A small business without a business plan will face several hurdles. One of the glaring disadvantages of proceeding without a business plan is the fact that it will prevent the small business from obtaining venture capital. Most small businesses struggle with start up costs like rent for operating space, the cost of materials for products, employee wages and much more. This means that the majority of small businesses must approach venture capitalists or a bank for venture capital or a loan.
No investor or lender will offer start up capital to a small business without a business plan. Anyone who wants money to get a business off the ground will have to prove that they have a marketable product or service with significant demand. A business plan that lays out specific numbers and facts will earn the respect and consideration of those who have the financial capital to help get it off the ground.
Another problem for small businesses without a business plan is that they’ll lack a helpful document that describes office policies, marketplace analysis and sales goals. It is very helpful to put this information on paper. While many small businesses lack an employee manual, they should all have comprehensive business plans with employee policies clearly outlined. This way, there will be no confusion as to what constitutes unacceptable behavior and what punishments will be implemented for employees who fail to follow standard operating procedures.
Aside from functioning as a human resources mechanism, a business plan will also lay out the business’s landscape both in terms of its sales goals and how it operates in the context of the industry. It should include a marketing plan, a budget and other critical financial information that should be continuously updated as the business grows. When this vital information is put to paper, it also serves to help those who inherit the business in case the founder or manager becomes ill or perishes. So, it is essentially a sort of insurance policy that will help keep the business operating during crises.