what do bankers want to see in a business plan

How to Write a Successful Bank Business Plan (+ Template)

Creating a business plan is essential. Still, it can be beneficial for bank s that want to improve their strategy or raise funding.

A well-crafted business plan outlines your company’s vision and documents a step-by-step roadmap of how you will accomplish it. To create an effective business plan, you must first understand the components essential to its success.

This article provides an overview of the key elements that every bank business owner should include in their business plan.

Download the Ultimate Business Plan Template

What is a Bank Business Plan?

A bank business plan is a formal written document describing your company’s business strategy and feasibility. It documents the reasons you will be successful, your areas of competitive advantage, and it includes information about your team members. Your business plan is a critical document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.

Why Write a Bank Business Plan?

A bank business plan is required for banks and investors. The document is a clear and concise guide of your business idea and the steps you will take to make it profitable.

Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.

Writing an Effective Bank Business Plan

The following are the key components of a successful bank business plan:

Executive Summary

The executive summary of a bank business plan is a one- to two-page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan.

• Start with a one-line description of your bank company
• Provide a summary of the key points in each section of your business plan, which includes information about your company’s management team, industry analysis, competitive analysis, and financial forecast, among others.

Company Description

This section should include a brief history of your company. Include a short description of how your company started and provide a timeline of milestones your company has achieved.

You may not have a long company history if you are just starting your bank business. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company or been involved in an entrepreneurial venture before starting your bank firm, mention this.

You will also include information about your chosen bank business model and how, if applicable, it is different from other companies in your industry.

Industry Analysis

The industry or market analysis is an essential component of a bank business plan. Conduct thorough market research to determine industry trends and document the size of your market. 

Questions to answer include:

• What part of the bank industry are you targeting?
• How big is the market?
• What trends are happening in the industry right now (and if applicable, how do these trends support your company’s success)?

You should also include sources for your information, such as published research reports and expert opinions.

Customer Analysis

This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.

For example, a bank business’ customers may include small businesses, large corporations, and individuals. Each customer segment will have different requirements that your bank company will need to cater to.

You can include information about how your customers decide to buy from you and what keeps them buying from you.

Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or bank services with the right marketing.

Competitive Analysis

The competitive analysis helps you determine how your product or service will differ from competitors, and what your unique selling proposition (USP) might be that will set you apart in this industry.

For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive advantage; that is, in what ways are you different from and ideally better than your competitors.

Below are sample competitive advantages your bank business may have:

• Proven track record with a focus on customer service.
• Superior technology that makes banking easier and more convenient for customers.
• Range of products and services to meet the needs of different customer segments.
• Sound financial position with a commitment to responsible lending practices.
• Extensive branch and ATM network.

Marketing Plan

This part of the business plan is where you determine and document your marketing plan. . Your plan should be laid out, including the following 4 Ps.

• Product/Service : Detail your product/service offerings here. Document their features and benefits.
• Price : Document your pricing strategy here. In addition to stating the prices for your products/services, mention how your pricing compares to your competition.
• Place : Where will your customers find you? What channels of distribution (e.g., partnerships) will you use to reach them if applicable?
• Promotion : How will you reach your target customers? For example, you may use social media, write blog posts, create an email marketing campaign, use pay-per-click advertising, or launch a direct mail campaign. Or you may promote your bank business via PR or events.

Operations Plan

This part of your bank business plan should include the following information:

• How will you deliver your product/service to customers? For example, will you do it in person or over the phone?
• What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?

You also need to include your company’s business policies in the operations plan. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.

Finally, and most importantly, your Operations Plan will outline the milestones your company hopes to achieve within the next five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. Examples of milestones for a bank business include reaching $X in sales. Other examples include expanding to new markets, launching new products and services, and hiring key personnel.

Management Team

List your team members here, including their names and titles, as well as their expertise and experience relevant to your specific bank industry. Include brief biography sketches for each team member.

Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute on your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.

Financial Plan

Here, you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix). 

This includes the following three financial statements:

Income Statement

Your income statement should include:

• Revenue : how much revenue you generate.
• Cost of Goods Sold : These are your direct costs associated with generating revenue. This includes labor costs and the cost of any equipment and supplies used to deliver the product/service offering.
• Net Income (or loss) : Once expenses and revenue are totaled and deducted from each other, this is the net income or loss.

Sample Income Statement for a Startup Bank

Balance sheet.

Include a balance sheet that shows your assets, liabilities, and equity. Your balance sheet should include:

• Assets : Everything you own (including cash).
• Liabilities : This is what you owe against your company’s assets, such as accounts payable or loans.
• Equity : The worth of your business after all liabilities and assets are totaled and deducted from each other.

Sample Balance Sheet for a Startup Bank

Cash flow statement.

Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include cash flow from:

• Investments

Below is a sample of a projected cash flow statement for a startup bank business.

Sample Cash Flow Statement for a Startup Bank

You will also want to include an appendix section which will include:

• Your complete financial projections
• A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
• Any other documentation which supports what you included in the body of your business plan.

Writing a good business plan gives you the advantage of being fully prepared to launch and grow your bank company. It not only outlines your business vision but also provides a step-by-step process of how you will accomplish it.

Now that you know how to write a business plan for your bank, you can get started on putting together your own.

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How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated March 18, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information you need to cover in a business plan sometimes isn’t quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

If you’re looking for a free downloadable business plan template to get you started, download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

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What bankers want to see in your plan

A well prepared and researched business plan is a valuable asset to any business. it sets out the business vision, goals and the model by which the business goals will be achieved in one document, together with financial projections. former banker carrie offers tips on what banks look for in a plan..

A business plan is the evidence for the chances of the business succeeding and thriving, and is the go-to document for bankers for any business seeking financial support.

Even if you are not seeking funding, discussing your business plan with your bank can help identify the best banking products and services to support your business aspirations. This can also provide a valuable source of feedback on your plans and the assumptions made about them.

When assessing a business plan, bankers will look for the following information:

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What Do Bankers Look For In A Business Plan?

On our recent webinar with Scott McGregor – Commercial Broker at Mortar Finance, we were asked, “Is there a key element of a business plan that banks put emphasis on?” 

Here’s our answer –

The business plans are handy. It gives the bank an understanding of the borrower’s thought processes around that business.

The fact that you’ve taken the time to prepare the business plan shows that you’ve actually put that thought behind it, which goes to the management experience capability piece within the character. If I’m looking at the business plan, I’m looking at a couple of things and that is, who are the people behind the business? bios, resumes, that sort of thing of the people that are running the business.

One thing that’s in a lot of business plans is a SWOT analysis, which is your strengths, your weaknesses, opportunities, and threats. What are the strengths of the business or the owners? Where are the weaknesses in that business? And how are they potentially using the strengths of the business to overcome that? What opportunities for growth or for new business that the owners have identified within the operation, and those opportunities may then be factored into a forecast that they’ve built, and some of the assumptions around that forecast. And then what are the threats to that business? And it might be industry related. 

