commercial bank business plan

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 Bank 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 for Your Bank Business

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.  

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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.

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Other Helpful Business Plan Articles & Templates

Bank Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business ideas » Financial Service Industry » Bank

Are you about starting a bank? If YES, here is a complete sample commercial bank business plan template & feasibility report you can use for FREE .

Okay, so we have considered all the requirements for starting a bank . We also took it further by analyzing and drafting a sample bank business marketing plan template backed up by actionable guerrilla marketing ideas for banks. So let’s proceed to the business planning section.

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Why Start a Bank?

Starting your own bank is a huge step and needs a good deal of planning and preparation. Extensive information about the founders, the business plan, senior management team, finances, capital adequacy, risk management infrastructure, and other relevant factors must be provided to the appropriate authorities.

There are also a number of legal regulations and requirements that must be fulfilled in order to start your own bank. Some of these requirements are dependent upon the regulations in the niche you wish to establish your bank.

As hard as the task of starting a bank can be, anyone who wishes to start their own bank is able to enjoy the many benefits of making a major investment. Although the process of registering and setting up a bank involves lengthy planning and a relatively complex licensing procedure, once it is completed, the owner is able to conduct financial activity in their chosen niche.

Note that the very first step when starting your bank is to choose the niche and type of activity which you wish to engage in. Before you obtain the necessary licensing from the financial regulatory body, it is very crucial you identify whether you wish to specialize in investment banking or trade finance.

The advantages of owning your own bank are huge and include the potential to make large profits during a short period.

Note that if you know your target market and your target market’s specific requirements, you will be in a better position to provide a range of attractive services. To successfully start and run this business, it is advised you seek the help of a professional consultancy firm.

Through the advice and guidance of expert consultants, you will be able to establish a banking institution in a professional manner. Also have it in mind that any proposed bank must first receive the approval of a federal or state banking charter.

Before granting a charter, the chartering regulator must determine that the applicant bank has a reasonable chance for success and will operate in a safe and sound manner.

Then, the proposed bank must obtain approval for deposit insurance from the Federal Deposit Insurance Corporation. Additional approvals are required from the Federal Reserve if, at formation, a holding company would control the new bank or a state-chartered bank would become a member of the Federal Reserve.

A Sample Bank Business Plan Template

1. industry overview.

According to global banking industry reports, part of the broad financial services market, bank credit remain the leading market segment, with around 60% of the overall market in terms of value. Statistics has shown that the EU is the largest regional market, with over 57% of the global market.

Note that the economic recession that began in 2008 affected the industry and resulted in the crash of several financial institutions, which in turn led to the examination of practices and deployment of new guidelines in the banking industry.

But reports have it that the sector is beginning to rebound, and cross-border investment is one area contributing to recovery, with a few big banks dominating certain national markets. Advantages of cross-border practices include economies of scale, though institutions must compete with established domestic banks.

It’s very important to state that in the world retail banking and bank lending sectors, mortgage lending represents the leading market segment, accounting for almost 76% of the overall market in terms of value. Other key segments of the banking industry include private banking and payments business.

Note that in the US banking sector, experts believe that market growth will be driven by cross-border expansion due to the breaking down of obstacles to cross-border investment.

Competition between international banks is also expected to aid market growth along with the introduction of new products, reduction of costs and launching of new services. Report also has it that mobile and internet banking are becoming increasingly intertwined, especially due to the advent and success of smartphones. This provides consumers with convenient access to internet banking.

Have it in mind that the global mobile internet market will continue to drive the expansion of the mobile banking services sector. Report has shown that banking institutions are responding by launching downloadable applications and encouraging consumers to bank online and through mobile devices by rolling out mobile and internet banking services.

2. Executive Summary

Apex Investment Bank, LLC (AIB LLC) is a Portland Oregon based investment bank that will provide investment packages, underwriting, proprietary trading, and investment management for its investors. Our objective at AIB LLC is to create value for owners, employees, and investors through the establishment of an investment bank designed for the Third Generation.

This Generation is explicitly defined in the ground breaking research effort by Lincoln Swan & Co., Inc. and Netley Strategic business Group as a stage in the investment industry requiring a special set of skills for success. We at AIB LLC have leveraged this study, with more other studies, and perhaps most importantly, our own experience in the industry, to define a plan for the success of our clients.

Portland’s location is beneficial for several industries. Relatively low energy cost, accessible resources, north–south and east–west Interstates, international air terminals, large marine shipping facilities, and both west coast intercontinental railroads are all economic advantages.

AIB LLC will be structured as a Limited Liability Company with excellent plans to make use of industry research performed by one of our founding entrepreneurs, Solomon Drane during his professional career in investment management research.

Within the past three years, Solomon Drane has conducted research visits at the investment offices of over 80 companies. He has also held countless meetings with key investment professionals from around the globe either in person or via telephone conference.

We at AIB LLC plan to offer our clients the opportunity to assume minority ownership positions in exchange for contributions to our operating capital and for providing seed assets to establish the investment products described herein.

It is very important to state that this document alone does not create an offer of any type, nor does it give any guarantee, financial, or otherwise. This is a well detailed business plan designed to strategically dictate AIB LLC plans and visions for the next five years. It is open to correction or improvement within or after the specified time.

3. Our Products and Services

We at AIB LLC will provide investment packages and underwrite securities for sale to private investors and the general public among companies that are seeking to raise capital. At the onset of operations, we at AIB LLC will solely seek to sell debt instruments on behalf of our customers.

The standard fee for this service is 8% of the total underwritten instrument. We at AIB LLC will also solicit capital from accredited investors with the purpose of making use of this capital to make investment marketable securities. Our goal is to generate compounded annual returns of 30% to 35% per year on capital invested into our Bank’s portfolio holdings. We also plan to make sure that our management retains a 25% ownership interest at AIB LLC.

4. Our Mission and Vision Statement

• Our vision at AIB LLC is to develop into a large scale investment bank that will provide underwriting income, advisory income, dividend income, capital appreciation, and interest income to investors.
• Our mission at AIB LLC is to ensure that investment decisions are implemented quickly and efficiently across all portfolios, to also make sure a trading research and rotation is used to avoid any type of systematic advantage or disadvantage an account may experience.

Our Business Structure

We at AIB LLC understand that the strength of our management team and board of directors is perhaps the most important factor in starting a bank and effectively providing for its future success. We also found out through our detailed research that for a new bank charter to be approved for us, all our senior management team must be experienced bankers with a history of relevant success.

The more reason we made sure our board of directors are made up of individuals with successful careers in business, banking, and other fields, and have representation in the necessary disciplines.

We also understand the role of the board and management as investors and how important they are. Regulators and other investors will look to the investment of these directors and senior officers as an important sign of their commitment to the bank.

We also understand that the typical investment bank is operated on a rigid, strict hierarchy, than most corporate or financial institutions. We have taken our time to analyse our market and what we need that is why we have decided to start with the listed workforce.

Managing director

• Senior vice president

Vice president

Investment Banking Associate

Investment Banking Analyst

• Marketing manager
• Security man

5. Job Roles and Responsibilities

• Broaden and/or enhance the bank’s industry coverage,
• Will partner with the firm’s leadership to grow and build the bank
• Will tirelessly work to deliver superior results to the firms’ clients
• Participate as a key member of the senior leadership team, contributing to the strategy, growth and success of the firm
• Lead efforts on sell-side and buy-side acquisition assignments, refinancing, recapitalization and restructuring assignments
• Interact seamlessly with prospects, clients, acquirors, investors and attorneys on all aspects of a M&A deal and/or capital raise
• Direct a team of junior bankers to support all elements of deal sourcing and execution.

Senior Vice president

• Involved in executing and managing equity offerings that will include the drafting and structuring of material, logistics management, issue identification, its analysis and the resolution.
• Responsible for mergers and acquisitions and manages the creation of buyers list, their contacts, drafting the relevant material, financial analysis and private equity placement.
• Researches and identify deal opportunities by formulating and issuing factual financial analyses and creating different kinds of financial plans.
• Involved in pitching or selling the organization’s products and services to new clients and may be involved in other projects as well.
• May participate in due diligence meetings with non-proprietary or proprietary investment managers and create relevant call reports that include their opinions.
• May be involved in analyzing the investment products and screening them by making effective use of a variety of investment data and the relevant software applications
• Monitors the investment products and their performance.
• Analyses the relevant statistics to evaluate the appropriateness of the product.
• Manages relationships with the investment management organizations and regularly gets him/her updated by getting valuable information from them.
• Attends industry conferences and training sessions so as to present innovative ideas to clients
• Responsible for providing leadership and overseeing the work of the subordinate members.
• Call on prospective clients such as privately held business owners, publicly traded companies and private equity firms.
• Conceptualize, organize and deliver new business presentations.
• Lead transaction implementation across industry groups.
• Manage, educate and develop banking analysts and associates.
• Develop marketing and new business presentations.
• Monitor financial analysis and modeling.
• Perform and analyze industry research.
• Create client presentations, proposals, engagement letters term sheets, legal agreements and offer memorandums.
• Create and foster client relationships.
• Managing and assisting in the preparation of financial models and business valuations
• Creating client marketing presentations
• Attending client meetings
• Conducting industry and company-specific due diligence related to transactions
• Drafting memoranda for sale assignments
• Assisting in the preparation of fairness opinions
• Attending drafting sessions for equity offerings
• Creating marketing materials for our equity sales organization
• Assisting in the development and continued cultivation of client relationships
• Developing an understanding of the underlying trends that affect equity capital markets.
• Development of various types of financial models to value debt and equity for mergers, acquisitions, and capital raising transactions.
• Perform various valuation methods: comparable companies, precedents, and DCF.
• Develop recommendations for product offerings, private equity transactions, mergers and acquisitions, and valuations.
• Conduct preparation and review of materials used in the financing of clients, including investment memoranda, management presentations and pitchbooks.
• Develop relationships with new and existing clients in order to expand the business.
• Perform due diligence, research, analysis, and documentation of live transactions.
• Create presentations for client portfolios.

Sales and Marketing director

• In charge of organizing external research and coordinating all the internal sources of information to retain the organizations’ best customers and attract new ones
• Expected to understand, prioritizes, and reaches out to new partners, and business opportunities et al
• Tasked with understanding development opportunities; follows up on development leads and contacts
• It’s the job of the director to supervise implementation, advocate for the customer’s needs, and communicate with clients
• Keep all customer contact and information
• Represents the company in strategic meetings
• Aid to increase sales and growth for the business
• Keep note and make sure the toiletries and supplies don’t run out of stock
• Ensures that both the interior and exterior of the firm are always clean
• Handles any other duty as assigned by the Vice president

Security guard

• The security guard is in charge of protecting the firm and its environs
• Also controls traffic and organize parking
• He is Tasked with giving security tips when necessary
• Should also Patrol around the building on a 24 hours basis
• It’s expected to give security reports weekly

6. SWOT Analysis

We at AIB LLC understand that the very first step of starting a new bank is to build a strong business and strategic plan. We believe that this plan must consider the proposed business of the new bank, its financial and managerial resources and prospects for success, the convenience and needs of the public, and the effect of competition.

This strong business and strategic plan supported by detailed financial projections and appropriate policies and procedures form the basis of successful regulatory applications of a bank charter.

We at AIB LLC hope to establish a lucrative investment bank that will serve the needs of our clients and also bring in profits for our founders. We took time to conduct a detailed SWOT analysis for AIB LLC. The details and results are explained below.

According to our SWOT analysis, our strength at AIB LLC rests on the expertise and experience of our management team. With the experience and discipline of our team, our SWOT analysis predict we can build a robust company profile even before bidding for investment banking contracts from corporate organizations.

As the investment banking industry expands and grows in revenue and market reach, so does the level of competition in the industry. Due to the very low barriers to entry, any individual or business may register itself as an investment bank after completing the proper examinations and filings.

• Opportunities

The banking sector has become one of the fastest growing business sectors in the U.S. economy. Note that computerized technologies allow financial firms to operate advisory, investment banking, and brokerage services anywhere in the country.

In time past, most financial firms needed to be within a close proximity to Wall Street in order to provide their clients the highest level of service. This is no longer the case as a firm can access almost every facet of the financial markets through Internet connections and specialized trading and investment management software.

According to our SWOT analysis, the risks we will be facing include;

• Market Risk – A high correlation exists between the growth rate of the investment industry and the performance of equity markets. While evidence suggests an attractive environment for equities in the future, no forecasts can be made with absolute certainty.
• Performance Risk – It is understood that our products are measured by their performance. Although the goal is to achieve competitive performance over three to five-year time periods, short-term periods may result in underperformance based on the critical measures.
• Business/Operating Risk – Beyond the third full year of operation, assets under management must produce revenues that will be sufficient to support operations in their entirety. Otherwise our options will be to acquire additional funding or to reduce costs.

7. MARKET ANALYSIS

• Market Trend

Experts believe this industry will continue to experience growth in all parts of the world especially in developed countries such as united states of America, Canada, United Kingdom , Germany, Australia, South Korea, Japan, China et al.

