Delmar, F., & Shane, S. (2003). Does business planning facilitate the development of new ventures? Strategic Management Journal, 24(12), 1165–1185. https://doi.org/10.1002/smj.349
Summary
Business planning has long been a hot topic in entrepreneurship. Some believe it’s a waste of time, arguing that entrepreneurs should act quickly instead of writing lengthy plans. Others see it as a critical step that guides new ventures to success. In this study, Delmar and Shane challenge the critics by showing that business planning plays a powerful role in helping new ventures succeed.
Using real-world data from 223 startups in Sweden tracked over 30 months, the authors tested whether early-stage business planning helps entrepreneurs (1) develop products, (2) build out their organizations, and (3) avoid failure. The answer is clear: yes, it does. Entrepreneurs who engaged in business planning were significantly more likely to stay in business and to make faster progress in developing their product or service and organizing their company.
Rather than being mere “administrative fluff,” planning helped founders make better decisions, avoid resource bottlenecks, and turn abstract goals into tangible action steps. This has big implications for anyone trying to launch or support a startup—planning doesn’t guarantee success, but it sharply improves your odds of surviving and making progress.
Planning as a Practical Tool, Not Bureaucracy
One of the key contributions of this paper is to shift the perception of planning from being a theoretical or administrative burden to being a practical mechanism that supports entrepreneurial action. Many entrepreneurs think of planning as something rigid—something that belongs in a corporate boardroom, not in the fast-paced startup world. Delmar and Shane push back against that view.
They argue that planning helps entrepreneurs navigate uncertainty by enabling them to think systematically about their goals, the resources they’ll need, and the actions required to succeed. Rather than slowing entrepreneurs down, planning equips them to move faster in the right direction. It reduces the need for guesswork and reactive decisions, which are often costly.
Planning, in this context, isn’t about writing a perfect 50-page document. It’s about clarifying what you want to do, how you’ll do it, and when you need to take specific actions.
The Three Functions of Planning
The study identifies three concrete ways that business planning helps startups grow and succeed:
- Improved Decision-Making: Entrepreneurs face dozens of decisions every day—from which market segment to target to how to price their product. Planning allows entrepreneurs to test their logic, compare alternatives, and commit to a more informed path. For example, a founder may realize that their initial customer segment is too small to sustain growth, prompting them to pivot before wasting time and money.
- Resource Synchronization: Startups often fail not because they lack resources, but because they fail to coordinate them. Planning helps ensure that resources like talent, capital, suppliers, and infrastructure are deployed in the right sequence. For instance, planning may prevent an entrepreneur from hiring staff too early before the product is market-ready or from investing in marketing before finalizing operations.
- Operational Focus and Clarity: A plan translates high-level ideas into specific actions. Instead of saying “We’re going to launch,” a good plan spells out steps: “We’ll build an MVP in Q1, beta test in Q2, and officially launch in Q3.” This clarity allows teams to work more effectively, stay accountable, and measure progress.
These three functions work together to improve entrepreneurial efficiency and reduce the risk of chaos or unproductive experimentation.
Planning Supports Product Development and Organizational Structuring
The study shows that startups that engaged in business planning made faster and more consistent progress in two critical areas:
- Product Development: Planning helped entrepreneurs organize their product development process, prioritize technical milestones, and manage iterative testing. Rather than jumping straight into building, planners identified customer needs, aligned product features with those needs, and set clear timelines for development. This disciplined approach increased the likelihood of producing a viable product within budget and on schedule.
- Organizational Development: Business planning also facilitated key administrative and operational steps, such as incorporating the company, acquiring physical space, purchasing necessary equipment, and forming a team. Planners were more likely to identify when and how to complete these activities efficiently. For example, they were better at timing key hires or ensuring compliance with legal requirements, which are often overlooked by entrepreneurs operating without a plan.
In both areas, planning transformed vague aspirations into structured progress, giving the venture a clearer path from concept to execution.
Planning Reduces the Likelihood of Failure
One of the strongest findings from the study is that startups that plan are significantly less likely to fail than those that do not. Planning acts as a buffer against the many uncertainties and surprises that new ventures face.
There are several reasons for this:
- Planners are more likely to anticipate risks and develop contingency strategies.
- They tend to validate assumptions earlier, reducing the chances of investing in bad ideas.
- They often set more realistic expectations, which leads to better cash flow and resource management.
Importantly, the benefit of planning is not that it prevents all mistakes—it’s that it helps entrepreneurs make fewer fatal mistakes. When failures do occur, planners are more likely to learn from them and adjust course, rather than abandon the venture altogether.
Planning Is Especially Useful in Uncertain, Early-Stage Conditions
Entrepreneurs often operate in environments with limited information, ambiguous customer needs, and evolving market dynamics. Critics of planning argue that these uncertainties make planning useless. But Delmar and Shane argue the opposite: the more uncertainty you face, the more useful planning becomes.
That’s because planning helps structure thinking, create a baseline for learning, and reduce the cognitive overload of constant decision-making. Rather than wandering blindly, a plan provides a hypothesis to test, which can be adjusted as new information comes in.
In highly uncertain contexts, planning becomes an act of discipline and focus—not rigidity. Entrepreneurs can still pivot, but they pivot with purpose, not panic.
10 Practical Insights for Business Owners and Managers
- Start with a Clear Plan—Even if It’s Simple
A written plan with goals, steps, and assumptions gives structure to early chaos and increases your odds of success. - Use Planning to Accelerate Action
Planning is not a substitute for action—it’s a catalyst for focused, coordinated action. - Translate Goals into Milestones
Break down abstract goals (e.g., launch product) into specific, trackable tasks (e.g., “complete prototype testing by Q2”). - Use Planning to Avoid Costly Mistakes
Identify pitfalls and test assumptions early—on paper—before investing time or money into bad decisions. - Plan Resource Timing to Avoid Bottlenecks
Use your plan to line up hiring, capital, and material needs in the right sequence—so you don’t stall halfway. - Revisit and Update the Plan as You Go
Planning is not a one-time event. Update it based on feedback, customer insights, or new challenges. - Use the Plan to Align the Team
A shared plan improves communication and coordination across cofounders, staff, and stakeholders. - Signal Credibility to Investors and Partners
A clear, well-thought-out plan builds trust and shows that you’re serious, especially to external funders. - Track Progress Using Your Plan
Use the plan to evaluate what’s working and what’s not—adjust goals and timelines as needed. - Don’t Overthink—But Don’t Skip It
A basic, working plan is far better than no plan at all. You don’t need a 50-page document—just something actionable and clear.
Closing Thought
Delmar and Shane’s research dismantles the myth that “real” entrepreneurs just act and improvise. Their findings show that planning does not paralyze—it empowers. A thoughtful plan improves clarity, coordination, and execution, and helps founders avoid costly missteps that could derail their startup.
For entrepreneurs, investors, accelerators, and educators, the message is clear: planning should be seen not as red tape, but as a strategic advantage—especially in the early stages of a business. Even in today’s lean and agile world, a smart plan is still one of the best tools for turning vision into venture.