There are multiple strategies to retain your business customers. In this blog, we focus on one critical strategy to retain your business customers: Maximize your Centers of Influence.

Let’s start by defining “Center of Influence.” In business, we refer to centers of influence (or “COIs”) as those individuals that continually send you customers. Whether the customers are individuals or businesses, your COIs are a constant pipeline for your business. In this blog, we focus on maximizing your COIs that refer business customers to you. But the strategies work similarly with consumer customers too.

One simple example of a COI are dentists. If you are an orthodontist and own a practice, who is your best source of referrals? The children’s dentist! Children initially go to a pediatric dentist to ensure everything is fine. Dentists teach children about cavities and also observe how their permanent teeth are growing. As soon as the dentist detects that the permanent teeth are not straight, they tell parents to think about braces. Dentists usually have a couple of their preferred orthodontists, and they give the parents their contact information. Parents then follow up with the “trusted orthodontist” who will take care of their children’s teeth and visit your clinic. At that point, it’s up to you, the orthodontist, to ensure they buy your services and stay with you.

Customer retention is just as crucial as customer acquisition.

Customer retention should be an ongoing strategic objective for financial institutions. Retention is just as crucial as customer acquisition. And one could even say that losing an existing customer is more costly than acquiring a new one. Why? Because you have to “undo” everything you set up for each customer and start the process of acquiring another one. All your time spent training the customers or additional resources hired becomes an expense with no income to show for.

There are multiple reasons business customers leave your institution. One important reason is simply ownership succession. The ownership transition from one generation to the next may not include your financial institution. Why? Because the next generation successors don’t have an existing relationship with your institution. Therefore, they go to other banks or credit unions they know or have relationships with already established.

Another reason is that the current owners sell the company to a new team of investors or another established company. The new owners use different institutions than yours to meet their banking needs, maybe even your competitors.

Who are the primary Advisors for businesses?

Business owners work with three primary advisors during an ownership succession whether the successors are family members or outside investors. And the succession process begins 24 to 36 months before any deal is closed. Below are the three primary advisors to businesses:

1. CPAs and Accountants: Business owners work with their CPAs on tax matters and in preparing financial statements to present to potential buyers.
2. Mergers & Acquisitions (M&A) Attorneys: The attorneys get involved in drafting the Letters of Intent (LOI) for the potential buyers. The business owners selling their business hire their own attorneys to review and negotiate the LOIs.
3. Wealth Advisors: Business owners, your customers, typically work with their wealth advisors ongoing. They may be the first ones to know when the owner is planning on selling the business. The wealth advisors begin the planning process and work with the tax accountants on multiple scenarios years before deals close. Not all financial institutions own a wealth management company. Therefore, it’s important to create an affiliation with a wealth management company.

Notice that the bank or credit union is not one of their primary advisors. This is a huge opportunity for your institution to become one of your business customers’ four primary advisors!

How to identify and maximize your COIs.

It is important to first identify your Centers of Influence so you can then maximize the relationship. Below are some strategies on how to do so:

• As you acquire a business customer, ask them who their key advisors are and ask for an introduction. You can then start building your own relationship with your customers’ advisors.
• You can also ask existing business customers who their key advisors are and establish a relationship with them going forward.
• If you have already identified your COIs, then get to know them better at the personal level. It’s important that your COIs feel appreciated and valued. Your COIs may or may not be your customer but treat them as your best customers!
• If you can, reciprocate and become their COI as well. Referring your institutions business customers to some of your COIs’ firms can be a win-win. Of course, you need to use common sense and avoid conflicts of interest. But it can be done to meet some of your business customers’ needs that your institution cannot meet. Examples are referring them to a tax accountant or an attorney that is also your customer and your COI.
• Always say “thank you” to your COI and let them know if the referral became a customer. COIs like to know what happened to the referral.
• Lastly, ensure you build relationships with your COIs’ successors too. If your COI is a partner at an accounting firm and he/she is going to retire, ensure they introduce you to their successor. Take the initiative to get to know their successor and offer your banking services to help their customers. Do the same with attorneys or wealth managers if they share about their own retirement timeline.

One Critical Strategy to Retain Your Business Customers – Conclusion

As mentioned above, there are multiple strategies to retain your business customers. One critical strategy to retain your business customers is to maximize your Centers of Influence. You acquire COIs by getting to know your business customers’ advisors early in the relationship. The goal is that when the time comes to selling the business, you retain the business as customers.

Knowing and building relationships with your Centers of Influence is crucial to retain your current business customers after they sell their business. Remember, it doesn’t matter if the business owners sell to their family members or to new investors. What’s important is that you’re building relationships with the successors and your customers’ advisors.