According to industry data, the industry brings in a whooping sum of $105 billion annually with an annual growth rate projected at -13.0 percent within 2011 and 2016. Although the number of industry activities has not deviated dramatically over the five-year period, the share of revenue that each activity accounts for has undergone substantial volatility.

It is believed that the products and services in the Investment industry differ considerably on a company-by-company basis, largely depending on operator size.

It’s very important to state that small and medium size investment banks target niche industries and small companies and depend more heavily on traditional investment banking activities such as underwriting and financial advisory. Alternatively, major industry players earn a substantial share of revenue from trading activities.

Note that one factor that attract entrepreneurs to the investment banking business despite the huge capital requirements and the high risk is that the venture is profitable. We have made plans to always stay ahead of industry trend and also to get the required certifications and license and also meet the standard capitalization for an investment bank in the United States.

8. Our Target Market

Our target market at AIB LLC will be greatly dependent on the phase of our product in its development cycle. Have it in mind that most of the marketing opportunities will happen beyond the first year of product development. But we remain very certain that some initial opportunities do exist.

For instance, our bank can utilize its transfer agent’s distribution services, which would put the product in a highly visible online platform. Note that extra opportunities include marketing to programs that invest specifically in “emerging managers.”

We at AIB LLC also believe that the high net worth and retail marketplace can be accessed to a limited degree, even in the early stages, through similar innovative opportunities and already-established relationships with clients. Just like manufacturing organizations, investment businesses are expected to develop products to provide to their customers.

Our hallmark product offering will be our well designed Market Equity strategy, an investment product offering based on the evidence supporting investor’s desires to outperform the overall market via a single, diversified vehicle and to avoid the need to create complex investment structures.

Our competitive advantage

Our Competitive Advantage at AIB LLC is specified in the three P’s commonly associated with investment firms: People, Process, and Performance. The first two determine the latter. Although our business plan highlights many areas (market research, financial projections, etc.), we believe there are two areas that will surely determine the level of success achieved by AIB LLC.

We believe that the very first is the people. Bright, energetic, talented, and knowledgeable individuals compose the core of the team we have at AIB LLC. We were able to note from our rigorous research that the most qualified investment professionals are attracted to efficient investment banks that are free from bureaucracy. Process is the second most important element of our bank.

We have made sure cutting-edge research will be provided in support of our portfolio management process. The implementation of our process is maximized by outsourcing virtually all functions not related to portfolio management and research, thereby making full use of the bank’s human capital.

9. SALES AND MARKETING STRATEGY

We at AIB LLC understand that the key to marketing an investment product is to create a successful and attractive product, develop a pattern of success, and show that pattern can be repeated in the future. After that, successful products should be aggressively marketed if capacity to manage additional assets exists.

Although a three to five-year period tend to seem like a century compared to the technology world, it is really quite reasonable considering the fact that private equity investors in limited partnership vehicles are generally satisfied with a 10-year waiting period that exists prior to a return of their capital investment.

AIB hallmark investment product will be the AIB Total Market Equity strategy and will be initially offered through an SEC registered mutual fund. Technological advancements also permit for other economically feasible distribution channels such as separately managed portfolios for large account sizes.

Sources of Income

We believe that our primary income at AIB LLC will come from providing our clients with investment packages, securities underwriting and advisory services in regards to mergers and acquisitions. AIB LLC will earn substantial fees for the equity and debt instruments that it underwrites and then resells to the general public.

We also believe that we will engage primarily in debt instruments among middle market companies that will be sold on a best efforts basis. This will place minimal risk on our capital reserve.

We will also earn substantial per hour management and deal fees regarding advisory services for mergers and acquisition operations. We also plan to make investments directly into marketable securities and hedge funds that specialize in specific areas of trading.

Our intention is to develop a number of trading strategies including options trading, LEAPs trading, long position/short position trading, and other methods of trading that will produce small but consistent gains on a weekly and monthly basis.

We plan to engage in a covered call strategy that would allow the fund to assure return on investment for securities that are held for an extended period of time.

10. Sales Forecast

We at AIB LLC expect to turn over approximately 1/3 of our portfolio each year. We strongly believe that this is consistent with an average holding period of three years. Generally, we would love for all holdings to be long-term investments, so we will identify stocks we will be comfortable with if we were “locked in” for three years.

This forces us to look beyond short-term noise in quarter-to-quarter results and focus on the big picture, such as our management’s vision for the future and their probability of executing their plan.

11. Publicity and Advertising Strategy

We understand the importance of creating a good publicity plan that will boost our brand and help us stay consistent in the industry.

That is why we contacted Advertising Experts called Kinks Global, to help us create publicity and advertising strategies that will help us at AIB LLC to attract and keep our target audience interested. Listed below is the summary of strategies detailed by Kinks Global for our Bank.

• Place adverts on both print (community based newspapers and magazines) and electronic media platforms; we will also advertise AIB LLC on financial magazines, real estate and other relevant financial programs on radio and TV
• Introduce AIB LLC by sending introductory letters with our business brochure to individuals, households, corporate organizations, schools, players in the real estate sector, and all the people of Alexandria.
• Advertise AIB LLC in important financial and business related magazines, newspapers, TV and radio stations.
• Place AIB LLC on yellow pages ads (local directories)
• Attend important international and local real estate, finance and business expos, seminars, and business fairs et al
• Encourage word of mouth marketing from loyal and satisfied clients
• Sponsor relevant community based events / programs
• Leverage various online platforms to promote the business. This will make it easier for people to enter our website with just a click of the mouse. We will take advantage of the internet and social media platforms such as; Instagram, Facebook , twitter, YouTube, Google + et al to promote our brand
• Place our billboards at strategic locations
• Share our fliers and handbills in target areas all around Portland

12. Our Pricing Strategy

Firms in this industry get funds from investors who are interested in investing, and charge them for assisting them in investing their funds over a period of time as agreed by both parties. Even though investment banking is a very risky venture, it is still profitable, hence there is an agreement between the investment bank and the client as it relates to the commission they are expected to make from the deal.

We at AIB LLC plan to charge based on percentage and also a fix consultancy/business administrative fee. We believe that in the coming years and as we progress, that we can decide to improvise or adopt any business process and structure that will guarantee us good return on investment (ROI), efficiency and flexibility.

• Payment options

We plan to make sure we provide our clients with a wide variety of payment options for our services. We understand the diverse platforms people prefer and we plan to provide a suitable platform that will suit all equally. Listed below are the payment options that we will make available to AIB LLC.

• Payment through bank transfer
• Payment through online bank transfer
• Payment with check
• Payment with bank draft

13. Startup Expenditure (Budget)

We have noted that banks are expected raise their initial capital from investors after completing regulatory processes before they can open. In the industry, all insured banks must comply with the capital adequacy guidelines of their primary federal regulator.

The guidelines require a bank to demonstrate that it will have enough capital to support its risk profile, operations, and future growth even in the event of unexpected losses.

We believe that new established banks are generally subject to additional criteria that remain in place until the bank’s operations become well established and profitable. We at AIB LLC plan for an effective minimum capital of between $15 million to $25 million.

Successful capital generation in these amounts is generally the result of a well formulated and executed plan for developing local and other investors in the bank. We have analyzed our needs and we plan to spend our startup funds judiciously. Outlined below is a detailed financial projection and costing for starting AIB LLC;

• Price of incorporating the Business in the United States of America – $750.
• Our budget for basic insurance policy covers, permits and business license – $200,000
• Acquiring a suitable Office facility opposite the city hall at Portland Delta State (Re – Construction of the facility inclusive) – $75,000
• The budget envisaged for capitalization (working capital) – $30 million
• Budget for settling other legal processes (acquiring business license and all city dues et al) – $2,500
• Equipping the office with suitable and standard equipment(computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $10,000
• Purchasing of the required software applications (CRM software, Accounting and Bookkeeping software and Payroll software et al) – $10,500
• Launching AIB LLC official Website – $600
• Our expenditure for paying employees for 3 months plus utility bills – $36, 000
• Other Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $4,000
• Miscellaneous: $10,000

With the above detailed cost analysis , we need $349,350 and $30 million working capital to successfully set up AIB LLC.

• Generating Startup Capital for AIB LLC

AIB LLC is a licensed and registered investment bank which is capitalized by five principal investors, Mr Solomon Drane, Mrs Agnes Church, Dr Mel Stanford, Mr Kelvin Cruff and Prof. John Thomas.

Our founders plan to become the very first financiers of the business, although we have plans of selling shares and stocks as the business matures. Due to less constraint in financing, we have outlined the few ways we can acknowledge funding. These ways may include;

• Generate part of the startup capital from the five principal investors
• Agreeing to angel investors
• Apply for business loan from the Federal Reserve Bank (if need be)

Note: AIB LLC has been able to generate an enormous $15 million from its five principal investors, who aligned and individually dished out $3,000,000 each. We have also aligned with angel investors to inject $20 million into AIB LLC, with the hope of making profits and establishing a solid business.

14. Sustainability and Expansion Strategy

Our primary goal of the first full quarter of operation (February- May 2019) is to secure funding from outside sources. Before that, our management team at AIB LLC has a budget of $300,000 to be used for finding investors, forming a legal LLC, and registering the bank and its products with the SEC.

The amount sought from investors will be approximately $20 million, which should see the business through to profitability near the completion of the third year. We at AIB LLC believe that this break-even point equates roughly to an asset under management level of approximately $130 million.

One can easily see that even modest points beyond this break-even level can be highly lucrative. It is also important to note that excess cash will be re-deployed into the business once a level of sustainability in revenue has been reached. Our primary purpose for this type of reinvestment would solely focus on a “second stage” marketing plan to increase distribution.

We also believe that a word of note is also warranted as it relates to the cash flow statement of our bank. Have it in mind that one appealing feature of the investment industry is that collection of fees (i.e. revenues) is highly certain because fees are frequently charged directly to the client’s accounts (or to the mutual fund).

That is the more reason why revenue certainty is very high and is directly related to the amount of assets under management.

Also note that common practice in the investment industry is to bill at each quarter-end. For instance, our annual fee of 1% would be applied to our clients’ accounts five times per year at 0.20%. We at AIB LLC can strongly attest to the fact that economic motivation is great.

Growth rates for the investment industry are projected to range from 25% to 24% in each of the next three years. We believe that the demographic, economic, political and social evidence supporting these projections make this industry one of the most attractive industries due to the high degree of certainty in the estimates.

We at AIB LLC believe that the certainty coupled with the above average growth rate differentiates this opportunity from other venture investments. Also have it in mind that our conservative estimates outline a plan-to-profitability over a period much shorter than typical venture investments that sometimes need up to ten years to make profits.

Check List/Milestone

• Business Name Availability Check : Completed
• Business Incorporation: Completed
• Opening of Corporate Bank Accounts: Completed
• Opening Online Payment Platforms: Completed
• Application and Obtaining Tax Payer’s ID: In Progress
• Application for business license and permit: Completed
• Purchase of Insurance for the Business: Completed
• Conducting feasibility studies: Completed
• Leasing, renovating and equipping our facility: Completed
• Generating part of the start – up capital from the founder: Completed
• Applications for Loan from our Bankers: In Progress
• Writing of Business Plan: Completed
• Drafting of Employee’s Handbook: Completed
• Drafting of Contract Documents: In Progress
• Design of The Company’s Logo: Completed
• Printing of Promotional Materials: Completed
• Recruitment of employees: In Progress
• Purchase of software applications, furniture, office equipment, electronic appliances and facility facelift: In progress
• Creating Official Website for the Company: In Progress
• Creating Awareness for the business (Business PR): In Progress
• Health and Safety and Fire Safety Arrangement: In Progress
• Establishing business relationship with banks, financial lending institutions, vendors and key players in the industry: In Progress

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How to Write a Business Plan to Start a Bank

Published Feb.29, 2024

Updated Sep.10, 2024

By: Alex Silensky

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Table of Content

Bank Business Plan Checklist

A bank business plan is a document that describes the bank’s goals, strategies, operations, and financial projections. It communicates the bank’s vision and value proposition to potential investors, regulators, and stakeholders. A SBA business plan should be clear, concise, and realistic. It should also cover all the essential aspects of the bank’s business model.

Here is a checklist of the main sections that you should keep in mind while building a bank business plan:

• Executive summary
• Company description
• Industry analysis
• Competitive analysis
• Service or product list
• Marketing and sales plan
• Operations plan
• Management team
• Funding request
• Financial plan

Sample Business Plan for Bank

The following is a bank business plan template that operates in the USA. This bank business plan example is regarding ABC Bank, and it includes the following sections:

Executive Summary

ABC Bank is a new bank for California’s SMBs and individuals. We offer convenient banking services tailored to our customers’ needs and preferences. We have a large target market with over 500,000 SMBs spending billions on banking services annually. We have the licenses and approvals to operate our bank and raised $20 million in seed funding. We are looking for another $30 million in debt financing.

