Thursday, May 14, 2009
Maryland Study: Investors Pay Little Attention to Business Plans
A new Maryland business school study (featured in today's New York Times) found that business plans are overrated by entrepreneurs and not worth much to investors.
Study author and researcher David Kirsch, associate professor of management and entrepreneurship at the Robert H. Smith School of Business at the University of Maryland, said entrepreneurs should focus more on tangible activities that do impress investors. He says, "You’re better off investing in your idea, your social network, finding potential investors, potential customers – the intangibles around your business that are going to make it more likely you succeed. Invest your time in any other business-building activity but working on your business plan.”
The study looked at more than 700 dotcom era business plans, which may be a nonrepresentative time sample of business plans and investment decisions. Nonetheless, current investors seem to validate the findings, which may be timeless - to wit, actions speak louder than words.
See the video about the research here.
To obtain a copy of the research article, published in the May 2009 issue of Strategic Management Journal, click here.