write an Annual Memo to the Board

• Anthony K. Tjan
• November 12, 2009

Fast Heat: How Korea Won the Microwave War

• Ira C. Magaziner
• Mark Patinkin
• From the January–February 1989 Issue

What Strategists Can Learn from Architecture

• Andrew Campbell
• Mark Lancelott
• November 13, 2013

Coupling Strategy to Operating Plans

• John M. Hobbs
• Donald F. Heany
• From the May 1977 Issue

Measuring the Strategic Readiness of Intangible Assets

• Robert S. Kaplan
• David P. Norton
• February 01, 2004

The World Bank’s Innovation Market

• Robert Chapman Wood
• From the November 2002 Issue

Link Manufacturing Process and Product Life Cycles

• Robert H. Hayes
• Steven C. Wheelwright
• From the January 1979 Issue

Right Tech, Wrong Time

• Rahul Kapoor
• From the November 2016 Issue

How to Avoid Catastrophe

• Catherine H. Tinsley
• Robin L. Dillon
• Peter M. Madsen
• From the April 2011 Issue

The Best Strategies Don't Just Take a Long View. They Take a Broad View.

• Richard Whittington
• May 23, 2022

Can We Simplify Financial Regulation?

• Ron Ashkenas
• November 06, 2009

If Brands Are Built over Years, Why Are They Managed over Quarters?

• Leonard M. Lodish
• Carl F. Mela
• From the July–August 2007 Issue

Merck Latin America (D): Mexico

• Michael Beer
• James Weber
• March 12, 2001

The Merger of UCSF Medical Center and Stanford Health Services

• Susan L. Madden
• Nancy M. Kane
• May 01, 2015

Franco Bernabe at ENI (A)

• Linda A. Hill
• Jennifer M. Suesse
• Mara Willard
• December 17, 1997

RKO Warner Video, Inc.: Incentive Compensation Plan

• George P. Baker
• Samuel L. Shimer
• October 20, 1989

Strategy Planning Sequence

• L. J. Bourgeois III
• November 06, 2013

iLinko: Enterprise Systems Implementation All Over Again

• January 11, 2013

Polaroid-Kodak (B4)

• Michael E. Porter
• January 01, 1978

GroupM India: The Human Dimension of Digital Transformation (A)

• Anand Narasimhan
• November 07, 2017

Swoop in the Era of Coronavirus

• Susan S. Harmeling
• October 30, 2020

GroupM India: The Human Dimension of Digital Transformation (B)

Colorado growth policy - sequel.

• Charles Kireker
• L. M. Cater
• Carol Edmonds Sullivan
• January 01, 1983

New Balance: Developing an Integrated CSR Strategy

• Vesela Veleva
• January 28, 2010

Polaroid-Kodak (B5)

Marketing as Strategy: Understanding the CEO's Agenda for Driving Growth and Innovation

• Nirmalya Kumar
• May 05, 2004

Parks and Partnership in New York City (A): Adrian Benepe's Challenge

• John D. Donahue
• June 01, 2004

Competitive Strategy in International Construction

• John D. Macomber
• Emrah Ergelen
• March 08, 2021

Leader-as-Architect: Alignment

• Ethan S. Bernstein
• Ryan L. Raffaelli
• Joshua D. Margolis
• October 22, 2014

Bill Riddick and the Durham S.O.S. Charrette

• Francesca Gino
• Jeff Huizinga
• February 08, 2020

General Electric's 20th Century CEOs (Abridged)

• Nitin Nohria
• Anthony J. Mayo
• Mark Benson
• May 30, 2006

Experiment in Public Procurement: Italy Buys in Bulk

• Pamela Varley
• September 30, 2008

Reversing the AMD Fusion Launch, Teaching Plan

• Ryan Johnson
• June 28, 2011

Playa Dorada Tennis Club: Expansion Strategy, Teaching Note

• W. Earl Sasser Jr.
• Brent Kazan
• June 28, 2010

Museum XYZ, Major City, USA, Teaching Note

• Anne Cohn Donnelly
• July 01, 2010

Popular Topics

Partner center.

Exclusive: Shein steps up London IPO preparations amid U.S. hurdles to listing, sources say

• Medium Text

CHINA REGULATORY NOD

Sign up here.

Reporting by Julie Zhu and Kane Wu in Hong Kong and Greg Roumeliotis in New York; Additional reporting by Helen Reid in London; Editing by Sumeet Chatterjee and Jan Harvey

Our Standards: The Thomson Reuters Trust Principles. New Tab , opens new tab

Markets Chevron

Global stocks rally, Europe at record highs, dollar gains

A rally in global equity markets lifted stocks in Europe to record highs on Friday amid strong corporate earnings and hopes central bank interest rate cuts are near, while the dollar edged higher despite signs of slowing U.S. economic growth.