It requires a different mindset and strategies to build a desirable commercial and business portfolio than it does to build consumer business. On the consumer side, a financial institution prepares the product, produces advertising through a variety of media: radio, internet, TV, billboards, statement stuffers, etc. Once the marketing campaign is out in the public, the attitude is to sit back and see what the marketing will bring in the door for consumer business.
Once when I worked for a savings and loan, we had a promotion to give away a Rubbermaid stepstool that doubled as a tool box. Each new deposit account would get one. We stacked hundreds of these in our branch, put out the marketing and waited for the results. People filed in to open an account and get a step stool.
Business development on the commercial or agricultural side does not work that way. This presents a problem for credit unions who attempt to build a successful portfolio using the same tools that they do on the consumer side. Marketing on the commercial side is more about raising brand awareness and is designed to get your foot inside the door of the companies you desire to service, not to bring those clients to your branch.
Commercial marketing is quite strategic. It involves identifying the type or industry to target or even identifying businesses to bring into the credit union. It requires that one join different groups or trade associations where your targets frequent. Waiting for your desired clients to come to you will not produce the results that you want. On the commercial and business side, people go where they already have a relationship. If they don’t have a relationship with you, the walk in is usually someone who is just looking for some method to have his business financed. Many times these folks have already been turned down somewhere else. This is often not the recipe for a desired borrower.
The sales cycle for commercial is also very unpredictable. It can be very short, if just happen to meet a business who is actively seeking to start a new banking relationship. It can also be quite long. One of the largest commercial relationships that I started when I was a commercial banker, took me five years of relationship building to win. We ended up getting $17MM of loans and $20MM of deposits. It was also one of the most financially sound companies in the entire portfolio of the bank.
So how do you handle commercial relationship development with such an unpredictable sales cycle? First, realize that advertising is primarily for brand awareness on the commercial side. Next, identify the businesses you want to target. This can be by industry like family doctors, dentists, attorneys, or mom and pop shops. It can also be a target business that you want to bank. It can also be a mixture of both targeted businesses and industry.
These targeted entities should create a series of calls. You need to build relationships and make friends. If your portfolio is not as big as you want it, you need to go make more friends. This will require that you work with some desired customers for years before you see the fruit from the tree that you have planted. In some cases, it will come a lot sooner.
Find groups that you can belong to where your targets hang out. This is the same as finding the right spot where the fish are biting on the river and getting your fly rod in that area on a regular basis. Don’t seek to sell people there, seek to build relationships. Remember people hate to be sold, but they love to buy.
Good commercial portfolios do require different tools and skills than most of the retail mindset that runs throughout the credit union industry. But with the right tools, you can be successful.