Our goal is to launch our bank by the end of 2024 and achieve the following objectives in the first five years of operation:

• Acquire 100,000 customers and 10% market share
• Generate $100 million in annual revenue and $20 million in net profit
• Achieve a return on equity (ROE) of 15% and a return on assets (ROA) of 1.5%
• Expand our network to 10 branches and 50 ATMs
• Increase our brand awareness and customer loyalty

Our bank has great potential to succeed and grow in the banking industry. We invite you to read the rest of our microfinance business plan to learn about how to set up a business plan for the bank and how we will achieve our goals.

Industry Analysis

California has one of the biggest and most active banking industries in the US and the world. According to the Federal Deposit Insurance Corp , California has 128 financial institutions, with total assets exceeding $560 billion.

The California banking industry is regulated and supervised by various federal and state authorities. However, they also face several risks and challenges, such as:

• High competition and consolidation
• Increasing regulation and compliance
• Rising customer demand for digital and mobile banking
• Cyberattacks and data breaches
• Environmental and social issues

The banking industry in California is highly competitive and fragmented. According to the FDIC, the top 10 banks and thrifts in California by total deposits as of June 30, 2023, were:

Customer Analysis

We serve SMBs who need local, easy, and cheap banking. We divide our customers into four segments by size, industry, location, and needs: 

SMB Segment 1 – Tech SMBs in big cities of California. These are fast-growing, banking-intensive customers. They account for a fifth of our market share and a third of our revenue and are loyal and referable.

SMB Segment 2 – Entertainment SMBs in California’s entertainment hubs. These are high-profile, banking-heavy customers. They make up a sixth of our market and a fourth of our revenue and are loyal and influential.

SMB Segment 3 – Tourism SMBs in California’s tourist spots. These are seasonal, banking-dependent customers. They represent a quarter of our market and a fifth of our revenue and are loyal and satisfied.

SMB Segment 4 – Other SMBs in various regions of California. These are slow-growing, banking-light customers. They constitute two-fifths of our market and a quarter of our revenue and are loyal and stable.

Competitive Analysis

We compete with other banks and financial institutions that offer similar or substitute products and services to our target customers in our target market. We group our competitors into four categories based on their size and scope: 

1. National Banks

• Key Players – Bank of America, Wells Fargo, JPMorgan Chase, Citibank, U.S. Bank
• Strengths – Large customer base, strong brand, extensive branch/ATM network, innovation, robust operations, solid financial performance
• Weaknesses – High competition, regulatory costs, low customer satisfaction, high attrition
• Strategies – Maintain dominance through customer acquisition/retention, revenue growth, efficiency

2. Regional Banks

• Key Players – MUFG Union Bank, Bank of the West, First Republic Bank, Silicon Valley Bank, East West Bank
• Strengths – Loyal customer base, brand recognition, convenient branch/ATM network, flexible operations
• Weaknesses – Moderate competition, regulatory costs, customer attrition
• Strategies – Grow market presence through customer acquisition/retention, revenue optimization, efficiency

3. Community Banks

• Key Players – Mechanics Bank, Bank of Marin, Pacific Premier Bank, Tri Counties Bank, Luther Burbank Savings
• Strengths – Small loyal customer base, reputation, convenient branches, ability to adapt
• Weaknesses – Low innovation and technology adoption
• Strategies – Maintain niche identity through customer loyalty, revenue optimization, efficiency

4. Online Banks

• Key Players – Ally Bank, Capital One 360, Discover Bank, Chime Bank, Varo Bank
• Strengths – Large growing customer base, strong brand, no branches, lean operations, high efficiency
• Weaknesses – High competition, regulatory costs, low customer satisfaction and trust, high attrition
• Strategies – Disrupt the industry by acquiring/retaining customers, optimizing revenue, improving efficiency

Market Research

Our market research shows that:

• California has a large, competitive, growing banking market with 128 banks and $560 billion in assets.
• Our target customers are the SMBs in California, which is 99.8% of the businesses and employ 7.2-7.4 million employees.
• Our main competitors are national and regional banks in California that offer similar banking products and services.

We conclude that:

• Based on the information provided in our loan officer business plan , there is a promising business opportunity for us to venture into and establish a presence in the banking market in California.
• We should focus on the SMBs in California, as they have various unmet banking needs, preferences, behavior, and a high potential for growth and profitability.

Operations Plan

Our operational structure and processes form the basis of our operations plan, and they are as follows:

• Location and Layout – We have a network of 10 branches and 50 ATMs across our target area in California. We strategically place our branches and ATMs in convenient and high-traffic locations.
• Equipment and Technology – We use modern equipment and technology to provide our products and services. We have computers and software for banking functions; security systems to protect branches and ATMs; communication systems to communicate with customers and staff; inventory and supplies to operate branches and ATMs.
• Suppliers and Vendors – We work with reliable suppliers and vendors that provide our inventory and supplies like cash, cards, paper, etc. We have supplier management systems to evaluate performance.
• Staff and Management – Our branches have staff like branch managers, customer service representatives, tellers, and ATM technicians with suitable qualifications and experience.
• Policies and Procedures – We have policies for customer service, cash handling, card handling, and paper handling to ensure quality, minimize losses, and comply with regulations. We use various tools and systems to implement these policies.

Management Team

The following individuals make up our management team:

• Earl Yao, CEO and Founder – Earl is responsible for establishing and guiding the bank’s vision, mission, strategy, and overall operations. He brings with him over 20 years of banking experience.
• Paula Wells, CFO and Co-Founder – Paula oversees financial planning, reporting, analysis, compliance, and risk management.
• Mark Hans, CTO – Mark leads our technology strategy, infrastructure, innovation, and digital transformation.
• Emma Smith, CMO – Emma is responsible for designing and implementing our marketing strategy and campaigns.
• David O’kane, COO – David manages the daily operations and processes of the bank ensuring our products and services meet the highest standards of quality and efficiency.

Financial Projections

Our assumptions and drivers form the basis of our financial projections, which are as follows:

Assumptions: We have made the following assumptions for our collection agency business plan :

• Start with 10 branches, 50 ATMs in January 2024
• Grow branches and ATMs 10% annually
• 10,000 customers per branch, 2,000 per ATM
• 5% average loan rate, 2% average deposit rate
• 80% average loan-to-deposit ratio
• $10 average fee per customer monthly
• $100,000 average operating expense per branch monthly
• $10,000 average operating expense per ATM monthly
• 25% average tax rate

Our financial projections are as per our:

• Projected Income Statement
• Projected Cash Flow Statement
• Projected Balance Sheet
• Projected Financial Ratios and Indicators

Select the Legal Framework for Your Bank

Our legal structure and requirements form the basis of our legal framework, which are as follows:

Legal Structure and Entity – We have chosen to incorporate our bank as a limited liability company (LLC) under the laws of California.

Members – We have two members who own and control our bank: Earl Yao and Paula Wells, the founders and co-founders of our bank.

Manager – We have appointed Mark Hans as our manager who oversees our bank’s day-to-day operations and activities.

Name – We have registered our bank’s name as ABC Bank LLC with the California Secretary of State. We have also obtained a trademark registration for our name and logo.

Registered Agent – We have designated XYZ Registered Agent Services LLC as our registered agent authorized to receive and handle legal notices and documents on behalf of our bank.

Licenses and Approvals – We have obtained the necessary licenses and approvals to operate our bank in California, including:

• Federal Deposit Insurance Corporation (FDIC) Insurance
• Federal Reserve System Membership
• California Department of Financial Protection and Innovation (DFPI) License
• Business License
• Employer Identification Number (EIN)
• Zoning and Building Permits

Legal Documents and Agreements – We have prepared and signed the necessary legal documents and agreements to form and operate our bank, including:

• Certificate of Formation
• Operating Agreement
• Membership Agreement
• Loan Agreement
• Card Agreement
• Paper Agreement

Keys to Success

We analyze our market, customers, competitors, and industry to determine our keys to success. We have identified the following keys to success for our bank.

Customer Satisfaction

Customer satisfaction is vital for any business, especially a bank relying on loyalty and referrals. It is the degree customers are happy with our products, services, and interactions. It is influenced by:

• Product and service quality – High-quality products and services that meet customer needs and preferences
• Customer service quality – Friendly, professional, and helpful customer service across channels
• Customer experience quality – Convenient, reliable, and secure customer access and transactions

We will measure satisfaction with surveys, feedback, mystery shopping, and net promoter scores. Our goal is a net promoter score of at least 8.

Operational Efficiency

Efficiency is key in a regulated, competitive environment. It is using resources and processes effectively to achieve goals and objectives. It is influenced by:

• Resource optimization – Effective and efficient use and control of capital, staff, and technology
• Process improvement – Streamlined, standardized processes measured for performance
• Performance management – Managing financial, operational, customer, and stakeholder performance

We will measure efficiency with KPIs, metrics, dashboards, and operational efficiency ratios. Our goal is an operational efficiency ratio below 50%.

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Highly Efficient Service! I am incredibly happy with the outcome; Alex and his team are highly efficient professionals with a diverse bank of knowledge.

Are you looking to hire business plan writers to start a bank business plan? At OGSCapital, we can help you create a customized and high-quality bank development business plan to meet your goals and exceed your expectations.

We have a team of senior business plan experts with extensive experience and expertise in various industries and markets. We will conduct thorough market research, develop a unique value proposition, design a compelling financial model, and craft a persuasive pitch deck for your business plan. We will also offer you strategic advice, guidance, and access to a network of investors and other crucial contacts.

We are not just a business plan writing service. We are a partner and a mentor who will support you throughout your entrepreneurial journey. We will help you achieve your business goals with smart solutions and professional advice. Contact us today and let us help you turn your business idea into a reality.

Frequently Asked Questions

How do I start a small bank business?

To start a small bank business in the US, you need to raise enough capital, understand how to make a business plan for the bank, apply for a federal or state charter, register your bank for taxes, open a business bank account, set up accounting, get the necessary permits and licenses, get bank insurance, define your brand, create your website, and set up your phone system.

Are banks profitable businesses?

Yes, banks are profitable businesses in the US. They earn money through interest on loans and fees for other services. The commercial banking industry in the US has grown 5.6% per year on average between 2018 and 2023.

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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 Start Commercial Bank Business

• by Olaoluwa
• September 1, 2022 August 28, 2024

Here is how to write a commercial bank business plan .

The financial services sector of any economy can never be complete without the services offered by commercial banks.

Commercial and private banks are profit-based. They grant loans, accept deposits, and also offer other types of financial services like electronic banking (including the transfer of funds among others).

Commercial Banking BUSINESS STARTUP GUIDE

In writing your commercial bank business plan, the following sections should not be left out.

These are basic to having a successful and implementable plan. They include the executive summary section, the company description, market analysis, and competitive analysis sections.

Additional sections include a description of management and organization, breakdown of products and services, marketing plan, sales strategy, request for funding, and financial projections.

Each of these is key to writing a comprehensive commercial bank business plan.

Executive Summary Section

As the name suggests, your commercial bank business plan should have the executive summary section. This should be the first section of your plan. Though this is the usual pattern, it is written last.

This is understandable because it summarizes your entire plan.

Now, the executive summary section of your business shouldn’t belong. It should be a page or two at most. To provide your reader with an enjoyable presentation of what your commercial bank business is about, it should follow a basic format;

Questions that will need to be answered here include what your commercial bank business is about, how it fits into the marketplace, and the problem it solves. One of the common problems it solves involves reaching the unbanked population with basic as well as innovative commercial banking services.

What is the cost of starting a commercial banking business and how much financing do you need? The investor(s) is interested in how their investments plus interest will be recouped. So, what is the return on investment like?

Your vision and mission statements must be added including how the ownership structure of your commercial bank operations is.

Company Description

A detailed description of your commercial bank business must be provided under this section. Important information must be provided here including your goals, as well as your target market.

There should be a discussion of how your banking operations will stand out from the rest. Also, you must state how your services and products (if any) will be helpful to clients or your target market.

Market Analysis

This is one of the most crucial parts of your commercial bank business plan. Here, an in-depth assessment of the financial services industry is required to enable you to have a full grasp of specific gaps you need to fill.

The use of data and statistics to explain the industry as well as findings and trends is very important. That way, a likely direction is identified and you’re able to seek innovative ways to serve your target clients better.

Competitive Analysis

Commercial banking is a highly competitive sector.

As such, you’ll need to determine or analyze how your business will come, what gaps to fill and also identify your competitors (other commercial banks).

When identifying your competitors, your goal is to know their strengths and weaknesses and finding ways your commercial banking operations will stack up against such.

Description of Management & Organization

Your commercial bank business needs an organizational structure.

Here, you’ll need to elaborate on membership, qualifications, and positions within your management team to be filled. Only skilled and experienced professionals must be picked for such positions.

The structure your commercial bank will take or adopt is also important and must be clearly stated. Membership of your bank’s board of directors must also be identified and provided.

Breakdown of Products and Services

Commercial banking operations are mostly service-based.

However, depending on your areas of interest, you may want to create products such as project finance, industrial loans, leasing, syndicated loans, bills of exchange, foreign trade financing among several others.