Things that could be threats to your business, which then become risks that the bank is going to want to see, how have you mitigated that? What are you doing about that? So those are the two important things that I would look at in a business plan. And it really comes down to the owners, and their assessment of that business.

Watch the full webinar, ‘Funding Your Next Business Acquisition’ at https://learning.benwalker.com/courses/fundingbusinessacquisition

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10 Steps to Evaluating Your Business Plan

Whether you’re writing your first business plan or updating your current one, the process requires strategic thinking, market research and motivation.

A well-developed business plan is a great way for you to take stock of your company’s attributes and needs. It outlines how you will progress over the coming years and also reveals information about the business owner. It explains how your strengths will be an asset to your business and how you will address areas where you may need help.

Here is an overview of 10 sections a good business plan should include:

1. Executive summary

The executive summary is a condensed version of your full business plan and covers:

• The high points of what your company does (or will do)
• Plans for the future
• How you will execute those plans
• Why your company will be successful

The summary is the big picture. It’s where plan reviewers – including banking partners – will form a first impression of your company. Some people prefer to write this section last while others prefer to write it first.

2. Company description

Explain the different elements of your business. Help plan reviewers quickly understand your goals, marketplace needs, how your products and services will meet those needs, and the competitive advantages of your business.

3. Market analysis

Show you are knowledgeable about the industry and the market in which your business will compete. Include your research findings and conclusions, such as:

• Industry description and outlook
• Information about your target market
• Competitive analysis
• Any known regulatory restrictions

There are many resources that can help you analyze the market, including the SCORE Association and Small Business Development Centers .

4. Organization and management

Explain your company’s organizational structure and ownership, its legal structure, and team backgrounds and qualifications.

5. Service or product line

Emphasize the benefits to customers and focus on why your particular service or product will fill a need for your target customers.

6. Sales and marketing

Your sales strategy should be defined concurrently with the marketing plan. How will you sell your product? Include your sales force and sales activity strategies.

Marketing helps you attract customers. Define your marketing strategy, which should be unique to your company and evaluated on an ongoing basis.

7. Contingency plan

Document how you will deal with some of the good and bad situations of running a business:

• What will you do if your product is an overwhelming success and demand is greater than expected?
• What will you do if initial sales are sluggish? How will you jump-start sales?

8. Funding request

Ask for the amount of money you need, explain why you need it and how it will be used. You will need to provide historical and prospective financial information to support your request.

9. Financial history or projections

Demonstrate your company can meet financial obligations. If you own an established business, supply two to three years of historical data related to its performance. If your business is a start-up or still in its infancy, supply projected data showing the company’s anticipated financial performance for the current and upcoming fiscal years.

10. Personal guarantee

Most business loans require the business owner(s) to personally guarantee repayment of debt. This means the owner of the business agrees to repay the debt using personal means if the business can no longer pay its debt. As a result, you should include the following documents with your business plan funding request:

• Your personal tax returns for the last two to three years.
• A personal financial statement listing the value of your personal assets and the balance(s) of exiting personal debt(s).

With a long history of advocating for entrepreneurs, Bankers Trust understands the needs of small businesses and the value they bring to the community.

Creating your business plan will give your company the foundation and direction needed to reach your goals. Contact us when you’re ready to put your business plan in motion.

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Chad Solberg

Chad Solberg joined Bankers Trust Company in May 2013 bringing 15 years of banking and finance experience. He currently serves as VP, Business Banking Manager overseeing a team of dedicated business bankers. Prior to joining Bankers Trust, he most recently spent nine years with Wells Fargo as a lender in business banking. Chad was also an examiner with the Federal Reserve Bank of Chicago for three years.

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How to get started creating your business plan, a successful business plan can help you focus your goals and take actionable steps toward achieving them. here’s what to consider as you develop your plan..

Regardless of whether or not you’re pitching to investors and lenders, starting a business requires a plan. A business plan gives you direction, helps you qualify your ideas and clarifies the path you intend to take toward your goal.

Four important reasons to write a business plan:

• Decision-making:  Business plans help you eliminate any gray area by writing specific information down in black and white. Making tough decisions is often one of the hardest and most useful parts of writing a business plan. 
• A reality check:  The first real challenge after deciding to launch a new venture may be writing the business plan. Through the process, you may realize your business idea is a bit flawed or not yet fully developed. This may feel like extra work, but the effort you put into improving your idea during this step can bolster your chance of future success. 
• New ideas: Discovering new ideas, different approaches and fresh perspectives are invaluable parts of the business planning process. Working closely with your concept can lead to unexpected insights, shifting your business in the right direction. 
• Developing an action plan: Your business plan is a tool that will help you outline action items, next steps and future activities. This living, breathing document shows where you are and where you want to be, with the framework you need to get there.

Business plan guide: How to get started

Use this exercise to gather some of the most important information. When you're ready to put an outline together, follow our standard business plan template (PDF) and use this business plan example to use as a guide as you fill in your outline. Once your outline is finalized, you can share it with business partners, investors or banks as a tool to promote your concept.

• Vision: Your vision statement sets the stage for everything you hope your business will accomplish going forward. Let yourself dream, pinpointing the ideas that will keep you inspired and motivated when you hit a bump in the road. 
• Mission: A mission statement clarifies the purpose of your business and guides your plan, ultimately answering the question, "Why do you exist?" 
• Objectives: Use your business objectives to define your goals and priorities. What are you going to accomplish with your business, and in what timeframe? These touchstones will drive your actions and help you stay focused. 
• Strategies: Your objectives describe what you’re going to do, while your strategies describe how you’re going to do it. Consider your goals here, and identify the different ways you’ll work to reach them. 
• Startup capital: Determine what your startup expenses will be. Having a clear idea will allow you to figure out where the money is coming from and help you spend what you have in the right areas. 
• Monthly expenses: What do you estimate your business’ ongoing monthly expenses will be? This may change significantly over time — consider what your expenditure could be immediately after launch, in three months, in six months and in one year. 
• Monthly income: In order to cover your expenses (and hopefully make a profit), you will need to estimate your income. What are your revenue streams? It's always wise to diversify your income. That way, you won’t be tied to one stream that might not be lucrative as quickly as you need it to be. 
• Goal-setting and creating an action plan: Once you have all the specifics outlined, it's time to set up the step-by-step action items explained in the companion guide, a standard business plan outline. This process will utilize the hard work you've already done, breaking each step down in a way that you can follow.   

A business plan isn’t necessarily a static document that you create once and then forget about. You can use it as a powerful tool by referencing it to adjust your priorities, stay on track and keep your goals in sight.

Business plan: An outline

Use this exercise to gather important information about your business.

Answer these questions to start your planning process. Your responses will provide important information about your business, which you can use as an overview to develop your plan further.

• What is your dream? 
• What do you feel inspired to do or create?
• What keeps you motivated, even in the face of uncertainty?  
• Why does this business exist? 
• What purpose(s) or need(s) does it fulfill for customers?   

