Week 1 Article - Joumat of Smalt Business Management...

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The Relationship between Written Business Plans and the Failure of Small Businesses in by Stephen C. Perry The objective of this study was to investigate the influence of planning on U.S. small business failures. A "failure" was defined as a bankruptcy with losses to creditors; firms with fewer than 500 employees were considered "small." Recently failed firms were selected randomly and matched with non-failed firms on the basis of age, size, Bradstreet credit reporting database. A paired-sample t-test was used to investigate differences between the failed firms and matched non-failed firms. The main conclu- sion was that very little formal planning goes on in U.S. small businesses; however, non-failed firms do more planning than similar failed firms did prior to failure. Well-know^n practitioner-oriented authors such as Peter Drucker captured the central role of planning long ago. Pro- fessor Drucker expressed it as follows: "Planning what is our business, planning what will it be, and planning what should it be have to be integrated. . . . Everything that is 'planned' becomes immediate work and commitment" (Drucker 1973, p. 122, emphasis in the original). Writers of popu- lar textbooks used in courses on the fun- damentals of management (for example, see Stoner and Ereeman 1992) often de- scribe "planning" as the first of four basic and essential managerial tasks. With books and related software crowding the shelves of bookstores and with courses that em- phasize planning well-represented in col- lege catalogs, it would seem that there is nearly universal agreement that planning is essential for business success. Neverthe- less, some authors caution that planning can be overdone, incorrectly done, and ineffective (Mintzberg 1994), w^hile others seem to delight in firms having survived while avoiding it altogether (Baechler 1996). Since planning is just one of several managerial tasks, the linkage between planning and success or failure has been difiicult to establish and even more diffi- cult to quantify. Indeed, most studies and reviews of business failures have tended to be anecdotal (for example, see Argenti 1976; Barmash 1973; Caggiano 1996; Cullinane 1992; D'Aveni 1989; Elias 1994; Dr. Perry is associate professor of business at Gardner-Webb University in Boiling Springs, North Carolina. His research focuses on causes of failure for small businesses, strategic planning, and decision support systems. *The author would like to thank the editor and three anonymous reviewers for their comments which enhanced the quality of this manuscript. PERRY
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This note was uploaded on 07/22/2011 for the course UOP 101 taught by Professor All during the Spring '11 term at University of Phoenix.

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Week 1 Article - Joumat of Smalt Business Management...

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