WE RECENTLY EVALUATED THE MARKET FOR A $900+-MILLION CLIENT AND FOUND A $17 MILLION SMALL BUSINESS REVENUE OPPORTUNITY. WHEN ADDING IN MICRO- AND MIDDLE-MARKET OPPORTUNITIES, IT GREW TO $38 MILLION. THOSE ARE NUMBERS THAT MERIT ATTENTION.
Have you considered the opportunity?
As growth gets more and more challenging, we are surprised to see many financial institutions neglecting what could be one of their best opportunities: small business. Small business is often mentioned as a targeted segment but is rarely given its deserved priority as a separate audience with its own unique set of needs. Some FIs completely ignore this group. Some dabble in it without making a full commitment. Others have made it a priority and point of differentiation. Where does your FI fall?
While the core services offered to small businesses have become increasingly commoditized, it doesn’t mean that there isn’t success to be had. First of all, small business owners still value quality service, delivered personally or digitally, by professionals who understand business and who demonstrate an appreciation for the customer. In addition, their needs are very broad and their “points of pain” vary dramatically. If you are simply focusing on the basics, you are likely leaving a lot on the table—both in terms of the client’s needs and in terms of your own profit opportunities.
Source: Profitability report model applied to a $900 million bank in Northeast region.
Sources: Galapagos data and industry research. Example represents specifics for one sample market in the Northeast U.S.
Establish a strategy
So, where do you start? You don’t have to have a complex strategy, but you do need an approach that makes sense—and it needs to be more than just duplicating a retail checking account and giving it a small business label. Here are a few foundational questions to consider:
Do you truly have a strategy for this segment?
Do you have a realistic plan and the appropriate channels to deliver on that strategy?
Do you have the resources to do so successfully? (In particular, do you have the right people? The solution is not branch managers dressed as business specialists.)
Does your bank have the products and services small businesses want and need?
Be intentional with your approach
Even if your small business numbers are growing, have you considered the strength of your approach from a tactical perspective? Do you truly know your clients and have a sense of what might be most helpful to them? To a business owner, it becomes very clear, very quickly, whether business is truly a priority and an area of expertise for your FI.
A few years ago, we experienced our own puzzling approach first-hand. Our bank normally met with us annually (to satisfy a requirement related to a line of credit). One year, they brought along a treasury management rep, who introduced herself and then immediately said, “I took a look and I don’t think you are a fit for treasury management now or in the near future.” Our internal response? “No kidding!” It felt like they were checking off internal boxes (1. annual visit, check; 2. increase Treasury Management exposure, check) rather than spending time understanding our business and supporting our goals. We left the meeting thinking: “Why are they even wasting their time coming to see us?”
Just as frustrating to us: the questions they didn’t ask, because we did have real needs: 401k plan design and administration, health care costs, succession planning, and a host of personal banking needs shared by our team members.
Consider these questions:
Are you treating meetings with clients as a “must-do” to meet a business requirement or are you planning ahead and probing for problems you can solve and opportunities you can act on?
Do you have the right people handling the business?
Do you know what your next-best opportunity is likely to be with your existing clients?
Have you made your small business program distinctive, so clients see the benefits of working with you?
If you are looking to be a clear winner in the Small Business space, it’s time to dedicate a true and appropriate effort. You will be able to crack the code of a successful small business strategy by meeting businesses where they are and helping them get to where they want to be.
Don’t miss a $38 million opportunity
Take the first step with a complimentary small business market opportunity assessment, including loans, deposits, treasury, and merchant service. Just confirm a single market area to be studied.