"Strategic insight combined with clear, concise and actionable solutions"

While the total number of bank branches is declining, the industry is still opening 1,000 branches annually.  Here are 10 keys to accelerating success of your new branch.

 

This article, by Peak Performance consultant Jon Voorhees, was originally published in BAI Banking Strategies on March 7, 2017

 

Seems like every banking journal today has an article about branch closures or consolidations. Less reported is that banks are still opening about 1,000 or more new branches annually. In fact, according to the latest FDIC update, banks opened nearly 6,000 new branches in the five-year period between 2011 and 2015, and are on pace to do nearly 900 more this year.

 

During the last half of my career I opened about 900 new branches and learned a great deal about the factors that drive a successful launch.

 

Here are my 10 best insights:

 

  1. Location. Location. Location. Everyone who has ever worked in real estate knows this concept. Your location and site selection have a big impact on your sales volumes. Not only do you want to locate in heavily trafficked retail areas, you want to make sure that you select sites that are highly visible and accessible. Hard corner stand-alone sites tend to out-perform mid-block or in-line sites. Both of those types tend to out-perform in-store or supermarket sites.
  2. Don’t shortchange marketing. Spend some money marketing the new site, whether through a grand opening celebration with a contribution to a local charity or some other type of event. You need to make sure people know you are open for business. I’ve always been amazed at banks that spend $2-3 million building a new branch and $0 dollars marketing it.
  3. Bridge to where you already have customers. About half a typical branch’s sales are from existing customers… so half must be from new customers. Opening a new branch as an infill point within your current footprint will likely outperform a new branch in a new market that expands your bank’s footprint. Building a convenient new location in an existing market where you already operate, the number of existing customers will influence sales performance.
  4. New customers are critical, but not the only reason for expansion. Conversely, opening a branch in a new market where you don’t have an existing customer base will lessen initial sales and extend the payback time for the capital investment. In these cases, increase marketing efforts to promote the new location. Even spending $25,000 in marketing can have a big boost in sales and it’s a small incremental price to pay for a $2-3MM investment.
  5. Will an ATM substitute for a branch? Consider deploying stand-alone deposit taking ATMs as infill points in markets where you have a decent branch network. They cost about 5-10% of a branch’s operating costs and can help boost local sales by as much as 15% in their trade area. Make sure you use the same site characteristics you would for a branch (e.g. highly visible, high traffic area, easy to access site, etc.). Also make sure the machines is available 24-hours. Avoid placing inside a retailer.
  6. Be wary of supermarket branches. While they cost less to build they cost about 60-70% the cost of a traditional branch to operate, and will only generate 40-50% of the revenue of a traditional. Additionally you have limited control over the grocery story. If they close you close, often with little customer notice, which could lead to regulatory issues.
  7. Heavy up on sales staff. A corollary to the supermarket note is make sure you have plenty of sales staff from day one. Never open a branch with only one seller, even if you have limited initial transaction traffic. Your sales volume in the early months have a big impact on the ultimate size of the branch.
  8. Go big on signage. Wherever you build bank sure your signage is as big and bright as you can get it. Customers need to find you location. Some municipalities and landlords limits the square footage of signage so plan carefully and consider in-branch signage through the windows as a complement to your external signage.
  9. Add drive up lanes, but not drive up tellers. Find a site that offers a drive-up lane if possible, especially in the colder northeast markets but place a drive-up ATM instead of a traditional teller. The long-term benefits of lower operating costs and increased transaction migration outweigh any potential customer complaints. It’s easier if you don’t offer manned drive up lane from the beginning than taking it away later by swapping in a drive up machine. Depending upon where you operate consider wider than normal drive up lanes if big pick-up trucks are common to your markets.
  10. Get staff on board early. Hire the new branch’s staff early and get them into the market talking to local businesses to “pre-sell” accounts. First, it shows the firm is committed to the local neighborhood but it also helps ensure a good opening month.

 

There you have it. Ten things to consider before making your next branch investment. Make it count.

 

 

Share

Leave a Reply

Follow us on...
Twitter  LinkedIn  Facebook  
Archives