How Does a Formal Business Plan Work?

Purpose of a Formal Business Plan

A formal business plan is a professional business document that outlines the growth plans, strategies and current state of the industry for a company or enterprise. A formal business plan also contains information on financing, marketing, recruitment and other details pertaining to the current state of a company and its future growth potential. Companies of all sizes and types can create a formal business plan to present their strategy and ideas to investors, lenders and other individuals who may have an interest in financing business operations or becoming a stakeholder. In addition to being a presentable document for investors, the formal business plan can serve as a blueprint for business operations, allowing the organization to map out its mission statement, vision and core objectives.

The formal business plan is comprised of several sections and includes detailed descriptions of each department, along with financial data such as revenue statements and accounting balance sheets. The ten core components of a formal business plan include the executive summary, company analysis, industry analysis, analysis of customers, analysis of competition, marketing plan, operations/design and development plans, management team, financial plan, and appendix. The appendix may include an overview of competitors, a summary of the financial statements and customer/client testimonials. Any supporting documents such as spreadsheets, tables and statistics can also be added to the appendix.

The contents of a formal business plan can be compiled with the help of department heads of an organization, and each section of the plan will need to be written in a formal tone. The formal business plan will need to identify all of the key points and samples from each department and be compiled in a digital format for printing. Most word processing software programs have templates available for business plans, but many books can also provide outlines and guides for drafting up an attractive and professional-looking business plan. The business plan will need a professional cover sheet and table of contents and be written in a professional font style. The formal business plan is typically printed with black text on white paper.

A company that takes the time to create a formal business plan can approach investors and potential funding resources in a professional way. Many lenders and investors request a formal business plan to better understand a business's goals and objectives as well as financial strategy and also learn about the company's executive management team. Outlining all of these details in a presentable business plan makes it easier for investors and lenders to assess a company or idea and make an informed decision about the potential of a company.