The Influence of Guided Preparation on the Long-Term Performance of New Ventures

The effectiveness of guided preparation programs for the long-term performance of new ventures is investigated. Guided preparation is the entrepreneur’s research, planning, and other activities engaged in prior to startup, conducted with the assistance of an outside advisor. Many such forms of entrepreneurial assistance programs havebeen found to be ineffective, however; and good theories and models are lacking. The paper presents a theory concerning why guided preparation can increase an entrepreneur’s knowledge, which is the most important advantage possessed by an entrepreneur or entrepreneurial team and the foundation of a venture’s advantages. The effectiveness of guided preparation programs on long-term performance, as measured by long-term growth in sales and employees, was tested using three groups of 159 new ventures that received varying amounts of counseling in the Small Business Development Center (SBDC) program in Pennsylvania in 1992, 1994, and 1996. The program offered informed self-selection, experienced and well-educated counselors, and just-in-time delivery of services.The ventures were studied three and five years after receiving assistance. A positive relationship was found between guided preparation, even when controlling for self-selection, and new venture performance. As well, there were diminishing marginal returns to the preparation: beyond some point, guided preparation may actually be detrimental. The study validates previous research on SBDC programs and demonstrates the contribution of guided preparation and planning and performance. In conclusion, implications for further research and practice are offered. (TNM)