A survey of entrepreneurs who started companies last year shows that while virtually all did substantial preparatory research and planning,...
GMAT Critical Reasoning : (CR) Questions
A survey of entrepreneurs who started companies last year shows that while virtually all did substantial preparatory research and planning, only half used that work to produce a formal business plan. Since, on average, the entrepreneurs without formal plans secured the capital they needed in half the time of those with plans, these survey results indicate that, in general, formal plans did not help the entrepreneurs who produced them to secure the capital they needed.
Which of the following, if true, most seriously weakens the argument?
Passage Analysis:
| Text from Passage | Analysis |
|---|---|
| A survey of entrepreneurs who started companies last year shows that while virtually all did substantial preparatory research and planning, only half used that work to produce a formal business plan. |
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| Since, on average, the entrepreneurs without formal plans secured the capital they needed in half the time of those with plans, these survey results indicate that, in general, formal plans did not help the entrepreneurs who produced them to secure the capital they needed. |
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Argument Flow:
The argument starts with survey data showing that all entrepreneurs did research, but only half made formal business plans. It then presents a key finding that those without formal plans got funding twice as fast. Finally, it concludes that formal plans don't help with securing capital.
Main Conclusion:
Formal business plans don't help entrepreneurs secure the capital they need.
Logical Structure:
The argument uses a correlation (faster funding for those without formal plans) to establish causation (formal plans don't help or may even hurt funding efforts). The logic assumes that faster funding time directly indicates that formal plans are unhelpful, without considering other possible explanations for the timing difference.
Prethinking:
Question type:
Weaken - We need to find information that would reduce belief in the conclusion that formal plans don't help entrepreneurs secure capital
Precision of Claims
The argument makes a specific timing claim (half the time) and a broad conclusion about effectiveness (formal plans don't help). The conclusion is based purely on speed of securing capital, not other factors
Strategy
To weaken this argument, we need to show that the faster timing doesn't actually prove that formal plans are unhelpful. We can do this by:
- Showing the groups aren't comparable
- Explaining why the timing difference might not reflect the value of formal plans
- Revealing that formal plans provide benefits the argument ignores
Companies started by entrepreneurs who had used formal business plans to attract investment were on the whole as profitable in their first year as were companies started by entrepreneurs who had not produced such plans.
This choice discusses profitability in the first year, but the argument is specifically about securing capital (getting funding), not about how profitable the companies became afterward. Even if both groups were equally profitable, this doesn't address whether formal plans helped or hindered the process of getting initial funding. This is irrelevant to the argument's conclusion.
In surveys of entrepreneurs who have attempted without success to raise sufficient capital, more than half of the respondents indicate that they have produced a formal business plan.
This talks about entrepreneurs who failed to raise sufficient capital, but we're looking at a survey of entrepreneurs who actually started companies (meaning they did secure funding). Information about unsuccessful entrepreneurs doesn't help us evaluate why some successful entrepreneurs got funding faster than others. This introduces a different population entirely.
Among the entrepreneurs surveyed, those who did not produce formal business plans sought and received a much larger proportion of their capital from investors with whom they had a long-standing business relationship.
This directly weakens the argument by explaining why the timing difference occurred. If entrepreneurs without formal plans got most of their money from long-standing business relationships, that would naturally be much faster than going through formal investment processes. This makes the two groups fundamentally different in their funding approaches, so the speed comparison doesn't prove that formal plans are unhelpful - it just shows different funding strategies have different timelines.
The entrepreneurs surveyed who did not produce a formal business plan spent nearly as much time doing preparatory research and planning as the entrepreneurs who produced plans.
This tells us both groups spent similar time on research and planning, but this actually supports rather than weakens the argument. If both groups did similar preparatory work but those without formal plans got funding faster, this reinforces the idea that the formal plan itself (not the underlying research) might be what slowed things down.
The entrepreneurs who produced business plans generally reported later that the process of writing the plan had increased their confidence that their company would succeed.
This discusses increased confidence from writing business plans, but confidence is a psychological benefit, not a capital-securing benefit. The argument specifically claims formal plans don't help with securing capital, so even if plans boost confidence, this doesn't contradict the main conclusion about funding effectiveness.