Pre-Start-up Preparations: Why the Business Plan Isn't Always Written‪.‬

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 person who has systematically determined the percentage of entrepreneurs who start out with business plans. Available estimates have tended to relate to strategic plans for ongoing small businesses. See, for example, Rue and Ibrahim (1998; Karger, 1996; Mazzarol, 2001; Sexton & Van Auken, 1985). As far as new small businesses go, Siropolis (1997) guess-estimated that only about 5% of them start out with business plans. There are many reasons why most start-up entrepreneurs do not write business plans. One common reason is the view that business plans are intended only for raising business funds, implying therefore that if an entrepreneur doesn't need external financing, there is no need to prepare a business plan. Although existing literature doesn't seem to support the view that business plans are written exclusively for raising business funds, there is some support for the view that the single most important reason for writing business plans is to attract external financing (Kaplan & Warren, 2007). However, according to Zimmerer & Scarborough (1996) and Ford, Bornstein & Pruitt (2007), the first and foremost purpose of business plans is to provide guidelines for successfully managing a business. Raising capital is a secondary purpose.