As you mine your member base looking for ways to increase revenue while bringing greater value to the people you serve, it's easy to overlook an important segment-the SOHO, or small office-home office business.
According to one study conducted by CUNA, 27% of your membership is composed of small businesses. Even at a more conservative estimate of 15% to 2%, this represents a huge opportunity. But how do you begin to tap into this market?
The key is to identify your SOHO members from your core system's member database. Begin by creating a system to code member records (CIF) and then ask your front line staff to identify small business owners as they serve them. Tellers can query members through informal surveys while handling their personal transactions, and MSRs and loan officers can assist by analyzing loan applications.
Once you have identified your SOHO members, you can then develop more formal focus groups, surveys and co-marketed open houses to learn what products and services are of interest.
Most core systems can assist you with product creation and accounting, but the ability to manage the SOHO customer relationship at multiple stages is one of the keys to keeping them satisfied. Your Membership Relationship Rewards solution must be capable of managing the business relationship in several areas:
* Contact management. Identify behavior patterns using history gathered from every interaction and all delivery channels.
* Prospect management. Maintain contact with prospects using integrated follow-up tools (reminders, outbound telemarketing, call scripts).
* Referral management. Track all sales opportunities using integrated, automated referral capabilities.
* Sales management. Measure cross-selling effectiveness with reporting tools that evaluate SOHO member acceptance patterns.
* Campaign measurement. Execute campaigns across all channels by segmenting and targeting specific groups and delivering the right offer at the right time.
Your core system should be able to deliver this critical MRM information to loan officers and branch personnel in a quick and easy view, providing a 360-degree perspective of the relationship. Once your staff fully understands a member's needs, they can effectively recommend specific products and services to meet those needs.
Deposit Products and Services
In the past, commercial businesses, including SOHOs, required their checks be returned so they could deliver them to accountants and provide evidence of payment. However, Check 21 has underscored what CUs have known for a long time-images of checks serve the same purpose and are easier to review and store.
Your technology solution should enable you to provide business checking account information in a variety of delivery channels. And your ability to deliver imaged statements is an opportunity to differentiate your service offerings. If your SOHO member requires a copy of a statement for accounting or legal reasons, you need the ability to provide an imaged statement in real time. In fact, your technology should allow your SOHO member to self-serve this information via your Internet banking channel.
You will want to consider complementing your Internet banking channel with other imaged-based technologies. For example, cash-management services are key to helping the SOHO business manage multiple accounts (i.e. operating, payroll, etc.). Likewise, remittance processing-or lockbox-services allow you to process checks quicker while giving the SOHO business faster access to cash and helping them eliminate daily trips to the credit union. These and other deposit and payment services should be handled by your technology provider in a real-time system with delivery to all channels.
Credit Products
Finally, to compete effectively, you must offer a variety of credit products. You already assist with traditional equipment and vehicle loans, but you should consider expanding your offerings to include working capital lines of credit, permanent asset-based working capital loans and commercial mortgages. As the SOHO business grows, their needs become more sophisticated and they will require these products.
Credit unions can offer these products through the SBA's 7(a) lending program, which provides loans to small businesses that are unable to secure financing on reasonable terms through conventional credit channels. The program operates through private-sector lenders that make loans that are guaranteed by the SBA in the case of default.
In addition to helping your members, your CU also benefits because loans are guaranteed up to 90%, reducing your risk and capital allocations. In addition, SBA loans offer extended repayment terms that help minimize the SOHO's cash flow requirements. Rates on SBA 7(a) loans are typically adjustable and tied to the Wall Street Journal prime rate index. For example, permanent working capital loans can be termed out up to seven years, with the loan tied to the Wall Street Journal Prime Rate and adjusted quarterly. The SOHO business gets a longer term loan to minimize cash flow with no balloon payment. And there is a very active secondary market that will purchase the guaranteed portion of the loan (for a premium typically between 5%-8%) and allow you to continue to service that loan and collect a one percent service fee. CUNA offers resources to get you started in SBA lending. In addition, the SBA offers extensive training to help you begin the expansion of your commercial lending programs.
Make sure they turn to you
Your members who operate small businesses are most likely handling their financial needs with one of your competitors. To position your credit union to earn their business, make sure you select a technology partner carefully. You will want to choose a provider that can help you originate a variety of deposit and loan accounts, service them efficiently, and accurately report the results. Your technology solution should allow you to continually evaluate risk and identify opportunities so you can adjust your objectives accordingly.
You are already delivering excellent service to your members. By expanding your products to offer small business services, you have the opportunity to gain an even larger share of their financial business.
Tom Berdan is a product manager for Fidelity Information Services, specializing in the company's MISER core processing solution.