Objectives 

• List the goals of your company, then number them in order of importance. 
• What will the business accomplish when it’s fully established and successful? 
• How much time will it take to reach this point?  
• For each goal or objective listed above, write one or more actions required to complete it.   

Startup capital 

• List any and all startup expenses that come to mind. 
• Next to each: 
• Estimate the cost of any expenses you can. 
• List the most likely source of the funding. 
• Circle the high-priority expenses. 
• Assess whether your available capital is going toward the high-priority items. If not, reconsider the way you will allocate funds.  

Monthly expenses

• If you can, estimate your business’ ongoing monthly expenses immediately after launch, in three months, in six months and in one year. 
• If you can’t, what information will you need in order to estimate your expenses?  

Monthly income 

• What are your revenue streams? Estimate your monthly income accordingly. 
• Which revenue sources deliver fast or slow returns? Are there other sources you could consider to diversify assets?  
• After completing your outline, reference your responses as you work through a traditional business plan guide. This next step will allow you to expand and add more detailed information to your plan. 
• When you’re ready to make your formal plan, reference this companion guide, a standard business plan outline  (PDF). We've also included a  business plan example  to help as you fill in your outline. 

Learn how U.S. Bank can support you and your business needs at usbank.com/small-business.

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Disclosures.

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rates and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.

Bank Business Plan Template

Written by Dave Lavinsky

Bank Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their banks.

If you’re unfamiliar with creating a bank business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great business plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a bank business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What Is a Business Plan?

A business plan provides a snapshot of your bank as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan

If you’re looking to start a bank or grow your existing bank, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your bank to improve your chances of success. Your bank business plan is a living document that should be updated annually as your company grows and changes.

Sources of Funding for Banks

With regards to funding, the main sources of funding for a bank are personal savings, credit cards, bank loans, and angel investors. When it comes to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to ensure that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Personal savings and bank loans are the most common funding paths for banks.  

Finish Your Business Plan Today!

How to write a business plan for a bank.

If you want to start a bank or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your bank business plan.

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of bank you are running and the status. For example, are you a startup, do you have a bank that you would like to grow, or are you operating a chain of banks?

Next, provide an overview of each of the subsequent sections of your plan.

• Give a brief overview of the bank industry.
• Discuss the type of bank you are operating.
• Detail your direct competitors. Give an overview of your target customers.
• Provide a snapshot of your marketing strategy. Identify the key members of your team.
• Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail the type of bank you are operating.

For example, you might specialize in one of the following types of banks:

• Commercial bank : this type of bank tends to concentrate on supporting businesses. Both large corporations and small businesses can turn to commercial banks if they need to open a checking or savings account, borrow money, obtain access to credit or transfer funds to companies in foreign markets.
• Credit union: this type of bank operates much like a traditional bank (issues loans, provides checking and savings accounts, etc.) but banks are for-profit whereas credit unions are not. Credit unions fall under the direction of their own members. They tend to serve people affiliated with a particular group, such as people living in the same area, low-income members of a community or armed service members. They also tend to charge lower fees and offer lower loan rates.
• Retail bank: retail banks can be traditional, brick-and-mortar brands that customers can access in-person, online, or through their mobile phones. They also offer general public financial products and services such as bank accounts, loans, credit cards, and insurance.
• Investment bank: this type of bank manages the trading of stocks, bonds, and other securities between companies and investors. They also advise individuals and corporations who need financial guidance, reorganize companies through mergers and acquisitions, manage investment portfolios or raise money for certain businesses and the federal government.

In addition to explaining the type of bank you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include the number of clients served, the number of clients with positive reviews, reaching X number of clients served, etc.
• Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the bank industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the bank industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your bank business plan:

• How big is the bank industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential target market for your bank? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your bank business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, small businesses, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of bank you operate. Clearly, corporations would respond to different marketing promotions than individuals, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other banks.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes trust accounts, investment companies, or the stock market. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

• What types of customers do they serve?
• What type of bank are they?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide loans and retirement savings accounts?
• Will you offer products or services that your competition doesn’t?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a bank business plan, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of bank company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide savings accounts, auto loans, mortgage loans, or financial advice?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the products and/or services you offer and their prices.

Place : Place refers to the site of your bank. Document where your company is situated and mention how the site will impact your success. For example, is your bank located in a busy retail district, a business district, a standalone office, or purely online? Discuss how your site might be the ideal location for your customers.

Promotions : The final part of your bank marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

• Advertise in local papers, radio stations and/or magazines
• Reach out to websites
• Distribute flyers
• Engage in email marketing
• Advertise on social media platforms
• Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your bank, including reconciling accounts, customer service, accounting, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to sign up your Xth customer, or when you hope to reach $X in revenue. It could also be when you expect to expand your bank to a new city.  

Management Team

To demonstrate your bank’s potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing banks. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a bank or successfully running a small financial advisory firm.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you see 5 clients per day, and/or offer sign up bonuses? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your bank, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a bank:

• Cost of furniture and office supplies
• Payroll or salaries paid to staff
• Business insurance
• Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your bank location lease or a list of accounts and loans you plan to offer.  

Writing a business plan for your bank is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the bank industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful bank.  

Bank Business Plan Template FAQs

What is the easiest way to complete my bank business plan.

Growthink's Ultimate Business Plan Template allows you to quickly and easily write your bank business plan.

How Do You Start a Bank Business?

Starting a bank business is easy with these 14 steps:

• Choose the Name for Your Bank Business
• Create Your Bank Business Plan
• Choose the Legal Structure for Your Bank Business
• Secure Startup Funding for Your Bank Business (If Needed)
• Secure a Location for Your Business
• Register Your Bank Business with the IRS
• Open a Business Bank Account
• Get a Business Credit Card
• Get the Required Business Licenses and Permits
• Get Business Insurance for Your Bank Business
• Buy or Lease the Right Bank Business Equipment
• Develop Your Bank Business Marketing Materials
• Purchase and Setup the Software Needed to Run Your Bank Business
• Open for Business

Don’t you wish there was a faster, easier way to finish your Bank business plan?

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.   Click here to see how a Growthink business plan consultant can create your business plan for you.

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7 Things Investors Are Looking for in a Business Plan

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A business plan is a comprehensive document that outlines a company’s mission, goals, finances, revenue, and market data.

The primary purpose of a business plan is to convince banks and/or investors to loan you money, but there are several other benefits.

Business plans help create accountability within an organization, offer a holistic view of the company, and can repeatedly be used as a frame of reference.

Ultimately, a business plan mitigates risk. It summarizes all business areas and details how those areas ( marketing , operations) impact growth.

And there’s no way around it; if you want to fund from an investor, especially if you’re just starting your business , you need a business plan.

Any entrepreneur would be lucky to meet with an angel investor or venture capitalist. But the initial pitch, meeting, and presentation are all the tip of the iceberg.

What comes next is most important.

