Small Business Marketing
November 17, 2010
By Larry W. Martin
I attended a national banking conference in Fort Worth on Monday and Tuesday of
this week-yee hah.! The conference focused on how to serve the banking needs of
the small business market-small business customers are for profit firms with
annual sales of $5 million or less. I came away from the conference with some
strategic observations and conclusions and thought I would share them with you.
Competition will increase-Conference
attendees and presenters were large national banking firms, super regional
banks and strategically focused community banks. I found this intriguing
since the market of small businesses has historically been the bastion of
community banks, but here you had large national banks and super regional's
touting their efforts to business model approaches to this market plus
others in the audience anxious to learn how to do the same thing. Why you
ask, it is very profitable (when not in a downturn, like now). There is
good and bad news in this attendance composition. The bad news is that
competition will increase in the small business market. The good news is
that those community banks that successfully design and execute a small
business strategy will be attractive acquisition targets.
Business as usual will not work-Community
banks that have traditionally focused on small businesses for loans and
deposits should expect in a much tougher competitive landscape as we emerge
from this recession. For community banks to compete effectively in this
sector, they will need to adopt more strategic approaches. The degree of
adoption will depend on their competitor set, if large banks it will need to
be more sophisticated than if other community banks are their only
competitors. The strategic approaches will include factually understanding
the wants and needs of small business customers, product lines to fill their
financial service needs expressed and to deepen the relationship with the
bank, and having relationship managers in place with the knowledge and
ability to earn the position of trusted business advisor to small
businesses. Not something you plan on the back of a napkin at dinner and
something that takes three to five years to accomplish.
CRE concentrated banks will have a bigger challenge-Community
banks who have a heavy CRE concentration for the past decade or so and who
want to have a more diversified C&I approach will also have to become more
strategic, as described above, in order to become successful in this market
and to achieve their diversification objectives. There challenge is not
only to move from a CRE focused bank to a more diversified bank requiring
significant changes in culture, loan policy, lending approaches, and
customer focus. This requires a comprehensive and effective strategic
business plan to accomplish.
Bank Strategies LLC looks forward to meeting with banks interested in sharpening
their approach to small business banking to discuss the strategic considerations
critical to serving small businesses.
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