A change of plan

FEB 2010

Queensland University of Technology (QUT) has made some surprising findings halfway through its record study of new SME’s.

In the largest ever study of its type, QUT’s Comprehensive Australian Study of Entrepreneurial Emergence (CAUSEE) is tracking the development of 1400 new and young firms in Australia.

The million-dollar, four year study aims to provide advice for all budding entrepreneurs; its first major conclusion questioning the value of business plans.

Associate Professor Paul Steffens, from QUT’s Faculty of Business says the research has found rigid business plans did not benefit start-up businesses.

“The study found that a written plan, whether informal or formal, has a negative effect on getting operational and achieving a positive cash flow, which is a surprising result,” says Steffens.

“Using the business plan as an action plan to follow step by step tends to be particularly counter-productive, whereas revision of the business plan is associated with positive performance.”

Steffens says this finding is likely to reflect how start-up businesses face a high degree of uncertainty and require adaptability to survive.

“Our research shows that start-ups must be prepared to adapt their venture in light of customer reactions,” he says.

“The first version of the business might not be the one that flies. Plans that lock the business too firmly into a pre-determined path will prevent it from taking new opportunities, while regular revision of a business plan will help the start-up to be flexible.”

The CAUSEE project is funded by Australian Research Council grants ($718,000) and further sponsorships with BDO and the National Australia Bank.