The potential investor will want a detailed business plan and will conduct due diligence to ensure you’re a worthy investment. With that in mind, here’s what investors are looking for in a business plan:

Strong Executive Summary

The executive summary is the first portion of your business plan and should be captivating enough to give a solid first impression.

Think of your executive summary as your website landing page. If visitors come to your website and can’t find what they’re looking for, they’ll move on to the next best thing.

Your executive summary should introduce the company and explain what you do and what makes you unique. It gives investors a complete overview of your business and should summarize key details in other business plan sections. This section is typically one page long and should be written last.

Start your executive summary by introducing yourself; follow up with an explanation of why your business matters and how it fills a gap in the market or solves a particular problem. Take a business plan example for inspiration for writing a practical executive summary.

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Complete Financial Forecast

Whether you have no sales or are generating revenue in the hundreds of thousands, every investor will scrutinize your financial plan to determine financial feasibility accurately. This section of your plan needs to be fully fleshed out and leave no grey area or room for further questions.

It’s essential to put yourself in the shoes of an investor. Based on your financial outlook, do you see yourself as a risky or promising investment? Your financial forecast should include the following:

Projected profit and loss statement Projects how much revenue you’ll generate and the profit you’ll make on those sales

Break-even analysis A detailed look at how many products you need to sell to cover fixed and variable production costs

Projected balance sheet Estimate of total assets and liabilities

Cash flow statement Details all cash inflows and outflows

Business ratios Calculations that illustrate the relationship between items (i.e., total sales and the number of employees).

To accurately build out your financial forecast, you must assess your market share (your market research section is also crucial to investors). Start from the bottom by highlighting your total addressable market and the percentage you’ll be targeting. Then you can dive a little deeper by outlining your segmented addressable market and share of the market. Investing sites can also help you better perceive the state of the market and other data for a more accurate forecast.

Want free financial templates for your business plan?

You will find a terrific collection of important templates, including a SWOT analysis, sales forecast template, profit and loss template, cash flow template, and balance sheet template, in this comprehensive guide on how to write a business plan.

Customer Acquisition Costs

Investors want to know how much it will cost to acquire new customers.

Understanding your customer acquisition costs (CAC) helps you grow healthy and scalable and shows investors that you know exactly what it takes to get a customer on board.

Knowing your CAC is more important than ever; the cost of acquiring new customers has increased by 60% over the past five years .

Customer acquisition costs are determined by examining the total cost of sales and marketing necessary to acquire new customers. You can calculate your CAC by dividing the total cost of marketing and sales by the number of customers acquired.

Your CAC can also help simplify your decision-making process, optimize your marketing strategies to focus on customer lifetime value, and paint a complete picture of your payback period (the amount of time it takes to recover the cost of an investment).

Strong Execution

A business plan is like an image. And as the age-old saying goes, “An image is worth a thousand words.”

Similarly, your business plan reveals much about who you are as a business owner. Let’s say that you have strong sales and an optimistic financial forecast. Is your business plan missing the necessary documentation and data points that support this? Is it rife with grammatical errors and improper formatting?

Execution is telling. How you communicate your business and your mission is just as important as the details within the plan. A hastily written or ambiguous business plan will result in more questions and hesitance.

If you can’t take the time to write a solid business plan, what else will you take shortcuts on?

The Financial Ask & Answer

The financial ask and answer addresses two crucial questions: How much money are you asking for, and what will you do with it?

The investment you’re seeking should be clear in your business plan (typically mentioned in the executive summary and expounded upon in the financial plan). How you intend to use the money should also be clear and logical.

Investors need to know that you’ll spend their money responsibly and that there’s proof that how you spend the money will result in revenue growth. Every dollar should be allocated to a specific destination for a good reason.

For instance, you cannot ask for a $500,000 investment without explaining how and why you arrived at this number. The business plan in the below example of a functional company called Culina states how much they’re asking for and why. In this case, Culina is raising $15 million to ramp up hardware manufacturing, improve UX and UI, expand marketing efforts, and fulfill pre-orders before the holiday season.

Strong Management

Your business plan should prove that you have a strong management team.

Many investors run their portfolios with a people-first mentality. This means that who you are is just as important as what you offer. Your business plan’s “Management” or “Team” section is great for humanizing your company and highlighting your strengths.

What makes your team especially capable of running and guiding this business toward profitability? What’s your background? Have you won any awards or participated in any incubator programs? Do you have relevant experience (either in running a business or working in the industry)?

Answer these questions to show investors that you’re uniquely qualified to lead.

Thorough Understanding of Your Market

Is there a market for your product or service, how can you reach your market, and what share of the market do you have a stronghold on?

Demonstrating a thorough understanding of your market and target demographic is crucial. Many businesses have failed because they didn’t conduct market research or speak to their customers and clients. Product validation should precede fundraising efforts.

“Market size” is a basic number that every investor looks for. Your competitive analysis , market research, metrics, and customer surveys should all be factored into the equation.

If you’re struggling to understand your market and position, you can start by gathering primary data from the Census and Labor Bureau. Many industries also have formal associations and publish their research online. You can purchase these studies or commission a market research firm to spearhead your research.

An interested investor can make or break your business and should be taken seriously. You wouldn’t rush through an Ivy League college application and shouldn’t submit a hastily written business plan.

Take the time to detail every aspect of your business and consider working with a business plan writer to ensure you communicate your message effectively. If an investor is impressed with your business plan, chances are you’ll score pivotal funding.

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The 5 Things Investors Really Care About When Reviewing Your Business Plan

A business plan is an essential tool for startups and, when executed correctly, it serves two key purposes:

• It provides goals and a roadmap for you to follow in order to build a successful company.
• It provides the format and information lenders and investors need to determine whether or not to provide funding to you.

When preparing your business plan for investors , you must keep this audience’s unique needs in mind. Below, you’ll learn what these needs are and what investors will scrutinize most when reviewing your plan.

Investors will generally take equity in your company, or they will give you a loan that must be repaid. In either case, their primary goal is to get a return on their investment. For loans, they want to have great confidence that you’ll be able to repay the loan and interest. For equity investments , they want to see real growth potential and a reasonable possibility of your exiting at a significant multiple.

For those unaware of the phrases “exiting” and “significant multiple,” please allow me to explain.

By “exiting,” I’m referring to an event in which the equity investor will be paid. The most likely exit event is for you to eventually sell your company. Another positive exit event is taking your company public; while this is very favorable to investors, the likelihood of this happening is extremely low.

Next, a “multiple” is the return on the investment that investors will receive. For example, let’s say a venture capitalist invested $5 million in your business and, upon exit, received a $50 million check for their equity stake. In this case, the investor would have received a 10X multiple or return on investment. Equity investors generally want to see a five- to 10-time multiple. While this seems very high, it’s because they understand that many of their investments will not materialize at all.

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Below are five of the most critical things investors look for in your business plan to determine if they think you will give them the return on investment they desire:, financial needs and projections.

Investors need to know how much money you are seeking, the proposed uses of the funds and your financial projections .