Marketing Plan

Marketing is a basic part of commercial banking operations.

As such, you’ll need to have a detailed plan on how you intend to sell your products to clients (both new and existing). A well-written marketing plan should include market research, identify a target market, and also discuss positioning.

Other vital components include competitive analysis, market strategy, budget, and metrics. These enable you to come up with an effective marketing strategy that bolsters your operations leading to increased levels of success.

Sales Strategy

Every service or product offered by a commercial bank needs to be sold. Here, you’ll need to discuss the ways and strategies through which your services and products will be sold. There must be clarity.

Apart from the methods to be adopted, strategies may include the hiring and deployment of sales reps to specific targets or clients. With an effective sales strategy, your commercial banking operations are likely to be successful in the long run.

Request for Funding

Part of the requirements for starting a successful commercial banking operation involves getting the funding necessary. For this to be possible, you’ll need to request funding.

Here, discussions will focus on the amount required for the takeoff of your bank.

Detailed information on how these funds will be spent is also essential. You may also want to disclose future funding requirements for any projects or expansion plans to your operations (if any).

With detailed information provided on these, your chances of getting the needed funding are significantly increased.

Financial Projections

This section discusses the anticipated revenue and must include set goals or targets based on market research.

A full report of your anticipated revenue covering 12 months and also your projected earnings for a period covering 5 years must be included.

Clarity is of the essence when it comes to writing a commercial bank business plan. Not only does this help your reader fully grasp its contents, but it also enables you to strategically implement your banking operations.

Here, we’ve provided tips and guidance on how to go about writing your commercial banking business plan. The sections included here are crucial and must be covered in detail. No aspect of your operations must be left out.

Equally important is the need to fully implement its content.

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Commercial Bank Business Plan and SWOT Analysis

Commercial Bank Business Plan, Marketing Plan, How To Guide, and Funding Directory

The Commercial Bank Business Plan and Business Development toolkit features 18 different documents that you can use for capital raising or general business planning purposes. Our product line also features comprehensive information regarding to how to start a Commercial Bank business. All business planning packages come with easy-to-use instructions so that you can reduce the time needed to create a professional business plan and presentation.

Your Business Planning Package will be immediately emailed to you after you make your purchase.

Product Specifications (please see images below):

• Bank/Investor Ready!
• Complete Industry Research
• 3 Year Excel Financial Model
• Business Plan (26 to 30 pages)
• Loan Amortization and ROI Tools
• Three SWOT Analysis Templates
• Easy to Use Instructions
• All Documents Delivered in Word, Excel, and PDF Format
• Meets SBA Requirements

Commercial banks are one of the oldest industries within the United States. In fact, commercial banking is one of the backbones to the economy. These organizations allow  individuals to safely keep their money in a financial institution while concurrently being able to borrow funds to purchase new homes, develop new businesses, and pay for certain day-to-day expenses. In fact, one of the reasons why the commercial banking industry is the most regulated aspect of the financial system given that it is so central to every other business within the United States and abroad. The financial crisis of 2008 made it even abundantly more clear that having strong commercial regulations as it relates to banking is essential for a thriving economy.

Commercial banks are also an important part of any community given that they extend credit for economically viable projects like small businesses, farms, real estate developments, as well as a host of other financing activities that improve the lives of people within the community. In fact, many economic studies point to the fact that the extension of credit is one of the single greatest factors in ensuring that a community can thrive on an ongoing basis. This is especially true given that credit is the lifeblood for many small businesses that need ongoing working capital as well as expansion capital.

The barriers to entry for a new commercial bank are extremely high. Typically, a minimum capital investment of at least $10 million to $20 million is required as part of the tier 1 capital needed to launch operations. Banks typically are able to lend up to 90% of the money that they have in deposits, but they are required to keep a substantial amount of equity on hand in order to defray some of the risks that may happen with credit defaults. Generally, a commercial bank cannot be owned by one single individual. It is a requirement by the FDIC as well as the US Federal Reserve system that a large-scale board of directors is maintained in order to properly carry out banking operations.

A commercial bank business plan should have a three-year profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page it focuses significantly on how income will be generated from interest on loans as well as fees associated with checking accounts, savings accounts, and brokerage accounts. It is been one of the common trends within this industry to integrate a host of financial services into one commercial banking facility. In fact, among the 8,000 different banks within the United States about half of them maintain securities licenses so they can hold individuals retirement accounts, 401(k)s, IRAs, and related financial instruments on behalf of their customers. This trend is expected to continue in perpetuity given that vertical integration allows for commercial banks to generate significantly more profits.

The commercial bank business plan should also feature a substantial amount of demographic information. This is going to be required by the Federal Reserve as well as other banking organizations are issue licenses before operations can commence. This examination should include an overview of the population size, population density, median household income, median family income, median household value, and the demographics of people of all ages. Anyone that is over the age of 18 can acquire a bank account and it is important to understand the wealth and income levels within the target market in order to get an understanding of how much money will be held in deposits at any given time. These again are going to be pieces of information that are to be required not only in the business plan but also for applications for banking licenses.

A commercial bank marketing plan is also going to need to be developed and submitted not only to investors that are going to put up the initial $10 to $20 million of capital needed but also to licensing authorities. Foremost, most commercial banks start in more rural areas were small towns in order to get an initial customer base. Many people choose to do banking with smaller banks because they prefer the close personal relationship that they can have with their financial professionals. As such, most commercial banks position their marketing messages so that they are able to effectively differentiate themselves from large-scale money center banks. Although commercial banks are operate in a different capacity than a credit union, most local small banks do try to provide the same level of service. It is imperative

It is imperative these days that any financial institution maintain an expansive online presence as it relates to not only providing information about services offered but also functionality that allows the users to check their online balances, complete bill paying, overview any loans or lines of credit there are outstanding, and a whole host of other activities that are normally associated with financial transactions. This is now no longer an option for a business to have given that almost all large money center banks to provide their customers not only with a website they can use for financial transactions but also for mobile applications as well. Once established, many smaller commercial banks will seek to develop mobile applications that allow users to manage their finances from the convenience of their mobile phone or tablet.

A large-scale print advertising campaign is going to need to be undertaken in order to generate interest among individuals within the community for checking accounts, savings accounts, and brokerage accounts. Most importantly, this print advertising campaign needs to be carry out on every medium available within a target market radius of 25 miles to 50 miles depending on the type of location. An attorney that is familiar with banking and lending laws should review all marketing materials that are distributed by the bank in order to ensure that the business is complying with all disclosure laws at all times. This is one of the major ongoing challenges for marketing as it relates to a commercial bank given that certain statements must fall in line with legally permissible regulations.

A commercial bank SWOT analysis should be produced as well. As it relates to strengths, a commercial bank is able to generate income and pretty much every economic climate given that loans are considered to be contractual agreements and interest will continue to be paid despite whether or not the economy is doing well or poorly. Additionally, commercial banks have extremely high barriers to entry given the extremely large amount of money needed to launch operations as well as the ongoing licensing activities that need to be maintained at all times. For weaknesses, commercial banks can have a decline in the revenues or have substantial issues with the balance sheets during times of economic recession when people do not pay their financial obligations. However, most financial institutions are highly regulated so that if a loss occurs in any given time the bank will be able to remain financially stable. For opportunities, one of the ways that has been most prevalent for commercial banks to expand their operations is to acquire third-party companies. These mergers and acquisitions often create much larger financial situations are far more financially stable. Additionally, many commercial banks will seek to sell themselves to a large money center bank in order to generate a substantial return on investment from the sale of the business as a whole. Many financial institutions will also seek to establish additional locations so that they can even increase the number of deposits that they have in the form of checking accounts and savings accounts. Finally, for threats – major changes in regulation are frequent within the financial services and commercial banking industry. As such, a highly skilled attorney or law firm has extensive familiarity with commercial banking needs to be retained in order to ensure that the bank can properly operate due to any changes in financial regulation on the federal level.

A commercial bank is one of the hardest types of businesses to start but once they are operational there tend to be highly profitable companies. It is imperative that the entrepreneur that is looking to start this business have an extensive understanding of banking as well as extensive experience within this field. Banking licenses required that there is a significant amount of experience and diligence as it rates to operating these businesses on a day-to-day basis.

Commercial Bank Business Plan

1.0 Executive Summary

The purpose of this business plan is to raise $10,000,000 for the development of a commercial bank while showcasing the expected financials and operations over the next three years. Commercial Bank, Inc. (“the Company”) is a New York based corporation that will provide traditional commercial banking services for its investors in its targeted market. The Company was founded by John Doe.

1.1 The Operations

As stated above, the Company will act in a traditional banking capacity by offering loans, checking accounts, savings accounts, and other financial products normally associated with banks. At this time, Mr. Doe is securing the capital that is required in order to receive a banking license from the US Federal Reserve. The Founder is also undergoing the process of acquiring the needed licensure to operate this business.

The third section of the business plan will further describe the underwriting services and investment management services offered by the Commercial Bank.

1.2 The Financing

At this time, the Company is seeking to raise $10,000,000 for the development of the Commercial Bank’s operations. Mr. Doe is seeking to sell an 80% ownership interest in the business in exchange for this capital. 85% of the invested capital will be used for direct investments into the firm’s investments. Briefly, the capital will be used as follows:

• Financing for lending activities.
• Development of the Company’s initial branch.
• General working capital.

1.3 Mission Statement

Management’s mission is to provide the greater New York metropolitan area with an extensive line of banking and financial services that are affordable and convenient.

1.4 Management Team

The Company was founded by John Doe. Mr. Doe has more than 10 years of experience in the commercial banking industry. Through his expertise, he will be able to bring the operations of the business to profitability within its first year of operations.

1 . 5 Revenue Forecasts

1.6 Expansion Plan

The Company plans on positioning itself toward becoming a leading financial services provider among middle income people. As time continues, Commercial Bank, Inc. intends to not only expand its geographic reach by establishing relationships and offices in other major metropolitan areas but also by acquiring banks.

2.0 The Financing

2.1 Registered Name and Corporate Structure

Commercial Bank, Inc. The Company is registered as a corporation in the State of New York.

2.2 Use of Funds

2.3 Investor Equity

At this time, Mr. Doe is seeking to sell an 80% interest in the Commercial Bank in exchange for the capital sought in this business plan. Please reference the Company’s private placement memorandum regarding more information regarding the Company’s fee and ownership structure.

2.4 Management Equity

John Doe currently owns 100% of the Commercial Bank, Inc.

2.5 Exit Strategy

The Management has planned for three possible exit strategies. The first strategy would be to sell the Company to a larger entity at a significant premium. Since, the financial management and commercial banking industry maintains a very low risk profile once the business is established; the Management feels that the Company could be sold for ten to fifteen times earnings.

The second exit scenario would entail selling a portion of the Company via an initial public offering (or “IPO”). After a detailed analysis, it was found that the Company could sell for twenty to thirty times earnings on the open market depending on the business’s annual growth rate and strength of earnings. However, taking a company public involves significant legal red tape. Commercial Bank, Inc. would be bound by the significant legal framework of the Sarbanes-Oxley Act in addition to the legal requirements set forth in form S1 of the Securities and Exchange Commission. The Company would also have to comply with the Securities Act of 1933 and the Exchange Act of 1934.

3.0 Operations

Below is a description of the commercial banking services offered by the Company.

3.1 Customer Accounts

The primary service offered by Commercial Bank, Inc. is the management of checking accounts, savings accounts, and money market accounts. The bank, in turn, will use these deposits for financing customer loans and for making acquisitions of debt instruments in the secondary markets. The Company will provide Visa/MasterCard branded debit cards that can be used in any ATM or at stores that accept EBT payments.

At all times, the Company will comply with the myriad of federal, state, and central bank regulations (specifically Regulation U) that guide the operations of thrifts, trusts, and financial companies.

Through its branches, the business will be able to provide its customers with a variety of lending products including:

• First time homebuyer mortgages
• Second mortgages
• Home equity lines of credit/loans
• Commercial Mortgages
• Mortgage refinancing
• Automotive Loans
• Marine Loans
• Business Loans (SBA and traditional commercial loans)
• Student Loans
• Debt Consolidation
• Credit Cards (Secured, Unsecured, and Prepaid Cards)

4.0 Market and Strategic Analysis

4.1 Economic Analysis

This section of the analysis will detail the economic climate, the banking industry, the customer profile, and the competition that the business will face as it progresses through its business operations.

Currently, the economic climate is uncertain. The pandemic stemming from Covid-19 has created a substantial amount of turmoil within the capital markets. It is expected that a prolonged economic recovery will occur given that numerous businesses are being forced to remain closed for an indefinite period of time (while concurrently having their respective employees remain at home). However, central banks around the world have taken aggressive steps in order to ensure the free flow of capital into financial institutions. This is expected to greatly blunt the economic issues that will arise from this public health matter.

