Employee Involvement

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PRE-START-UP PREPARATIONS: WHY THE BUSINESS PLAN ISN’T ALWAYS WRITTEN
Edward D. Bewayo, Montclair State University
ABSTRACT Probably the best way to prepare for a business start-up is to formulate a business plan. However, only a small fraction of entrepreneurs start out with business plans. This paper summarizes the findings of a study covering 355 small business owners in New Jersey who were interviewed by senior undergraduate students on the activities they undertook in preparation for new business launches. Fifty percent of the 355 business owners interviewed claimed to have prepared business plans for their start-ups. This particularly high percentage is explained in the paper. The study found that preparing business plans correlated with the usage of external financing and that bank loans mostly went to business owners with business plans. However, a large majority of the business owners who had prepared business plans had found their business plans to be useful more as guidelines for operating their businesses than as tools for raising business funds. The most important reasons for not preparing business plans were not having to use bank financing and being highly experienced in the entrepreneurs’ lines of business. Fifty percent of business owners with industry/business experience didn’t prepare business plans, and frequently saw their experience to be a substitute for business plans. However, the other half of business owners with business experience did prepare business plans. The interviewed business owners, even when they didn’t prepare business plans, undertook a variety of market-related non-documented activities, especially investigating the competition. These non-documented pre-start-up activities are often referred to as intuitive planning. INTRODUCTION Herman Holtz (1994) pointed out “that everyone talks about the need for a business plan but most people starting … small businesses …do nothing about it.” There doesn’t appear to be any

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