Your financial projections should show your expected sales, expenses and profits over the next five years. Investors want to see significant growth and profits but need to feel confident about your assumptions.

For example, while it’s easy to assume that your sales will grow 500% per year, investors will want you to provide rationale behind this and other assumptions. Did your last company grow at 500% per year? Are there other companies in the market that are growing at this rate?

The more research you can do to bolster your assumptions, the more credibility they will have in the eyes of investors, which will make them more likely to believe in your business and fund your company.

Related: How to Create a Fundable Business Plan

Investors want to see that you’ve achieved traction. Traction is similar to the term “proof of concept.” It is getting users or, ideally, paying customers for your product or service. By gaining traction, you reduce risk for yourself and for investors.

For instance, consider two companies developing mobile apps . One just has the idea to create the app. The other has already built the app (i.e., they’ve proven they could successfully code and complete the app), they’ve acquired 10,000 users (i.e., they’ve proven they could market the app and that customers really want it) and 1,000 users are currently paying for a premium subscription of the app (i.e., they’ve proven they can monetize their business). As you can see, the latter company has already removed multiple risk factors to the investor and is thus much more likely to receive funding.

In the executive summary at the start of your business plan, you want to clearly describe what you do and explain any traction that you’ve accomplished thus far to get investors interested right away.

Note that if you are a true startup, it may be hard to show traction in terms of paying customers. However, you could show a prototype or research you’ve done proving customer interest in your product. Sometimes you need to get creative in showing traction!

Unique success factors

Documenting your unique success factors is critical to winning over investors, which is why any comprehensive business plan should include a section on this. Your unique success factors are those things that make your company more likely to succeed.

Traction, as just mentioned, is clearly a unique success factor. Other factors are past accomplishments of your management team. They can also be market research you’ve uncovered showing that market trends are moving in a direction that benefits your company over your competition. Another success factor could be a marketing partnership you’ve formed that’s sure to bring in a steady flow of customers.

Think through why your company is uniquely qualified to succeed in your given field, and stress this in your executive summary and throughout your business plan, as it’s imperative investors see and understand this.

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Marketing plan.

The marketing section of your business plan discusses the four Ps, which include:

• P roduct or service
• P lace, or distribution strategy, which is how customers will buy from you (e.g., via your website, storefront, direct mail, distributors, etc.)
• P romotions, which is how you will attract new customers

Within the promotions section, you need to explain to investors the cost of attracting a new customer, the expected lifetime value of your customer and whether or not there’s room to scale.

Regarding the cost of attracting customers, hopefully you have real figures to work with. If not, you can apply realistic assumptions. For example, you might assume that via pay-per-click advertising, it will cost you $2 per click, and one out of every 100 clicks will become a client. Thus, your customer acquisition cost (CAS) will be $200.

Next, you might be able to show that your average customer pays $100 for your product and buys 10 times over the first year at a 50% profit margin. This would mean that your average customer gives you a profit of $500.

Finally, you want to show the market is big enough to support your growth. Ideally, you can prove with market research that your target market includes, let’s say, 5 million customers.

In summary, you would be showing it costs you $200 to obtain a customer worth $500, and there are 5 million potential customers out there; this would prove to investors that you have a sizable and profitable opportunity.

The final thing investors really care about in your business plan is research. Research will appear in multiple sections of your plan, and the goal of it is to bolster the argument that your company is worth investing in. As demonstrated above, the right research will support your financial projections, unique success factors and other key sections.

Here is the key research you need to conduct:

• In your industry analysis section, you must provide research on the size of your market and trends
• In your customer analysis section, you should document how many target customers exist and their wants and needs
• Your competitors. Show their strengths and weaknesses, and conduct research to support your financial assumptions

Key takeaways on preparing your business plan for investors

Investors want confidence that investing in your business will give them a solid return on investment. It is your job as the founder of your company to make sure your business plan achieves this. Be sure to conduct your research, and pay special attention to your financial needs and projections, traction, unique success factors and marketing plan, and finding investors to write you a check will become much easier.

Originally published July 25, 2021.

• business plan
• financial projections
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• How to Use Your Business Plan Most Effectively
• The Basics of Writing a Business Plan
• 12 Reasons You Need a Business Plan
• The Main Objectives of a Business Plan
• What to Include and Not Include in a Successful Business Plan
• The Top 4 Types of Business Plans
• A Step-by-Step Guide to Presenting Your Business Plan in 10 Slides
• 6 Tips for Making a Winning Business Presentation
• 12 Ways to Set Realistic Business Goals and Objectives
• 3 Key Things You Need to Know About Financing Your Business
• How to Perfectly Pitch Your Business Plan in 10 Minutes
• How to Fund Your Business Through Friends and Family Loans and Crowdsourcing
• How to Fund Your Business Using Banks and Credit Unions
• How to Fund Your Business With an SBA Loan
• How to Fund Your Business With Bonds and Indirect Funding Sources
• How to Fund Your Business With Venture Capital
• How to Fund Your Business With Angel Investors
• How to Use Your Business Plan to Track Performance
• How to Make Your Business Plan Attractive to Prospective Partners
• Is This Idea Going to Work? How to Assess the Potential of Your Business.
• When to Update Your Business Plan
• How to Write the Management Team Section to Your Business Plan
• How to Create a Strategic Hiring Plan
• How to Write a Business Plan Executive Summary That Sells Your Idea
• How to Build a Team of Outside Experts for Your Business
• Use This Worksheet to Write a Product Description That Sells
• What Is Your Unique Selling Proposition? Use This Worksheet to Find Your Greatest Strength.
• How to Raise Money With Your Business Plan
• Customers and Investors Don't Want Products. They Want Solutions.
• 5 Essential Elements of Your Industry Trends Plan
• How to Identify and Research Your Competition
• Who Is Your Ideal Customer? 4 Questions to Ask Yourself.
• How to Identify Market Trends in Your Business Plan
• How to Define Your Product and Set Your Prices
• How to Determine the Barriers to Entry for Your Business
• How to Get Customers in Your Store and Drive Traffic to Your Website
• How to Effectively Promote Your Business to Customers and Investors
• What Equipment and Facilities to Include in Your Business Plan
• How to Write an Income Statement for Your Business Plan
• How to Make a Balance Sheet
• How to Make a Cash Flow Statement
• How to Use Financial Ratios to Understand the Health of Your Business
• How to Write an Operations Plan for Retail and Sales Businesses
• How to Make Realistic Financial Forecasts
• How to Write an Operations Plan for Manufacturers
• What Technology Needs to Include In Your Business Plan
• How to List Personnel and Materials in Your Business Plan
• The Role of Franchising
• The Best Ways to Follow Up on a Buisiness Plan
• The Best Books, Sites, Trade Associations and Resources to Get Your Business Funded and Running
• How to Hire the Right Business Plan Consultant
• Business Plan Lingo and Resources All Entrepreneurs Should Know
• How to Write a Letter of Introduction
• What To Put on the Cover Page of a Business Plan
• How to Format Your Business Plan
• 6 Steps to Getting Your Business Plan In Front of Investors

How to Fund Your Business Using Banks and Credit Unions Here's everything you need to know about securing a loan with favorable terms for your business.