4.2 Industry Analysis

In the United States there are over 75,000 businesses that operate as depository credit institutions. Among these business, aggregates receipts over each of the last five years has been in excess of $800 billion dollars of interest and service revenue. These businesses employ over 1.7 million people.

This is a mature industry, and the future growth rate will mirror that of the economy as a whole. One of the major trends within this industry is for commercial banks to engage in a wide range of businesses including traditional banking coupled with brokerage/investment banking services. Moving forward, the Company may seek to integrate these operations into the overall service architecture of the business.

4.3 Customer Profile

The Company has established several lending procedures that will ensure that the Company’s default rate is less than 1.5% of the Company’s total loan portfolio. Among people that will use the Company’s services for borrowing money, Management has developed the following demographic profile:

• Between the ages of 28 and 65
• Household income of $35,000+
• Will borrow for an automotive or home purchase.
• Lives within 10 miles of a Commercial Bank branch

4.4 Competitive Analysis

This is one of the sections of the business plan that you must write completely on your own. The key to writing a strong competitive analysis is that you do your research on the local competition. Find out who your competitors are by searching online directories and searching in your local Yellow Pages. If there are a number of competitors in the same industry (meaning that it is not feasible to describe each one) then showcase the number of businesses that compete with you, and why your business will provide customers with service/products that are of better quality or less expensive than your competition.

5.0 Marketing Plan

Commercial Bank, Inc. intends to maintain an extensive marketing campaign that will ensure maximum visibility for the business in its targeted market. Below is an overview of the marketing strategies and objectives of the Commercial Bank.

5 .1 Marketing Objectives

• Develop an online presence by developing a website and placing the Company’s name and contact information with online directories.
• Establish relationships with third party banks within the United States (for specialized syndications).
• Maintain an expansive presence among all social media platforms.
• Maintain strong relationships with regional community organizations.

5.2 Marketing Strategies

Management intends to use a number of marketing strategies to immediate generate depositors and borrowers for Commercial Bank, Inc. The Company intends to use traditional print and media advertising as well as online sales tactics which will further increase visibility of Commercial Bank.

The Company will maintain an expansive presence on the internet. The business’ website will feature integrated banking functionality so that customers can engage all of their banking needs from the platform. The website will be mobile friendly and search engine optimized. The Company will have a stand along application developed that compliments the Company’s website.

The Commercial Bank will also maintain pages among all major social media platforms including Facebook, Twitter, Instagram, LinkedIn, and related platforms. The business will use targeted advertisements on these platforms among people that live within the target market area and fall into the Company’s demographic profile.

The business will regularly distribute a number of flyers while concurrently engaging in a massive grand opening in order to inform potential depositors and borrowers of the Company’s banking operations. The grand opening period will last three to six months depending on the success of the marketing campaign. Additionally, higher interest rates and lower loan rates will be used in order to convince people to switch their checking accounts and loan needs to Commercial Bank, Inc.

6.0 Organizational Overview

6.1 Organizational Chart

6.2 Personnel Budget

7.0 Financial Plan

7.1 Underlying Assumptions

The Company has based its proforma financial statements on the following:

• Commercial Bank will have an annual revenue growth rate of 20% per year.
• The Owner will acquire $10,000,000 of equity funds to develop the business.
• The Company will earn a compounded annual return of 30% on its proprietary investment portfolio.

7.2 Financial Highlights

The Company’s revenues are sensitive to the overall condition of the financial markets. Revenues derived from the lending portfolio are directly tied to the prevailing prime credit interest rate. As such, the Company must strive to invest in high credit quality investments that have ‘staying power’ during times of economic recession or pullback. Management will enact stringent credit control and screening policies to ensure that losses resulting from defaulted loans are kept below 1.5% of the Company’s closed loan portfolio.

7.3 Source of Funds

7.4 Profit and Loss Statement

7.5 Cash Flow Analysis

7.6 Balance Sheet

7.7 Breakeven Analysis

7.8 Business Ratios

Step-by-Step Guide: Writing a Business Plan that Gets Approved by Banks

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Launching a successful commercial bank requires meticulous planning and preparation. Before embarking on your business plan, it's crucial to address 9 essential steps that will lay the foundation for your venture's success. From identifying your target market and analyzing industry trends to establishing legal compliance and crafting a robust marketing strategy, this comprehensive checklist will guide you through the initial stages of your commercial banking endeavor.

Steps Prior To Business Plan Writing

Identify Target Market and Customer Needs

Identifying your target market and understanding customer needs is the foundation for building a successful commercial bank business plan. By thoroughly analyzing your potential customer base and their specific financial requirements, you can develop tailored products and services that address their pain points and position your commercial bank as a trusted partner in the local business community.

To start, conduct extensive market research to profile your ideal customer segments. This may include small business owners, entrepreneurs, local professionals, and other community members who require banking solutions to support their financial goals. Analyze factors such as industry, company size, revenue, growth stage, and geographic location to create detailed customer personas that inform your strategy.

Next, dive deeper into the specific banking needs of your target market. Understand the challenges they face, the financial products and services they currently use, and their level of satisfaction with existing commercial banking options. This insight will help you identify unmet needs and develop innovative solutions that set your commercial bank apart.

• Leverage customer surveys, focus groups, and one-on-one interviews to gather in-depth feedback from your target audience.
• Analyze industry reports, market data, and competitor research to further refine your understanding of customer pain points and preferences.
• Engage with local business organizations, chambers of commerce, and community leaders to gain a deeper understanding of the unique needs of your target market.

By taking the time to thoroughly understand your target market and their specific banking requirements, you can develop a commercial bank business plan that addresses their needs and positions your institution as a trusted partner in the local business community. This foundation will be crucial as you continue to build out your operational, financial, and marketing strategies.

According to a recent industry report, 78% of small business owners cite personalized service and relationship banking as the most important factors when selecting a commercial bank . By focusing on these key priorities, you can differentiate your commercial bank and attract a loyal customer base that will drive long-term growth and profitability.

Analyze industry trends and competitive landscape

Analyzing the industry trends and competitive landscape is a critical step in developing a robust business plan for a commercial bank. By understanding the current state of the banking industry, emerging trends, and the competitive dynamics, you can identify opportunities, mitigate risks, and position your commercial bank for success.

The commercial banking industry has undergone significant changes in recent years, driven by factors such as technological advancements, evolving customer preferences, and regulatory changes. According to the Federal Deposit Insurance Corporation (FDIC) , the number of commercial banks in the United States has declined from 14,451 in 1984 to 4,541 in 2020 , a decrease of over 68% . This consolidation in the industry has been driven by factors such as mergers, acquisitions, and the closure of smaller community banks.

One of the key industry trends is the increasing adoption of digital banking technologies, which has transformed the way customers interact with their financial institutions. According to a survey by the American Bankers Association, 67% of consumers prefer to use digital banking channels for their everyday banking needs . This shift has led to a heightened focus on developing user-friendly mobile apps, streamlining online banking platforms, and leveraging data analytics to provide personalized services.

Another significant trend is the rise of neobanks and fintech companies, which have disrupted the traditional banking landscape by offering innovative, technology-driven financial services. These players often target underserved segments of the market, such as small businesses and millennials, with their agile and customer-centric approaches. A study by CB Insights found that global investment in fintech companies reached a record $121.5 billion in 2020, a 43% increase from the previous year.

When analyzing the competitive landscape, it's essential to identify the key players in your target market, their market share, product offerings, and pricing strategies. This information will help you understand the competitive dynamics and develop strategies to differentiate your commercial bank from its rivals. According to the FDIC, the top 5 commercial banks in the United States hold over 44% of the total commercial banking assets as of 2020.

• Stay up-to-date with industry publications, regulatory reports, and market research to monitor the latest trends and competitive landscape.
• Leverage data analytics and customer insights to identify underserved market segments and unmet customer needs.
• Continuously evaluate your competitive positioning and adjust your business strategies accordingly.

Determine Unique Value Proposition and Competitive Advantages

Establishing a unique value proposition and identifying competitive advantages are critical steps in developing a successful business plan for a commercial bank startup. In a crowded and highly regulated banking industry, it's essential to differentiate your offerings and showcase how your institution can uniquely meet the needs of your target market.

For the 'Community Trust Hub' commercial bank, determining its unique value proposition starts with a deep understanding of the local business community and the specific financial challenges they face. By focusing on relationship banking and tailored solutions, the bank aims to become a trusted partner that facilitates growth and stability for small businesses and entrepreneurs.

• Conduct thorough market research to identify the pain points, financial needs, and preferences of your target customers - local businesses and entrepreneurs.
• Analyze the competitive landscape to understand the services and offerings of existing commercial banks in the area, and identify gaps that your institution can fill.
• Engage with the local business community to gather insights and feedback that can shape your unique value proposition.

One of the key competitive advantages of 'Community Trust Hub' is its commitment to personalized service and deep understanding of the local market. By hiring experienced relationship managers who can provide tailored financial solutions, the bank aims to differentiate itself from larger, more impersonal institutions. Additionally, the bank plans to leverage its local expertise and community connections to offer unique products and services that cater to the specific needs of its target customers.

Another important aspect of the bank's competitive strategy is its focus on financial technology (fintech) integration. By incorporating cutting-edge digital tools and platforms, 'Community Trust Hub' aims to provide a seamless and efficient banking experience for its customers, while also reducing operational costs and improving overall efficiency.

• Identify 2-3 key competitive advantages that set your commercial bank apart, such as specialized expertise, personalized service, or innovative technology solutions.
• Quantify the potential impact of your competitive advantages, such as 20% faster loan processing times or 15% lower fees compared to industry average .
• Develop a clear and compelling value proposition that communicates the unique benefits your commercial bank offers to the target market.

By clearly articulating its unique value proposition and competitive advantages, 'Community Trust Hub' can position itself as the preferred commercial banking partner for local businesses and entrepreneurs in the community. This strategic focus will be a key driver in the bank's success and growth in the years to come.

Assess financial requirements and funding sources

Determining the financial requirements and securing appropriate funding sources are critical steps in developing a robust business plan for a commercial bank. As a new entrant in the highly competitive banking industry, Community Trust Hub must carefully estimate its startup and ongoing operational costs, as well as identify the most suitable funding options to ensure the long-term viability and growth of the organization.

One of the primary considerations in assessing the financial requirements for a commercial bank is the initial capital investment needed to establish the necessary infrastructure, including branch locations, technology systems, regulatory compliance, and staffing. According to industry data, the average startup cost for a new commercial bank in the United States ranges from $10 million to $20 million , depending on the scale and geographic reach of the operation.

• Research the specific regulatory capital requirements for commercial banks in your target market, as these can vary significantly by region.
• Carefully estimate the costs associated with obtaining necessary licenses, permits, and insurance coverage to ensure full compliance with industry regulations.

In addition to the initial startup costs, commercial banks must also account for ongoing operational expenses, such as employee salaries, rent, utilities, marketing, and compliance monitoring. These recurring costs can consume a significant portion of a bank's revenue, making accurate financial projections and cash flow management critical to the long-term success of the business. Industry data suggests that the average operating expenses for a commercial bank range from 60% to 70% of total revenue , with the largest expense typically being personnel costs.

To fund the startup and operational requirements of Community Trust Hub , the management team should consider a combination of funding sources, including:

• Equity financing: Raising capital from private investors, venture capitalists, or through an initial public offering (IPO) can provide a substantial infusion of funds to support the bank's establishment and growth.
• Debt financing: Obtaining loans or lines of credit from commercial lenders, such as larger banks or government-backed programs, can help bridge the gap between startup costs and available equity.
• Retained earnings: As the bank begins to generate revenue, it can reinvest a portion of its profits back into the business to fund expansion and ongoing operations.

By carefully assessing the financial requirements and exploring a diverse range of funding options, Community Trust Hub can develop a comprehensive business plan that positions the bank for long-term success in the local business community.

Develop Operational Plan and Resource Requirements

Crafting a comprehensive operational plan is a critical step in developing a robust business plan for your commercial bank. This phase involves mapping out the day-to-day operations, resource requirements, and logistical considerations necessary to bring your banking services to life and ensure long-term sustainability.

One of the key aspects of your operational plan is determining the physical infrastructure needed to support your commercial bank. This includes securing an appropriate location for your branch(es), ensuring the necessary technology and equipment are in place, and establishing efficient workflow processes. According to industry data, the average cost of setting up a new commercial bank branch ranges from $2 million to $5 million, depending on the size and location.

• Carefully research and evaluate potential branch locations, considering factors such as accessibility, visibility, and proximity to your target market.
• Invest in modern banking technology, including secure online and mobile banking platforms, to meet the evolving needs of your customers.
• Develop streamlined operational procedures to maximize efficiency and provide a seamless banking experience for your clients.

In addition to physical infrastructure, your operational plan should also address the human capital required to run your commercial bank effectively. This includes assembling a skilled management team with relevant expertise in areas such as banking operations, risk management, and customer service. Industry data suggests that the average commercial bank employs between 15 to 25 full-time staff per branch, with an average annual salary of $50,000 to $80,000 per employee.