It’s also important to build relationships with your COIs’ successors. Doing so will guarantee your pipeline will continue growing indefinitely and it won’t dry out.

I hope these strategies encourage you to identify your COIs and maximize your relationship with them, so your institution continues to grow.

Managing Treasury Management Service Providers is a must. One of the most common topics discussed at our Treasury Management Forums is the challenge of relying on third-party providers. Every Treasury Management service is provided by a third-party vendor, and they must seamlessly integrate into the core system. Many banks experience multiple challenges with their vendors to provide the “white glove” service to businesses they strive for. Most core systems come with a “default” module for multiple Treasury Management services. However, most of the default services are not ideal and some don’t even integrate well with their own core.

In this blog, we list several challenges community banks face with their Treasury Management services providers and ideas on how to approach them.

Managing Treasury Management Service Providers: Critical Systems

One of the first steps in formalizing your TM department is to “turn on” the Account Analysis System (AAS). The AAS is one of the most critical and foundational systems for your TM department. The major decision you must make is which AAS to use. The AAS is not a service nor a product. It’s your bank’s “billing system” for all the account activity and TM services you provide to your business customers. Most core systems come with a “default” AAS and with the “paid version” of the AAS. The paid version is the one you want! It comes with all the additional features you need to provide the best experience for your customers. Some of the key features you need to look for are:

• Tiered ECR capability
• Flexibility with Account Analysis statement cycles and choosing the day of the month to assess service charges
• Multiple Account Analysis types
• Ability to retain earnings history for life (not just for 12 months)
• Ability to allow exception pricing on an account-by-account basis
• Ability to carry over Earnings Credit Allowance if customers have a surplus (to assess services charge charges quarterly versus monthly, for example)
• Able to create billing notices versus directly debiting customer’s account
• Multiple tiers to charge for Negative Average Collected Balances
• ECR variances on account-by-account basis
• Ability to pay interest on the same account that earns an Earnings Credit Allowance (allows businesses to offset service charges first and earn interest on surplus balances – on the same account)
• Separate Account Analysis statement from regular bank statement
• Modeling Module to provide customers and prospects with a comparative sample AA statement

Another critical system that supports your Treasury Management offerings is the Online Banking platform. Once again, the OLB platform is not a TM service or product. It is the platform through which your business customers access their TM services along with doing their normal banking activities. In our Forum discussions we learn about community banks struggling with their OLB platform. Because it doesn’t integrate well with the core system or with the Account Analysis System. Additionally, many institutions’ OLB platforms fail to integrate the TM services such as RDC, ACH, and Positive Pay correctly. This problem results in additional manual labor for the TM Support and/or the Operations teams. They must enter billing manually into the AAS or perform other manual duties.

Treasury Management Services that Need Third-Party Providers

In addition to choosing the right AAS and OLB platform for your institution, you need to choose the right providers for all the TM services you want to offer. Below is a list of the most common Treasury Management services in the market grouped by type of service. Each service needs a third-party service provider.

As you can see from these charts, there are multiple Treasury Management services, and your bank must manage each vendor. Often the core provider also offers several of these services. However, due to reasons stated above (mostly lack of integration), banks use multiple providers to ensure they work well together.

Aside from the integration issue, there are multiple providers that still offer old, antiquated systems that no longer work. These systems are keeping banks behind and impacting their ability to offer top notch customer service to their business customers. These old systems also introduce additional third-party risk to your bank which includes reputational risk. This is unacceptable and community banks must raise their voice and require their vendors to upgrade their systems. One way you can do this is by forming a Treasury Management Users Group or Core System Users Groups. You can then collectively formally complain and pressure them to change.

Below are tips to manage your Treasury Management vendors successfully:

• Ensure each vendor is part of your Vendor Management Program and goes through the appropriate due diligence.
• Assign a Vendor Owner to each Treasury Management third-party provider.
• Require each TM provider to sign a Non-Disclosure Agreement before you sign the contract.
• Always ask the key integration questions before you sign up. Talk to the technical team not the sales rep.
• Research minimum three providers for the specific Treasury Management service you’re looking to implement.
• Stay in touch with your providers to ensure you get serviced when needed. It’s all about building relationships with them so they get to know your bank.
• Follow up on the references. Talk to peer banks that are actually using the services or products you’re researching.
• Enforce the Service Level Agreements if you have one. Hold them accountable when they don’t deliver on their promises.
• Always ask as part of your due diligence if the provider uses third-party vendors. These become your bank’s fourth-party vendors.

Managing Treasury Management service providers requires time and effort. But in the end, it’s always worth it to establish good relationships and to communicate your needs as they arise. It’s a must to mitigate your third and fourth-party risks.

If you’re thinking of formalizing or implementing your Treasury Management department, feel free to reach out. We’re here to help!