By Eric Butow • Oct 27, 2023

Key Takeaways

• Bankers provide debt financing, which means an entrepreneur does not need to give up ownership.
• Loan covenants must be reviewed carefully before accepting a loan.
• Bankers will ask for information regarding your cash flow, collateral, cosigners, marketing plans and management team.
• Your personal credit must be in order before you can secure a business loan.
• Credit unions are not-for-profit financial institutions that may provide lower interest rates and fewer fees than banks.

Opinions expressed by Entrepreneur contributors are their own.

This is part 3 / 10 of Write Your Business Plan: Section 2: Putting Your Business Plan to Work series.

Many of the most successful businesses are financed by banks, which can provide small to moderate amounts of capital at market costs. They don't want control—at least beyond the control exerted in the covenants of a loan document. And they don't want ownership. Bankers make loans, not investments, and as a general rule they don't want to wind up owning your company.

Bankers primarily provide debt financing. You take out a loan and pay it back, perhaps in installments consisting of principal and interest, perhaps in payments of interest only, followed by a balloon payment of the principal. One of the nice things about debt financing is that the entrepreneur doesn't have to give up ownership of his company to get it. The cost is clearly stated.

Related: Finance Your Money Right

Bankers can usually be counted on to want minimal, if any, input into how the business is run. Most often, as long as you remain current on payments, you can do as you like. Get behind on the payment schedule, and you're likely to find a host of covenants buried in your loan documentation.

Loan covenants, however, may require you to do all sorts of things, from setting a minimum amount of working capital you must maintain to prohibiting you from making certain purchases or signing leases without approval from the bank. In fact, most bank loans contain so many covenants that it's difficult for a borrower to avoid being technically in default on one or more of them at a given time. For this reason, you want your accountant, financial advisor, or attorney to review your loan documents and spell out everything for you very carefully.

Related: 3 Strategies For Getting Into Lending Shape

Your loan officer is likely to ignore many covenant violations unless you stop, or seem likely to stop, making timely payments. Even then you'll probably get a chance to work out the problem. But if you remain in violation, you may find yourself declared in default in short order, and the bank may demand all of its money immediately, perhaps seizing your collateral and even forcing you to protect yourself by declaring bankruptcy.

What Bankers Want

A banker's first concern is getting the bank's money back plus a reasonable return. To increase the odds of this, bankers look for certain things in the businesses they lend to. Those include everything from a solid explanation of why you need the money and what you're going to use it for to details about any other borrowing or leasing deals you've entered into.

Bank loan applications can be voluminous, almost as long and complete as a full-fledged business plan. Plans and loan applications aren't interchangeable, however. A banker may not be interested in your rosy projections of future growth. In fact, when confronted with the kind of growth projection required to interest a venture capitalist, a banker may be turned off. On the other hand, a banker is likely to be quite interested in seeing a contingency plan that will let you pay back the loan even in the event of a worst-case scenario. The things a banker will look for you to address are:

Cash flow. One of the most convincing things you can show a banker is the existence of a strong, well-documented flow of cash that will be more than adequate to repay a loan's scheduled principal and interest. Basically, you're going to have to show where you're going to get the money to pay back what you're borrowing.

Related: Choosing A Lender? Watch Out FOr These Costly Traps.

You'll need more than a projection of future cash flow, by the way. Most bankers will want to see cash flow statements as well as balance sheets and income statements for the past three or so years. And don't forget your tax returns for the same period.

Collateral. If you're just starting out in business or if you're dealing with a banker who you don't know well, you're unlikely to be able to borrow from a bank without collateral. (That's doubly true if, as is the case with many entrepreneurs, both descriptions apply to you.) Collateral is just something the banker can seize and sell to get back some or all of the money you've borrowed in the event that everything goes wrong and you can't pay it back with profits from operations. It may consist of machinery, equipment, inventory, or all too often, the equity you own in your home. It's advisable NOT to put your home up for collateral—it's simply too big a risk.

But it's a good idea to take the initiative here and propose something that will be used if you suspect a banker will require it. Often the collateral will consist of whatever you're borrowing money to buy—production equipment, computers, a building, and so on.

Related: 4 Ways To Finance Your Business.

Why do bankers seek collateral? They have no desire to own secondhand equipment or your house. Experience has taught them that entrepreneurs who have their own assets at risk are more likely to stick to a business than those who have none of their own assets at risk.

Quick tip: It seems sensible to plan to put up as collateral the exact item you're borrowing money to buy. But bankers often demand more because it may be impossible to sell the item that you're buying for what you'll owe on it. So, plan to use purchased equipment for part of your collateral but be ready to offer more.

Cosigners. They provide an added layer of protection for lenders. If your own capacity for taking on additional debt is shaky, a cosigner (who is essentially lending you his or her creditworthiness) may make the difference.

Related: Choosing A Business Loan Type

Marketing plans. More than ever before, bankers are taking a closer look at the marketing plans embedded in business plans. Strong competitors, price wars, me-too products, the fickle habits of the buying public, and other market-related risks must be addressed. There are also very web-savvy marketers out there, and it helps if you are tapped into online marketing, such as social media.

Your banker (and most other investors) has to know that you recognize these risks and have well-thought-out ways to deal with them. Besides, it's the cash flow from operations that pays off bank loans.

Management. Bankers like to stress the personal aspect of their services. Many state that they are interested in making loans based on a borrower's character as well as her financial strength. In fact, the borrower's track record and management ability are concerns for bankers evaluating a loan application. If you can show you've run one or more other companies successfully, it will increase your chances of landing a loan to get a startup going.

Related: Despite Access to Credit, Many Business Owners Are Reluctant to Take on Debt

Getting Your House in Order

As an entrepreneur seeking a bank loan, or any funding for that matter, you'll want to make sure you have everything in place, including all of your financial documentation as well as your credit history. And if you need to improve your credit history and rating, you should do so in advance. Even if you have previous business experience, you'll need to get your personal credit information in order. Start by contacting one of the three major credit bureaus:

Equifax: 1-800-685-1111, www.equifax.com

Experian: 1-888-397-3742, www.experian.com

TransUnion: 1-800-916-8800, www.transunion.com

Do this once because loan officers will also inquire, and the more your credit ratings are checked, the more suspicious it may appear to lenders. Also, read your credit reports carefully, especially if your rating is not as good as you expected. Credit bureaus make more mistakes than you would ever imagine. Make sure there are no errors on your credit reports. If there are errors, call the credit bureau to have them corrected.

Related: 6 Tips For Navigating Online Lending Options

Lenders Look at the Four Cs of Credit

• Character. What's your reputation and record?
• Capacity or cash flow. Do you have sufficient cash flow to repay principal and interest?
• Capital. Does your business have enough capital to keep going if you can't pay the debt from earnings?
• Collateral. Do you own something valuable the banker can take if you can't pay the loan back?