• Recruit experienced professionals who can contribute to the long-term success of your commercial bank.
• Offer competitive compensation and benefits packages to attract and retain top talent.
• Implement comprehensive training programs to ensure your employees are equipped to provide exceptional customer service and adhere to regulatory requirements.

Another critical aspect of your operational plan is ensuring compliance with relevant banking regulations and industry best practices. This may involve obtaining necessary licenses and permits, adhering to capital requirements, and implementing robust risk management and compliance protocols. According to the Federal Deposit Insurance Corporation (FDIC), the minimum capital requirement for a new commercial bank is typically $ 10 million , with ongoing regulatory capital ratios to maintain.

• Carefully research and understand all applicable banking regulations and compliance requirements in your local jurisdiction.
• Develop policies and procedures to ensure your commercial bank operates in full compliance with relevant laws and regulations.
• Allocate sufficient resources to maintain a strong compliance and risk management function within your organization.

By meticulously planning your commercial bank's operations, you can ensure that your business is equipped to deliver high-quality banking services, maintain regulatory compliance, and ultimately achieve long-term success within your local community.

Assemble a Skilled Management Team and Advisory Board

Assembling the right management team and advisory board is a critical step in building a successful commercial bank. The individuals you choose to lead and guide your organization will play a pivotal role in shaping its culture, strategy, and ultimately, its success.

When selecting your management team, it's important to seek out individuals with a proven track record in the banking industry, as well as a deep understanding of the local market and the specific needs of the community you aim to serve. Your team should possess a diverse set of skills and expertise, including financial analysis, risk management, customer service, and operations management.

In addition to your internal management team, it's also recommended to establish an advisory board. This group of experienced professionals can provide invaluable guidance, industry insights, and strategic direction to help your commercial bank navigate the complex landscape of the financial services sector. Your advisory board should comprise individuals with a range of expertise, such as banking regulations, technology, marketing, and entrepreneurship.

• Aim to assemble a management team with a diverse set of skills and experiences, including individuals with a proven track record in the banking industry.
• Establish an advisory board that can provide strategic guidance and industry insights to help your commercial bank thrive.
• Ensure that both your management team and advisory board members are deeply engaged with the local community and understand the unique needs of your target market.

According to a recent study by the Federal Deposit Insurance Corporation (FDIC) , the success of a commercial bank is directly correlated with the quality and expertise of its management team. The study found that banks with experienced and well-rounded management teams were 50% more likely to remain profitable over a 5-year period compared to those with less qualified leadership.

Furthermore, a survey by the Independent Community Bankers of America (ICBA) revealed that 78% of successful commercial banks attribute their growth and stability to the guidance and expertise provided by their advisory boards. These external advisors can help commercial banks navigate regulatory changes, identify new market opportunities, and develop innovative products and services that meet the evolving needs of their customers.

By investing the time and resources to assemble a skilled management team and an experienced advisory board, you'll be positioning your commercial bank for long-term success and positioning it as a trusted partner within the local business community.

Establish Legal and Regulatory Compliance

As a commercial bank, it is crucial to ensure that your business operations are in full compliance with the relevant legal and regulatory frameworks. This step is essential not only for mitigating risks but also for building trust and credibility with your target market, investors, and regulatory authorities.

The first and foremost step in establishing legal and regulatory compliance is to obtain the necessary licenses and permits required to operate a commercial bank in your jurisdiction. This typically involves securing a banking charter or license from the appropriate regulatory body, such as the Federal Deposit Insurance Corporation (FDIC) in the United States or the Prudential Regulation Authority (PRA) in the United Kingdom.

In addition to obtaining the banking license, you must also comply with a range of other legal and regulatory requirements, including:

• Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations: Implement robust processes to identify and verify the identity of your customers, as well as monitor and report any suspicious activities.
• Data Privacy and Cybersecurity: Ensure that you have robust data protection and cybersecurity measures in place to safeguard your customers' sensitive information and comply with relevant data privacy laws, such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA).
• Capital Requirements: Maintain the minimum required capital levels as stipulated by the regulatory authorities to ensure the financial stability and solvency of your commercial bank.
• Reporting and Disclosure: Comply with the periodic reporting and disclosure requirements set by the regulatory bodies, such as submitting financial statements, risk management reports, and other relevant information.
• Deposit Insurance: Enroll in the appropriate deposit insurance program, such as the FDIC in the United States, to protect your customers' deposits and build trust in your commercial bank.
• Familiarize yourself with the specific legal and regulatory requirements for commercial banks in your jurisdiction, as these may vary depending on the local laws and regulations.
• Consider hiring a compliance officer or engaging the services of a specialized law firm to ensure that your commercial bank is fully compliant with all relevant laws and regulations.
• Stay up-to-date with any changes in the legal and regulatory landscape and be prepared to adapt your policies and procedures accordingly.

By establishing robust legal and regulatory compliance, you can not only mitigate risks and avoid penalties but also demonstrate your commitment to responsible and ethical banking practices, thereby building trust and credibility with your stakeholders and the broader community.

Create a Marketing and Sales Strategy

Developing an effective marketing and sales strategy is crucial for the success of your commercial bank startup. This aspect of your business plan will outline how you plan to reach and acquire new customers, as well as how you will maintain and grow relationships with existing clients. By carefully crafting your marketing and sales approach, you can position your commercial bank as a trusted and preferred financial partner within your target market.

Begin by conducting thorough market research to deeply understand your target customer segments, their pain points, and their preferred communication channels. This will enable you to craft tailored messaging and deploy the most effective marketing tactics to reach and engage your audience.

• Leverage data-driven insights to create buyer personas that accurately reflect your ideal customers.
• Identify the most effective marketing channels for your target market, such as social media, content marketing, or local community outreach.
• Develop a content marketing strategy to position your commercial bank as a thought leader and trusted advisor in your community.

In addition to your marketing efforts, your sales strategy should focus on building strong relationships with potential and current clients. This may involve deploying a dedicated team of experienced relationship managers who can provide personalized service and tailored financial solutions to meet the unique needs of each customer.

• Implement a customer relationship management (CRM) system to streamline sales processes and track customer interactions.
• Empower your sales team with the necessary training, resources, and incentives to deliver exceptional customer service.
• Continuously monitor and analyze your sales performance to identify areas for improvement and optimize your approach.

To ensure the success of your marketing and sales strategy, it is essential to set clear, measurable goals and key performance indicators (KPIs). This may include targets for customer acquisition, retention, cross-selling, and revenue growth. Regularly review and adjust your strategy as needed to adapt to changing market conditions and customer preferences.

By crafting a comprehensive marketing and sales strategy that aligns with your commercial bank's unique value proposition and target market, you can effectively position your startup for long-term growth and success.

Outline Key Milestones and Performance Metrics

Establishing key milestones and performance metrics is a critical step in the commercial bank business planning process. These benchmarks serve as guideposts for tracking the bank's progress and ensuring it stays on course to achieve its strategic objectives. By outlining specific, measurable, and time-bound goals, the management team can effectively monitor the bank's performance and make informed decisions to drive growth and profitability.

When developing the commercial bank's key milestones and performance metrics, it's essential to consider the following factors:

• Financial Targets: Set clear financial goals, such as target deposit growth, loan portfolio size, net interest margin, and return on assets (ROA). These metrics will help the bank measure its financial performance and identify areas for improvement.
• Customer Acquisition and Retention: Establish targets for the number of new customers acquired, customer retention rates, and cross-selling of products and services. These metrics will help the bank evaluate the effectiveness of its marketing and sales strategies.
• Operational Efficiency: Monitor key operational metrics, such as cost-to-income ratio, branch productivity, and customer satisfaction scores. These metrics will help the bank identify opportunities to streamline processes and enhance the customer experience.
• Regulatory Compliance: Ensure the bank meets all relevant regulatory requirements, such as capital adequacy ratios, liquidity coverage ratios, and anti-money laundering (AML) standards. These metrics will help the bank maintain its compliance and avoid costly penalties.
• Community Impact: Consider metrics that measure the bank's contribution to the local community, such as the number of small business loans granted, community development initiatives undertaken, and financial literacy programs offered. These metrics will help the bank demonstrate its commitment to the communities it serves.

By aligning the commercial bank's key milestones and performance metrics with its overall business strategy, the management team can effectively monitor the bank's progress and make data-driven decisions to drive long-term success.

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• Regularly review and update the bank's key milestones and performance metrics to ensure they remain relevant and aligned with the evolving business environment.
• Communicate the bank's key milestones and performance metrics to all employees to foster a culture of accountability and continuous improvement.
• Leverage data analytics and business intelligence tools to track and analyze the bank's performance metrics, enabling data-driven decision-making.

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Writing a Bank Business Plan

When it comes to seeking funding from a bank or other financial institution, one of the most important things you can do is have a well-written business plan . This document will not only give potential lenders and investors an idea of your company’s current position and future goals but will also provide them with a clear understanding of the risks involved in lending you money or investing in your business.

What is a Business Plan?

A business plan is a document that provides a detailed description of a business, its products or services, its market, and its financial projections. It is used to secure funding from lenders or investors and to provide guidance for the business’s future operations.

Why Write a Business Plan

There are several reasons why you might want to write a plan for your business, even if you’re not looking for funding, they are:

• To clarify your company’s purpose and direction
• To better understand your industry and customers
• To develop a realistic financial plan and accurate projections
• To identify potential risks and opportunities
• To track your company’s progress over time

An effective and well-written plan is helpful for potential investors and clarifies the plans you have for any future business partners.

Sources of Business Funding for Banks

There are many sources of business funding available to banks, including:

• Equity financing: This is when you sell a portion of your business to investors in exchange for capital. This can be a good option if you need a large amount of money quickly, as it doesn’t require you to pay back the funds over time.
• Debt financing: This is when you borrow money from a lender, such as a bank, in exchange for repayment plus interest. This type of financing can be helpful if you need to keep your cash flow low in the early stages of your business.
• Grants: There are several different government and private grants available to businesses, which can often be used for start-up costs or expansion.
• Venture capital: This is when you receive funding from a venture capitalist in exchange for a portion of your company’s equity. Venture capitalists typically invest their own personal savings in high-growth businesses with a lot of potential.

Resources to Write a Bank Business Plan

To write a bank business plan, you’ll need access to a variety of resources, including:

Sample Plans for Your Business

A good place to start is by looking at some sample plans for businesses in your industry. This will give you a good idea of the types of information to include in your own plan.

Business planning software

There are a number of software programs that can help you create professional-looking plans for your business.

Market Research

When writing a business plan for a bank, it’s important to include a section on your company’s market research. This will include detailed information about your industry, your market, and your competition.

Industry Analysis

In order to accurately describe your industry and the market for your products or services, you’ll need to conduct an industry analysis. This should include information about the size and growth of the industry, the key players in the industry, and any major trends or changes that are taking place.

Target Market Analysis

To effectively market your products or services, you need to understand who your target market is. This should include information about the demographics of your target customers (age, gender, income, etc.), psychographics (lifestyle preferences, interests, etc.), and geographic (location, region).

Competition Analysis

In order to differentiate your business from the competition, you’ll need to know what they’re offering and how they’re positioning themselves in the market. This should include a SWOT analysis (strengths, weaknesses, opportunities, threats) of your competitors.

Customer Segments

A customer segment is a group of customers who share common characteristics, such as age, income, location, or lifestyle preferences. When creating business plans for a bank, it’s important to identify and target your key customer segments. This will help you focus your marketing efforts and create products and services that appeal to your target market.

There are a variety of ways to segment customers, including:

• Demographics: Age, gender, income, location, etc.
• Psychographics: Lifestyle preferences, interests, etc.
• Behavior: How they interact with your brand, what channels they use to purchase products or services, etc.
• Usage: How often they purchase your product or service, how much they spend, etc.
• Value: How much they’re willing to pay for your product or service, how much they value customer service, etc.

Once you’ve identified your customers, you can create buyer personas. These are fictional characters that represent your ideal customer within each segment. Creating buyer personas will help you better understand your target market and create more effective marketing campaigns.

Financial templates

If you’re not familiar with financial terminology or calculations, use a financial template to help you develop your business’s financial projections as well as including an income statement and balance sheets.

Accounting and Legal Advice 

It’s important to seek out accounting and legal advice from professionals who can help ensure that your business plan is accurate and complete.

Bank Business Plan Template

While there is no one-size-fits-all template for writing a business plan, there are some key elements that should be included. Here is a brief overview of what should be included:

Executive Summary

This is a high-level overview of your company, its products or services, and its financial situation. Be sure to include information on your target market, your competitive advantage, and your plans for growth.

Company Description

This section provides more detail on your company, including its history, structure, and management team. Be sure to include information on your company’s mission and vision, as well as its values and goals.

Products and Services

Here you will describe your company’s products or services in detail, including information on your target market and your competitive advantage.

Market Analysis

In this section, you will provide an overview of your market, including demographic information and information on current and future trends. This is also a good section to add the marketing plan you have developed to appeal to potential customers.

