There is unquestionably an advantage to belonging to a group, and we all know how there is a “safety in numbers” for personal and professional survival. However, there can be disadvantages to following the herd everywhere it roams. If resources are lean, you will compete against the entire herd, and cannibalism may arise.
I visited the Minneapolis-St. Paul area last week, and had an opportunity to visit with CU business lenders in that market. They echoed a stressful sentiment about competition that I was accustomed to hearing in Washington DC. In major urban markets, all banks, big and small, are attracted to do business there, and the competition gets to be quite brutal. Terms of lending get loose, interest rates get low, all to win the deal, leaving prudent lenders with few opportunities that make sense. In this situation, what could one possibly do to be competitive, but not stupid?
I have always been an advocate of abandoning the herd and going off the beaten path. While this is not for everyone, it can be fruitful for hardworking people willing to educate themselves in new markets, industries and practices.
For example, every business expo in the Washington DC market was packed full of bankers. I would meet more bankers at these meetings than actual business leads! It was far from an effective way to land new business. I decided it would be better instead to branch out into a different industry, the non-profit industry, where bankers were not falling over each other to win business. Why weren’t bankers vying for non-profit accounts? I think most didn’t realize that they had similar needs as other businesses, like the desire to purchase or construct facilities. Since nobody thinks about non-profits when they think about banking, it wasn’t a competitive field. The herd wasn’t ever at that watering hole, so it never got much attention.
I also convinced my colleagues that perhaps it didn’t make much sense to chase our business in a crowded field, but rather, have the business chase us. We decided to have an exclusive, by invitation only, meeting at our bank for various businessmen and developers. In this case, we were the only bankers at the meeting, and the clients felt special by attending the event. Other banks were not doing these types of events, so we definitely stood out in their minds as unique.
Another way in which I tried to break from the herd was by exploring new markets. Again, every banker was trying to do business in Washington DC, but none of them were looking at opportunities outside of the city. I looked at government data that tracked the economic output of the surrounding communities, and I could see Baltimore was experiencing an upswing in growth. Despite the recent negative news surrounding the city, the community is poised for great redevelopment. I attended a couple of business expos there, and often found I was the only banker in attendance! This gave me easier access to developers and other professionals too.
There is a reason why many bankers were not trying what I did, and it boils down to risk. It is a risk to enter a new industry, enter a new market, or adopt a new pattern of doing business. But when you have to compete in your existing market with extraordinary low rates or bad terms, then how much additional risk is it to explore new options elsewhere? Trying to win a giant race is exhausting, and sometimes it is easier and no more risky to try something new.