Opening a bank sounds like a daunting task…but it's doable.
Why Start a New Bank?
Starting a bank isn't the same as starting a corner mom and pop shop. The process for launching a financial institution is long and arduous, and it will likely be years before you earn a profit on your endeavors.
As a financial entrepreneur, it's important to check your motivations and make sure you're starting a bank for the right reasons. If your goal is simply to emulate successful banks that already exist in your area, your financial startup may be doomed. In fact, your geographic area may already be saturated with financial service providers.
The most common motivations behind successful bank startups include a large gap for financial services in the marketplace and/or the existence of strategic partners. In many cases, large business interests have their own reasons for wanting to help launch a new bank and are willing to offer the kind of assistance you'll need to get your endeavor up and running.
Tips for Emerging Bank & Financing Entrepreneurs
It's impossible to launch a new bank without investing substantial time and effort in business planning. During the course of business planning, there are several issues you'll need to be address, including the following.
- Market Analysis. Before you go too far in the planning process, you'll need to perform a professional market analysis to identify whether or not gaps truly exist in the financial services marketplace. Your perception of gaps and their actual existence may be two entirely different things. If demand for a new bank exists, you can proceed with the rest of your planning process; if not, it's time to go back to the drawing board and recast your entrepreneurial vision.
- Capitalization. It shouldn't come as a surprise that a new bank is a costly venture. In addition to meeting the capital requirements for your bank's physical assets, you'll need to accumulate enough capital meet reserve and hiring requirements. If you're thinking in terms of thousands, readjust your expectations and start thinking in terms of millions. This is where the existence of strategic relationships with partners and investors really comes into play.
- Regulatory Hurdles. Common sense dictates that the government doesn't let just anyone start a bank. Before you can accept your first deposit or sign off on your first loan, you'll need to clear multiple regulatory hurdles, including membership in the Federal Reserve System. The American Bankers Association and other trade groups can point you toward resources to help you meet regulatory requirements in your state.
Best Bank Business Plans
As a startup bank owner, writing a quality business plan is one of the first tasks you need to address.
Now here's the good news: You can minimize the amount of time it takes to write a business plan by buying business plan software. A reliable software solution will increase the accuracy and consistency of your business plan, dramatically improving its value to your bank.
Properly utilized, business plan software has the potential to transform your business plan from a throwaway business requirement to an integral strategic resource.
Well in advance of opening a bank within your community, it's worthwhile to determine what the competition looks like. We've provided the link below to help you find competitors nearby. After clicking on the link, type in your city, state and zip code to get a list of banks near you.
Gain a knowledge of how existing firms have positioned themselves in the marketplace, and then design your business in a way that sets you apart from the others.
Getting Advice from Experienced Entrepreneurs
If you want to open a bank you really ought to learn from folks who are already in business. If you think owners of nearby banks will give you advice, think again. Why would they want to educate a future competitor?
On the other hand, an individual who has a bank in another town will be much more likely to talk with you, after they realize you reside far away from them and won't be stealing their local customers. Many business owners are happy to give advice to new entrepreneurs In my experience, you may have to call ten business owners in order to find one who is willing to share his wisdom with you.
Where does one find a bank founder who is willing to talk to you but doesn't live nearby?
Here's how we would do it. Try the useful link below and key in a random city/state or zipcode.
Acquired Banks: Competitive Advantages
Pursuing a bank acquisition can be an effective route to profitability for emerging entrepreneurs.
A business acquisition also provides the benefit of intangible assets like a brand identity. In fact, many entrepreneurs pursue acquisitions for the primary purpose of buying an established brand.
Since your bank's ability to compete is largely indexed to your brand reputation, an acquisition strategy significantly condenses the amount of time it will take for your business to become a competitive threat.
Don't Forget About Franchising As an Option
You should know that your odds of becoming a successful entrepreneur increase if you go the franchising route rather than going it alone.
Prior to starting a bank, it's worthwhile to investigate whether purchasing a franchise might be the right move for you.
The link below gives you access to our franchise directory so you can see if there's a franchise opportunity for you. You might even find something that points you in a completely different direction.
These additional resources regarding getting started as an entrepreneur may be of interest to you.
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