Don't Take No for an Answer

One, two, three strikes, you're out. Most small business owners give up after trying three banks. You should be more persistent. Those entrepreneurs that have persisted have found that the fifth, tenth, or even twentieth banker has been impressed enough to give them a loan. Of course, tweaking the business plan based on the criticism you receive can, and often does, help improve your odds as you continue going from bank to bank. Listen and learn from feedback and criticism, make changes if you feel the comments are relevant, and keep on going. Be persistent.

Related: Fund Your Business With Bonds And Indirect Funding Sources

When Bank Financing Is Appropriate

Bank financing is most appropriate for up-and-running enterprises that can show adequate cash flow and collateral to service and secure the loan. Bankers are less likely to provide startup money to turn a concept into a business and even less likely to put up seed money to prove a concept unless you have a track record of launching previous businesses with successful results. Even then, each concept will stand on its own merits.

Bankers are sensitive to the term or length of a loan. Most bank loans are short to intermediate term, meaning they are due in anywhere from less than a year to five years. A short-term loan may be for ninety days and used to finance receivables so you can get a big order out the door. A longer-term loan, up to twenty years, may be used to purchase a piece of long-lasting capital equipment.

Borrowing When You Really Need It

The old saying about bankers lending only to people who don't need to borrow is almost true. Bankers prefer to lend to companies that are almost, but not quite, financially robust enough to pursue their objective without the loan. Bankers are lenders, not investors. Unlike a venture capitalist who takes an equity position, bankers don't get a higher return on their loan if you happen to be more successful than expected. Their natural tendency is to be conservative.

Related: The Current State Of Business Lending

This is important to understand because it affects how and when you will borrow. You should try to foresee times you'll need to borrow money and arrange a line of credit or other loan before you need it. That will make it easier and, in many cases, cheaper in terms of interest rates than if you wait until you're a needier and, in bankers' eyes, less attractive borrower.

Credit Unions

Another option when seeking funding is to join a credit union. According to the National Credit Union Administration, there are more than 4,900 credit unions in the country with 131 million members as of March 31, 2022. Because credit unions are not-for-profit financial institutions, their focus is serving the financial needs of their members and not on making a profit. As a result, once you have applied and joined a credit union, it may be easier to get a lower interest rate with fewer fees than can be found at a bank when procuring a loan. However, like a bank, you will still need to prove your creditworthiness and that you can repay the loan or have someone cosign for it.

Because banks have gotten a lot of bad press in recent years for attaching fees to all sorts of activities, many people have switched over to credit unions. One reason is that credit unions typically offer more personalized service, which can include helping you get your house in order before applying for a loan. Credit unions may also offer a sense of camaraderie because they are typically sponsored by a business, a community, or some group of people of which you are one. This can be advantageous because you may find other people interested in your business ideas.

Related: Choosing A Bank For Your Start-Up? Here Are Some Things To Know.

While credit unions are not protected like banks by the FDIC, they are covered by the National Credit Union Share Insurance Fund (NCUSIF). This fund provides federal and most state-chartered credit union members with up to $250,000 of insurance per individual depositor, per federally insured credit union.

Term to Know: Balloon Payment

A balloon payment is a single, usually final, payment on a loan much greater than the preceding payments. Some business loans, for example, require interest-only payments the first year or two, followed by a single large payment that repays all the principal.

More in Write Your Business Plan

Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.

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Musk's Grok-1.5 AI chatbot to be available next week

Elon Musk's artificial intelligence startup xAI's latest Grok-1.5 chatbot will be available on his social media platform X next week, the billionaire said in a post on X on Friday.

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A Total Solar Eclipse Is Coming. Here’s What You Need to Know.

These are answers to common questions about the April 8 eclipse, and we’re offering you a place to pose more of them.

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By Katrina Miller

On April 8, North America will experience its second total solar eclipse in seven years. The moon will glide over the surface of our sun, casting a shadow over a swath of Earth below. Along this path, the world will turn dark as night.

Skywatchers in Mexico will be the first to see the eclipse on the mainland. From there, the show will slide north, entering the United States through Texas, then proceeding northeast before concluding for most people off the coast of Canada.

Why eclipses happen is simple: the moon comes between us and the sun. But they are also complicated. So if you’ve forgotten all of your eclipse facts, tips and how-to’s since 2017, we’re here to explain it for you.

But before we dive in, there is one thing to know that is more important than anything else: It is never safe to look directly at the sun during an eclipse (except for the few moments when the moon has fully obscured its surface). At all other times, watch the event through protective eye equipment . Read on to learn about how to watch an eclipse safely.

What is a total solar eclipse?

A solar eclipse occurs when the moon orients itself between Earth and the sun, shielding the solar surface from our view.

In cosmic terms, it is unusual that this happens: the moon is about 400 times smaller than the sun, but it is about 400 times closer to us. That means that when these two celestial bodies are aligned, they appear to be the same size in the sky.

What other types of eclipses are there?

Annular solar eclipses occur when the moon is farther from Earth and appears too small to completely shield the sun’s surface. Instead, the outer part of the solar disk remains uncovered — a “ring of fire” in the sky.

Partial solar eclipses happen when Earth, the moon and the sun are imperfectly aligned. The moon only obscures a chunk of the sun. There will be two in 2025.

Earth can also get between the moon and the sun, creating a lunar eclipse. This can be observed once or twice a year .

How dark will it be during the eclipse?

In any given place along the eclipse path , the event will last around two hours or more.

The event will commence with a partial solar eclipse, as the moon takes a small bite out of the sun’s edge, then consumes more and more of its surface. According to NASA , this can last anywhere from 70 to 80 minutes.

The phase of the eclipse where the moon has completely blocked the sun’s surface is called totality. This is the only time the event can be viewed with the naked eye.

The length of totality varies by location. In April, some places will experience this phase for more than four minutes; others, for only one to two minutes.

During totality, the sky will get dark as night and the temperature will drop. Wispy white strings of light from the sun’s outer atmosphere, or corona, will suddenly be visible. Lucky viewers may even spot a thin, reddish-pink circle around the edge of the moon. That’s the chromosphere, an atmospheric layer below the sun’s corona. Its color comes from the presence of hydrogen throughout the layer.

After totality, the sun will slowly peek out from behind the moon again — another partial eclipse that will last the same amount of time as the first one. The moon will recede until the sun is back to normal brightness in our sky.

How can I watch the solar eclipse safely?

In general, avoid looking directly at the sun without special equipment to protect your eyes. Inexpensive options for watching the eclipse include paper solar viewers and glasses. If you are using equipment purchased for a past solar eclipse, make sure to inspect it. Toss anything with scratches or other signs of damage.

According to NASA , it is not safe to look at the sun through any optical device while using paper glasses or viewers. To watch the eclipse through cameras, binoculars or telescopes, buy a special solar filter.

