Note to Entrepreneurs: Planning, Not Just Brains and Guts, Holds a Key to Your Organization’s Success

There is a widely held belief, among both entrepreneurs and researchers, that the world of entrepreneurship is best navigated by instinct, not careful, elaborate planning. However, Frese and his colleagues at Justus-Liebig-University, in Giessen, Germany, would disagree. As it turns out, “elaborate and proactive planning” is significantly related to entrepreneurial success.

For some, this may seem like an obvious conclusion. It is not. A significant number of people have argued over the years that it is a combination of brains, motivation, and sheer luck that determines the fate of a small business. Certainly, this study confirms that cognitive ability and motivational factors are significant contributors to small business success. However, it is quite clear that plans, defined as “mental simulations of actions used to develop for thought and control future actions,” play a very large role, as well.

This is particularly important in at least a couple of respects. First, since it is very difficult to improve cognitive ability while planning, on the other hand, can be taught, this is no small finding. Second, the findings of this study suggest that planning does not, contrary to the belief of some, impede small business improvisation and experimentation. Rather, it seems more likely that “planning and experimentation can actually complement each other. … Planning may actually improve the use of experimenting and improvising; for example, owners may be able to recognize more effectively whether they are on track in their experiments.”

Thus, it seems there are at least three a major “buckets” of factors in the AQAL model’s “upper-left”, or Intentional quadrant that contribute to small business success: brains, motivation, and the knowledge of how to make plans.

(From “Business Owners’ Action Planning and Its Relationship to Business Success in Three African Countries,” by Frese, Krauss, Kieth, Escher, Grabarkeiwicz, Luneng, Heers, Unger, & Friedrich (2007), JAP 92(6), 1481-1498.)