Giving these operators attention and tailoring offers to their needs can help banks develop an enduring relationship that can become more fruitful over time.
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By: Isio Nelson – You can read this article HERE in its entirety on BAI’s website
When banks hunt for new revenue, consumers and big businesses get plenty of attention. But operators of small or micro businesses are an untapped gold mine that may be hiding in plain sight.
Business formations skyrocketed across the United States between 2017 and 2022, according to data from BrightQuery, a BAI partner that tracks public and private companies. The number of sole proprietors grew from 26.1 million to 36.8 million, an increase of more than 40%, as more people took a chance and started companies or side hustles. When it comes to businesses with between two and 500 employees, the number actually dropped ever so slightly to 5.8 million from 5.9 million.
If you need more convincing about potential, consider these stats: The number of companies with annual revenue under $100,000 climbed from 25.9 million in 2017 to 36.6 million in 2022. This increase more than offset a slight drop in the number of companies reporting revenue between $1 million and $20 million to 1.76 million in 2022 from 1.81 million in 2017, according to BrightQuery.
According to the recently released BAI Banking Outlook: Small Business Banking Priorities and Insights, net promoter scores are the lowest (19) for businesses with less than $1 million in sales. This also correlates with data from the report that indicates that those businesses reporting sales under $1 million received product and service recommendations just 2.8 times a month, compared with 4.1 times a month for those reporting sales between $10 million and $20 million.
Small business owners get personal
The large majority of small business operators use the same bank for personal accounts, yet many banks do not fully recognize their potential. In fact, 58% of small business accounts started as a personal deposit relationship.
More than 70% of business owners want to originate digitally, and often the only easy way to do that is with a personal account, as banks have lagged on digital originations for businesses with multiple complexities, including the upcoming CFPB Section 1071 rules that will require banking institutions to collect and report data on lending to small businesses, defined as enterprises with gross revenue under $5 million.
Small-business operators dread having to do the financial part of running their company, but they may not be big enough for…
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