The only time you can view a solar eclipse with the naked eye is during the moments of totality. Once the moon begins to reveal the surface of the sun again, return to watching the event through protective equipment to avoid injury.

What happens if I look at the eclipse without protection?

In general, staring directly at the sun, even for a few seconds, can cause permanent damage to your eyes . This can range from blurry or distorted vision to something even more serious, like blind spots. Because there are no pain receptors in the retina, you won’t feel it while it’s happening.

The same is true during an eclipse — except during the brief moments of totality, when the moon has hidden the face of the sun. At all other times, use protective eye equipment to view the event.

What do I do if I can’t find eclipse glasses?

If it’s too late to get glasses or viewers, there’s always a do-it-yourself option: a pinhole camera to indirectly experience the eclipse. You can create one using cardstock , a cardboard box , a kitchen strainer or even your fingers . These designs project an image of the eclipse onto the ground or some other surface that is safe to look at.

Where are the best places to watch the eclipse?

The total eclipse will sweep across large portions of Mexico, the United States and eastern Canada. For the most dramatic show, it’s best to experience the eclipse along the path of totality , which is where the moon will completely blot out the sun.

The Path of the Eclipse

On April 8, a total solar eclipse will cross North America from Mazatlán, Mexico, to the Newfoundland coast near Gander, Canada. Viewers outside the path of the total eclipse will see a partial eclipse, if the sky is clear .

Percentage of

the sun obscured

during the eclipse

Indianapolis

Little Rock

San Antonio

Viewers near Mazatlán, a beach town on the Pacific shoreline of Mexico, will be the first place to experience totality on North America’s mainland. Various sites in Mexico along the eclipse’s path will experience the longest duration of totality — as long as four minutes and 29 seconds.

Cities across the United States, including Dallas, Indianapolis and Cleveland, will most likely be hot spots for the upcoming eclipse. Other notable locations include Carbondale, Ill., which also saw totality during the solar eclipse in 2017; small towns west of Austin, Texas, which are projected to have some of the best weather in the country along the eclipse path; and Niagara Falls, if the skies are clear. Six provinces of Canada are in the path of totality, but many of them have a very cloudy outlook.

When does the eclipse begin and end?

The show begins at dawn, thousands of miles southwest of the Pacific shore of Mexico. The moon starts to conceal the sun near Mazatlán at 9:51 a.m. local time. Viewers near Mazatlán will experience totality at 11:07 a.m. for four minutes and 20 seconds.

Then the moon’s shadow will swoop through Mexico, crossing over the Texas border at 1:10 p.m. Eastern time. Totality in the United States will start at 2:27 p.m. and end at 3:33 p.m. Eastern time.

Canadians will experience the solar eclipse in the afternoon for nearly three hours. The eclipse concludes beyond Canada’s boundaries when the sun sets over the Atlantic Ocean.

How long will the eclipse last?

The duration of totality depends on how far a given location on Earth is from the moon. Places with the longest totality are closest to the moon and farther from the sun. The speed of the lunar shadow is slowest over spots with the longest totality.

In April, the longest period of totality will occur over Durango, a state in Mexico, for a total of four minutes and 29 seconds. Along the centerline, the location of shortest totality on land is on the eastern coast of Newfoundland and Labrador in Canada, for about two minutes and 54 seconds. But totality is even shorter along the edges of the total eclipse path; in some places, it lasts less than a minute.

How fast does the eclipse move?

Solar eclipses may seem to happen slowly, but the moon’s shadow is racing across the surface of Earth. Exact speeds vary by location. Eclipse calculators estimate the shadow will move between about 1,560 m.p.h. and 1,600 m.p.h. through Mexico, and more than 3,000 m.p.h. by the time it exits the United States. The eclipse will reach speeds exceeding 6,000 m.p.h. over the Atlantic Ocean.

When was the last total solar eclipse in the United States?

According to the American Astronomical Society , total solar eclipses happen once every year or so, but they can only be viewed along a narrow path on Earth’s surface. Many occur over water or other places that can be difficult to reach. A given location will experience totality once in about 400 years.

But some places get lucky: Carbondale, a college town in southern Illinois, saw the total solar eclipse in the United States on Aug. 21, 2017, and will experience another one this April. San Antonio experienced an annular eclipse last October, and is also in the path of totality for this year’s eclipse.

Do other planets experience solar eclipses?

Yes, any planet in our solar system with a moon can experience a solar eclipse. In February, a Martian rover captured Phobos , one of the red planet’s moons, transiting the sun.

The moons on other planets, though, appear either smaller or larger than the sun in the sky . Only Earth has a moon just the right size and at just the right distance to produce the unique effects of totality.

How will things on Earth change during the eclipse?

As the eclipse approaches its maximum phase, the air will get cooler, the sky will grow dimmer, shadows will sharpen and you might notice images of crescents — tiny projections of the eclipse — within them. Along the path of totality, the world will go dark while the moon inches toward perfect alignment with Earth and the sun.

Animals will also react to the solar eclipse. Bees stop buzzing , birds stop whistling and crickets begin chirping. Some pets may express confusion . Even plants are affected, scientists found after the solar eclipse in 2017 . They have diminished rates of photosynthesis and water loss similar to, though not as extreme as, what happens at night.

What if I can’t get to the path of totality?

Viewers in locations away from the eclipse path will see the moon partially blot out the sun, though how perceptible the effects are depends on the site’s distance from the centerline. (The closer you are, the more remarkable it will be.) Still, it won’t be quite like experiencing the eclipse during totality.

Remember that you should always wear protective eye equipment while watching a partial eclipse.

If you can’t make it to the path of totality but still want to experience it, many organizations are providing live video streams of the eclipse, including NASA and Time and Date . The Exploratorium, a museum in San Francisco, will also offer a sonification of the eclipse and a broadcast in Spanish.

What have we learned from solar eclipses?

In the 1800s, a French astronomer discovered the element helium by studying the spectrum of sunlight emitted during an eclipse. These events also allowed the first scientific observations of coronal mass ejections — violent expulsions of plasma from the sun’s corona — which can cause power outages and communication disruptions on Earth. Scientists also confirmed Einstein’s theory of general relativity, which says that massive objects bend the fabric of space-time, during a solar eclipse in 1919.

And there is more to discover. This April, NASA plans to fly instruments on planes to capture images of the solar corona, and launch rockets to study how the drop in sunlight during an eclipse affects Earth’s atmosphere. A radio telescope in California will try to use the moon as a shield to measure emissions from individual sunspots .

The public is joining the fun, too. During the eclipse, a team of ham radio operators will beam signals across the country to study how solar disturbances can affect communications. Some people along the path of totality will record sounds from wildlife . Others will use their phones to snap pictures of the eclipse to help sketch out the shape of the solar disk .

An earlier version of this article referred imprecisely to eclipse on other worlds. Some appear larger than the sun in sky, they are not all partial eclipses.

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Katrina Miller is a science reporting fellow for The Times. She recently earned her Ph.D. in particle physics from the University of Chicago. More about Katrina Miller