Sales and Marketing

This section will detail your sales and marketing strategy, including information on your pricing, your distribution channels, and your promotion plans.

Financial projections

This is perhaps the most important section of your business plan, as it will provide lenders and investors with an idea of your company’s financial health. Be sure to include detailed information on your past financial performance, as well as your projections for future revenue and expenses. This is also a good section to include your cash flow statements, income statements, and information about any bank accounts opened for your business.

This is where you will include any supporting documents, such as your financial statements, marketing materials, or product data sheets.

While this is not an exhaustive list of everything that should be included in your bank business plan, it covers the most important elements. By taking the time to write a well-thought-out and detailed business plan, you will increase your chances of securing the funding you need to grow your business.

Opening a bank is a detailed and complex process, but it can be enormously rewarding both professionally and financially. The best way to increase your chances of success is to write a business plan that outlines all aspects of opening and running a bank. This document should include market analysis, organizational structure, financial projections, and more. Our team has extensive experience helping entrepreneurs open banks. We have created a comprehensive business plan template that covers all the key points you need to consider when writing your own business plan. By following our template, you can be sure that you haven’t missed any essential elements in your planning process. Investing in professional help when writing your business plan gives you the best chance for success when opening a new bank.

Bank Business Plan Template FAQs

Do i need to use a business plan template.

There is no one-size-fits-all answer to this question. If you are seeking funding from a lender or investor, they may have specific requirements for the format and content of your business plan. In other cases, using a template can be helpful in ensuring that you include all of the important information in your plan.

Where can I find a business plan template?

There are a number of resources that offer business plan templates, including the Small Business Administration (SBA) and the U.S. Chamber of Commerce. Additionally, many software programs that offer business planning tools also include templates.

How long should my business plan be?

Again, there is no one-size-fits-all answer to this question. The length of your business plan will depend on the complexity of your business and the amount of detail you need to include. In general, however, most business plans range from 20 to 50 pages.

Do I need to hire a professional to help me write my business plan?

While you are not required to hire a professional to write your business plan, it may be helpful to do so. A professional can help you ensure that your plan is well-written and free of errors. Additionally, they can offer advice on how to best structure your plan and make it more likely to succeed.

• Business Planning
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Writing a business plan in 9 steps

Discover all the doors a solid business plan can help open for you, including business banking accounts, loans and other forms of funding.  Presented by Chase for Business .

Whether you're starting your first business or your company is seeking funding , a business plan is essential for charting your path to success.

A well-written and researched business plan can act as a roadmap that outlines your plan for selling and marketing your products and services, making profits and growing over a period of three to five years. Your plan can also help position your company within the industry and set your business apart from competitors.

With the right tools and a little excitement, you can write a business plan. In this article, you'll learn how to write a business plan in a step-by-step process.

1. Ask these questions

To get in the right frame of mind and gather necessary details for writing an effective business plan, ask yourself the following questions:

• Why do I want to start this business? What’s my reasoning or inspiration?
• How does my business stand out from the competition?
• What is my unique value proposition?
• Who are my target customers? How can I reach them?
• Who is already on my management team? What gaps do I need to fill?
• How can my business make a profit? How soon will it break even?

Knowing the answers to these questions will help guide the structure and cadence of your business plan.

2. Research before you write

Your business plan should be a well-researched, actionable document that you can return to again and again. To get the information you need, use the following tactics when writing a business plan:

• Do a SWOT analysis. Consider your company’s strengths, weaknesses, opportunities and threats. This type of analysis allows you to identify what sets your business apart and plan for potential risks.
• Perform due diligence. If you’re planning to buy an existing business, make sure you research the company’s finances, sales, inventory and other aspects to ensure it’s a sound investment.
• Use Porter’s Five Forces . This analytical approach is a framework for analyzing your company’s competitive environment.

3. Think about your audience

Ask yourself, who will read my business plan, and what kind of information do they need? For example, if you’re looking for funding, you should include plenty of financial data and forecasting. If you’re seeking to bring on new business partners, you should include a detailed section where you outline how the business intends to support growth over the next three to five years.

If you want to share your business plan with different types of stakeholders, think about writing more than one version. This will allow you to make sure every reader has the right, targeted details about your business.

4. Include market analysis

Writing and researching a business plan gives you the opportunity to learn more about your industry, market, competitors, audience, local government, suppliers, sales channels and more. It also allows you to assess risk related to your market or supply chain.

To do this research, you can start by looking for online data related to your industry and target audience. It’s a good idea to include data that's recent enough to still be relevant and from a credible source.

With a bit of patience, the information you need can be found online for free. Services also exist that provide customized data for a fee — which can be a good option for business owners without the luxury of time.

5. Make realistic projections

When writing a business plan, you’re naturally going to be excited, and it may feel easy to think positively and overestimate how well your business will perform. Optimism may cause you future distress when investors or business partners expect more than your business is able to provide.

It’s always better to aim low and blow your projections out of the water than to do the opposite. Make your business plan as realistic as possible. When you include accounting data, carefully consider the market, your competitors and the demand for your products.

6. Share your vision

Although financial projections, product descriptions and management charts serve as the focus for most business plans, including a vision statement can help you personalize your goals and refer back to your initial mission.

In this section, briefly discuss your reason for starting the business, share any underlying motivations and hypothesize on how your company can contribute to a larger cause.

7. Keep it concise

As you write your business plan, it's tempting to include every detail about your company. Before you know it, your market analysis alone might be 10 pages long. If your business plan becomes too big, it may become less actionable, or your readers may not devote the time to reading and comprehending it.

Take care to feature only the essential data when you write your business plan. Be sure to include the standard sections mentioned above.

A good suggestion is to feature a page or two for each section plus any financial statements or resumes. If you have additional research or notes that don't fit neatly into your plan, keep them on file for your own internal use.

8. Include a visual element

Most business plans tend to be text-heavy — but that doesn’t mean you can’t make yours visually appealing for the reader. Include relevant graphics, pictures, charts and diagrams.

9. Keep the style simple

Focus on presenting your information and storytelling in a clear way that doesn’t require additional context to be understood. Keep the formatting as simple as possible. Use a classic serif font like Times New Roman to maintain readability. The last thing you want is for investors to focus more on your font choice than your financial projections.

A business plan can help you review your idea and put actionable goals in place. Once you’ve worked out the details, a  business banker  can walk you through important next steps like  setting up a business checking account .

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How to Write a Business Plan for a Small Business

Noah Parsons

24 min. read

Updated September 2, 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 writing a business plan

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

You understand that writing a business plan helps you: 

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

As you start to write your business 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 writing your business 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

When writing a business plan, the produces and services section 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

When writing a business plan, 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

The last section of your business plan is your financial plan and forecasts. 

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 to write a 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 to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; 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

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 writing 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.

Writing 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 writing 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.

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

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How to write an effective business plan in 11 steps (with workbook)

February 02, 2023 | 14 minute read

Writing a business plan is a powerful way to position your small business for success as you set out to meet your goals. Landmark studies suggest that business founders who write one are 16% more likely to build viable businesses than those who don’t and that entrepreneurs focused on high growth are 7% more likely to have written a business plan. 1 Even better, other research shows that owners who complete business plans are twice as likely to grow their business successfully or obtain capital compared with those who don’t. 2

The best time to write a business plan is typically after you have vetted and researched your business idea. (See How to start a business in 15 steps. ) If conditions change later, you can rewrite the plan, much like how your GPS reroutes you if there is traffic ahead. When you update your plan regularly, everyone on your team, including outside stakeholders such as investors, will know where you are headed.

What is a business plan?

Typically 15-20 pages long, a business plan is a document that explains what your business does, what you want to achieve in the business and the strategy you plan to use to get there. It details the opportunities you are going after, what resources you will need to achieve your goals and how you will define success.

Why are business plans important?

Business plans help you think through barriers and discover opportunities you may have recognized subconsciously but have not yet articulated. A business plan can also help you to attract potential lenders, investors and partners by providing them with evidence that your business has all of the ingredients necessary for success.

What questions should a business plan answer?

Your business plan should explain how your business will grow and succeed. A great plan will provide detailed answers to questions that a banker or investor will have before putting money into the business, such as:

• What products or services do you provide?
• Who is your target customer?
• What are the benefits of your product and service for customers?
• How much will you charge?
• What is the size of the market?
• What are your marketing plans?
• How much competition does the business face in penetrating that market?
• How much experience does the management team have in running businesses like it?
• How do you plan to measure success?
• What do you expect the business’s revenue, costs and profit to be for the first few years?
• How much will it cost to achieve the goals stated in the business plan?
• What is the long-term growth potential of the business? Is the business scalable?
• How will you enable investors to reap the rewards of backing the business? Do you plan to sell the business to a bigger company eventually or take it public as your “exit strategy”?

How to write a business plan in 11 steps

This step-by-step outline will make it easier to write an effective business plan, even if you’re managing the day-to-day demands of starting a new business. Creating a table of contents that lists key sections of the plan with page numbers will make it easy for readers to flip to the sections that interest them most.

• Use our editable workbook to capture notes and organize your thoughts as you review these critical steps. Note: To avoid losing your work, please remember to save this PDF to your desktop before you begin.

1. Executive summary

The executive summary is your opportunity to make a great first impression on investors and bankers. It should be just as engaging as the enthusiastic elevator pitch you might give if you bumped into a potential backer in an elevator.

In three to five paragraphs, you’ll want to explain what your business does, why it will succeed and where it will be in five years. The executive summary should include short descriptions of the following:

• Business concept. What will your business do?
• Goals and vision. What do you expect the business to achieve, both financially and for other key stakeholders, such as the community?
• Product or service. What does your product or service do — and how is it different from those of competitors?
• Target market. Who do you expect to buy your product or service?
• Marketing strategy. How will you tell people about your product or service?
• Current revenue and profits. If your business is pre-revenue, offer sales projections.
• Projected revenue and profits. Provide a realistic look at the next year, as well as the next three years, ideally.
• Financial resources needed. How much money do you need to borrow or raise to fund your plan?
• Management team. Who are the company’s leaders and what relevant experience will they contribute?

2. Business overview

Here is where you provide a brief history of the business and describe the product(s) or service(s) it offers. Make sure you describe the problem you are attempting to solve, for whom you will solve it (your customers) and how you will solve it. Be sure to describe your business model (such as direct-to-consumer sales through an online store) so readers can envision how you will make sales. Also mention your business structure (such as a sole proprietorship , general partnership, limited partnership or corporation) and why it is advantageous for the business. And be sure to provide context on the state of your industry and where your business will fit into it.

3. Business goals and vision

Explain what you hope to achieve in the business (your vision) as well as its mission and value proposition. Most founders judge success by the size to which they grow the business using measures such as revenue or number of employees. Your goals may not be solely financial. You may also wish to provide jobs or solve a societal problem. If that’s the case, mention those goals as well.

If you are seeking outside funding, explain why you need the money, how you will put it to work to grow the business and how you expect to achieve the goals you have set for the business. Also explain your exit strategy—that is, how you would enable investors to cash out, whether that means selling the business or taking it public.

4. Management and organization

Many investors say they bet on the team behind a business more than the business idea, trusting that talented and experienced people will be capable of bringing sound business concepts to life. With that in mind, make sure to provide short bios of the key members of your management team (including yourself) that emphasize the relevant experience each individual brings, along with their special talents and industry recognition. Many business plans include headshots of the management team with the bios.

Also describe more about how your organization will be structured. Your company may be a sole proprietorship, a limited liability company (LLC) or a corporation in one or more states.

If you will need to hire people for specific roles, this is the place to mention those plans. And if you will rely on outside consultants for certain roles — such as an outsourced CFO — be sure to make a note of it here. Outside backers want to know if you’ve anticipated the staffing you need.

5. Service or product line

A business will only succeed if it sells something people want or need to buy. As you describe the products or services you will offer, make sure to explain what benefits they will provide to your target customers, how they will differ from competing offerings and what the buying cycle will likely be so it is clear that you can actually sell what you are offering. If you have plans to protect your intellectual property through a copyright or patent filing, be sure to mention that. Also explain any research and development work that is underway to show investors the potential for additional revenue streams.

6. Market/industry analysis

Anyone interested in providing financial backing to your business will want to know how big your company can potentially grow so they have an idea of what kind of returns they can expect. In this section, you’ll be able to convey that by explaining to whom you will be selling and how much opportunity there is to reach them. Key details to include are market size; a strengths, weaknesses, opportunities and threats (SWOT) analysis ; a competitive analysis; and customer segmentation. Make it clear how you developed any projections you’ve made by citing interviews or research.

Also describe the current state of the industry. Where is there room for improvement? Are most companies using antiquated processes and technology? If your business is a local one, what is the market in your area like? Do most of the restaurants where you plan to open your café serve mediocre food? What will you do better?

In this section, also list competitors, including their names, websites and social media handles. Describe each source of competition and how your business will address it.

7. Sales and marketing

Explain how you will spread the word to potential customers about what you sell. Will you be using paid online search advertising, social media promotions, traditional direct mail, print advertising in local publications, sponsorship of a local radio or TV show, your own YouTube content or some other method entirely? List all of the methods you will use.

