Lack of information and vulnerability of young firms. The role of the business plan
Our previous research has highlighted that a very small number of Italian companies failed planned their activities and carried out the management control through instruments such as budget, reporting, cost analysis, etc. (Nicolò, 2011). The lack of information has likely contributed to the crisis and failure of these companies. About 1/3 of these failed companies were very young, as they had been established for less than ten years. As is well known, young firms are very vulnerable because they do not have a corporate reputation and, consequently, the bonds of trust with the stakeholders are very fragile. Young firms do not have a history that can demonstrate that they are able to keep their commitments to lenders, investors, suppliers, customers, strategic partners. At the first difficulties, these fragile bonds of trust often break down and companies collapse on themselves because of the lack of resources they need to survive (Nicolò 2015, Nicolò and Ferrara 2015, Nicolò 2017). Drawing up a business plan can mitigate the high level of vulnerability of young firms because it helps to prevent wrong decisions. Moreover, the business plan is the only tool that can be used to build quickly a corporate reputation analytically demonstrating to stakeholders that the company will be able to survive over time and to meet their interests and expectations.
Keywords: Start-ups, Corporate Reputation, Business Plan, Survival of Young Firms, Management Control Systems
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