Make sure readers know exactly what the path to a sale will be and why that approach will resonate with customers in your ideal target markets as well as existing customer segments. If you have already begun using the methods you’ve outlined, include data on the results so readers know whether they have been effective.

8. Financials

In a new business, you may not have any past financial data or financial statements to include, but that doesn’t mean you have nothing to share. Preparing a budget and financial plan will help show investors or bankers that you have developed a clear understanding of the financial aspects of running your business. (The U.S. Small Business Administration (SBA) has prepared a guide you can use; SCORE , a nonprofit organization that partners with the SBA, offers a financial projections template to help you look ahead.) For an existing business, you will want to include income statements, profit and loss statements, cash flow statements and balance sheets, ideally going back three years.

Make a list of the specific steps you plan to take to achieve the financial results you have outlined. The steps are generally the most detailed for the first year, given that you may need to revise your plan later as you gather feedback from the marketplace.

Include interactive spreadsheets that contain a detailed financial analysis showing how much it costs your business to produce the goods and services you provide, the profits you will generate, any planned investments and the taxes you will pay. See our startup costs calculator to get started.

9. Financial projections

Creating a detailed sales forecast can help you get outside backers excited about supporting you. A sales forecast is typically a table or simple line graph that shows the projected sales of the company over time with monthly or quarterly details for the next 12 months and a broader projection as much as five years into the future. If you haven’t yet launched the company, turn to your market research to develop estimates. For more information, see “ How to create a sales forecast for your small business. ”

10. Funding request

If you are seeking outside financing such as a loan or equity investment, your potential backers will want to know how much money you need and how you will spend it. Describe the amount you are trying to raise, how you arrived at that number and what type of funding you are seeking (such as debt, equity or a combination of both). If you are contributing some of your own funds, it is worth noting this, as it shows that you have skin in the game.

11. Appendix

This should include any information and supporting documents that will help investors and bankers gain a greater understanding of the potential of your business. Depending on your industry, you might include local permits, licenses, deeds and other legal documents; professional certifications and licenses; media clips; information on patents and other intellectual property; key customer contracts and purchase orders; and other relevant documents.

Some business owners find it helpful to develop a list of key concepts, such as the names of the company’s products and industry terms. This can be helpful if you do business in an industry that may not be familiar to the readers of the business plan.

Tips for creating an effective business plan

Use clear, simple language. It’ll be easier to win people over if your plan is easy to read. Steer clear of industry jargon, and if you must use any phrases the average adult won’t know, be sure to define them.

Emphasize what makes your business unique. Investors and bankers want to know how you will solve a problem or gap in the marketplace differently from anyone else. Make sure you’re conveying your differentiating factors.

Nail the details. An ideal business plan will be detailed and accurate. Make sure that any financial projections you make are realistic and grounded in solid market research. (If you need help in making your calculations, you can get free advice at SCORE.) Seasoned bankers and investors will quickly spot numbers that are overly optimistic.

Take time to polish it. Your final version of the plan should be neat and professional with an attractive layout and copy that has been carefully proofread.

Include professional photos. High-quality shots of your product or place of business can help make it clear why your business stands out.

Updating an existing business plan

Some business owners in rapidly growing businesses update their business plan quarterly. Others do so every six months or every year. When you update your plan make sure you consider these three things:

• Are your goals still current? As you’ve tested your concept, your goals may have changed. The plan should reflect this.
• Have you revised any strategies in response to feedback from the marketplace? You may have found that your offerings resonated with a different customer segment than you expected or that your advertising plan didn’t work and you need to try a different approach. Given that investors will want to see a marketing and advertising plan that works, keeping this section current will ensure you are always ready to meet with one who shows interest.
• Have your staffing needs changed? If you set ambitious goals, you may need help from team members or outside consultants you did not anticipate when you first started the business. Take stock now so you can plan accordingly.

Final thoughts

Most business owners don’t follow their business plans exactly. But writing one will get you off to a much better start than simply opening your doors and hoping for the best, and it will be easier to analyze any aspects of your business that aren’t working later so you can course-correct. Ultimately, it may be one of the best investments you can make in the future of your business.

Business plan FAQs

What are common mistakes when writing a business plan.

The biggest mistake you can make when writing a business plan is creating one before the idea has been properly researched and tested. Not every idea is meant to become a business. Other common mistakes include:

• Not describing your management team in a way that is appealing to investors. Simply cutting and pasting someone’s professional bio into the management section won’t do the trick. You’ll want to highlight the credentials of each team member in a way that is relevant to this business.
• Failing to include financial projections — or including overly optimistic ones. Investors look at a lot of business plans and can tell quickly whether your numbers are accurate or pie in the sky. Have a good small business accountant review your numbers to make sure they are realistic.
• Lack of a clear exit strategy for investors. Investors may want the option to cash out eventually and would want to know how they can go about doing that.
• Slapdash presentation. Make sure to fact-check any industry statistics you cite and that any charts, graphs or images are carefully prepared and easy to read.

What are the different types of business plans?

There are a variety of styles of business plans. Here are three major types:

Traditional business plan. This is a formal document for pitching to investors based on the outline in this article. If your business is a complicated one, the plan may exceed the typical length and stretch to as many as 50 pages.

One-page business plan. This is a simplified version of a formal business plan designed to fit on one page. Typically, each section will be described in bullet points or in a chart format rather than in the narrative style of an executive summary. It can be helpful as a summary document to give to investors — or for internal use. Another variation on the one-page theme is the business model canvas .

Lean plan. This methodology for creating a business plan is ideal for a business that is evolving quickly. It is designed in a way that makes it easy to update on a regular basis. Lean business plans are usually about one page long. The SBA has provided an example of what this type of plan includes on its website.

Is the business plan for a nonprofit different from the plan for other business types?

Many elements of a business plan for a nonprofit are similar to those of a for-profit business. However, because the goal of a nonprofit is achieving its mission — rather than turning a profit — the business plan should emphasize its specific goals on that front and how it will achieve them. Many nonprofits set key performance indicators (KPIs) — numbers that they track to show they are moving the needle on their goals.

Nonprofits will generally emphasize their fundraising strategies in their business plans rather than sales strategies. The funds they raise are the lifeblood of the programs they run.

What is the difference between a business plan, a strategic plan and a marketing plan?

A strategic plan is different from the type of business plan you’ve read about here in that it emphasizes the long-term goals of the business and how your business will achieve them over the long run. A strong business plan can function as both a business plan and a strategic plan.

A marketing plan is different from a business plan in that it is focused on four main areas of the business: product (what you are selling and how you will differentiate it), price (how much your products or services will cost and why), promotion (how you will get your ideal customer to notice and buy what you are selling) and place (where you will sell your products). A thorough business plan may cover these topics, doing double duty as both a business plan and a marketing plan.

Explore more

Editable business plan workbook

Starting a new business

1 . Francis J. Green and Christian Hopp. “Research: Writing a Business Plan Makes Your Startup More Likely to Succeed.” HBR. July 14, 2017. Available online at https://hbr.org/2017/07/research-writing-a-business-plan-makes-your-startup-more-likely-to-succeed.

2 . CorpNet, “The Startup Business Plan: Why It’s Important and How You Can Create One,” June 29, 2022.

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How to write a winning business plan

Business plans are a great way to set out your business goals and how you’re going to reach them. Writing a business plan helps you consider what you do, the market opportunity, the risks and your strategy to succeed.

What is a business plan and why is it important?

A business plan is important so that you know where your business is going and how it’s going to get there. You may need a business plan to inspire confidence from investors, or show lenders that your business has potential. It can also help everyone on your team stay on the same page.

A business plan is always important, and even more so if you’re just starting out . It sets out the destination and the route plan of your business. You could say it’s a bit like a satnav - it helps you know which road to take at a junction.

Your business plan helps you play to win

People think of a business plan as a set of numbers but take it from me, an accountant , that this is probably the least important part of the plan. The numbers are like the scorecard and your business is the game. Your business plan is your strategy for how you’d like to play the game - and win!

What to consider for your business plan

Decide what outcome you want. You probably want to win this game but by how much? Or you may have just been promoted to this league and you need time to build some solid foundations. 2-1 win or £100,000 profit?

Look at your opposition, sometimes called a competitor analysis, to see what they are doing well and where they are leaving gaps. Are there areas of the market that are underserved or that could be better served by you than your competitors?

Team tactics. Can you see where you will sell £500,000 (or how you will score those two goals)? A few big customers or lots of smaller ones? This is the sales plan.

Look at your own team, as well as player wages do you need to recruit or train to get the best out of them? This will have costs that need to be included in the plan.

What other costs do you have? How much will the pitch, court or premises cost you and will you need to invest in any technology to help you win - such as a new scoreboard? Think about what kind of benefits you need to achieve (revenue gains or reduced costs to make the investment worthwhile).

Is this likely to give you the outcome you wanted? Or do you need to review all this again?

Do you have enough cash to pay for everything along the way or do you need to borrow?

How to structure a business plan

Once you have been through this thought process you can start to put your plans into a more formal structure. If you’re applying for loans or other finance it’s important to use the right terminology but, if the plan is only for internal use then it should be presented in a way that you and your team can understand. These are some common sections in business plans.

The overall goal

It’s tempting to start your business plan by explaining how amazing or radical your innovation or business idea is (there’s time for that later). It may be more useful to set the scene for the goal by explaining what real-world needs or problems you’re aiming to solve.

Your overall goal should be tied in to your personal goals. It’s no good building a million pound business that requires you to work 80 hours a week if what you really want is more time with your kids now.

Market analysis

Do some research to find out how much demand there is for your brilliant idea. Talk to your existing and prospective customers and ask questions. How many potential customers are out there? You could use a market research company, but you should still conduct your own research.

If you can use real or verifiable values, so much the better - vague terms like ‘the potential market is huge’ may not be enough to impress potential funders. Look at things like the current size of the market, its dynamics, if it’s growing or changing.

SWOT analysis

Determining the strengths, weaknesses, opportunities and threats to your business is a useful way to view the things you do well and those that you need to improve. Identifying threats early allows you to put things in place to minimise or even negate them. Spend a few minutes searching and you’ll find many free examples of SWOT templates.

How much are you going to sell and to whom? It’s normal to spread this over 12 months. Will you sell to other businesses or to individuals? Decide whether you will sell to a few, bigger customers or several, smaller ones. Your approach will depend on your product and the market and will drive a lot of decisions from marketing strategy to recruitment. You’ll find a few sites out there offering free sales plan templates.

Marketing plan

How will you price your product and what promotion do you need to help achieve those sales? How will you attract new customers and how will you keep the ones you have? Who is your ideal customer and how will you reach them? Where do they spend time, is it on Instagram or travel websites?

Staffing plan

What skills do you need to achieve your plan? What will the organisation chart look like? Do you need to recruit or buy in expertise? Remember that flexible working means that you don’t need to recruit full time people if you only need the expertise half the time. Do you need to recruit straight away or part way through the year?

Capital investment

Are there any large costs coming up as you invest in equipment, technology or a new website? How are you expecting to finance them and what benefit do you expect them to deliver?

The numbers

This is what people think of when they think of a business plan but it is the last part of the game plan. Don’t forget to look at profit and loss. Draw up a profit and loss account to reflect all the numbers. If you’re also looking to raise finance with the plan - can you quantify your return on investment? It’s important to focus on your revenue model and if it’s viable in the short, medium and long term. Look at growth forecasts.

Look at the timing of money coming in and out. When will your customers pay for your sales and when will you have to pay your bills? How much money will be tied up in stock? Will you receive VAT from your customers before you have to pay it to HMRC? Are there any big costs that will need to be paid out? When are loan repayments due? Have you got enough cash set aside to pay your tax at the year end?

How long should the business plan be?

One common question is how long does the plan need to be? Three pages, a 100, something else?

The answer partly depends on if the plan’s for internal or external use. Internally, the plan can be as long as makes sense for its purpose, which could be to inform employees or keep founders on track.

If it’s external, perhaps to help raise funding, you do need enough detail to cover every section and make a compelling argument, but avoid a thick document which may lose your audience’s attention. Try to convey the key takeaways in a clear and simple way - sometimes more information isn’t better.

Don’t forget to write an executive summary to front up your plan. It should be simple, clear and specific. It needs to give a quick sense of what you do - but also why it’s valuable.

How many months or years do you need to plan for?

Business plans are usually completely in detail and fixed for 12 months and then a broader outline for three to five years. If you’re applying for finance then your plan should cover the whole period until the loan is repaid. There is no reason that you can’t update your forecasts as you progress through the year.

As you go through the year, more information will come to light so you will probably reforecast and your actions will evolve. This is the same way that your satnav changes route when you meet traffic or diversions. Both your satnav and your business rely on accurate information.

At the end of the original plan period you can compare what you actually achieved, against your targets. See where you did better and if there are any areas to learn from. Hindsight is a wonderful thing, so use it to plan an even better business in the future.

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