Why Commercial Bankers Need to Specialize AND How To Do It!!

In his groundbreaking work, The Pumpkin Plan – Mike Michalowicz outlines how you can find “riches in the niches”. The part of the book that was like a lightning bolt to me was when he told the story of 2 doctors. My paraphrased summary is below:

1. Dr. Normal, MD is a general practice owner, someone whose knowledge is a mile wide and a foot deep. He has thousands of patients, what he brings to the market is a commodity, he is working himself ragged jumping from patient to patient to fit as many as he can each day (because he has traded his time for cash), and while he has a nice lifestyle, he doesn’t have cash to burn.
2. Dr. Rockstar, MD is a specialty (niche) doctor that is world renowned for expertise with a specific part of the body. His knowledge is an inch wide and a mile deep. He has a fraction of the patients of his friend Dr. Normal, people fly all over the world to seek his expertise, he works 3 days a week (because he has traded his knowledge for cash), and his lifestyle is the envy of other doctors, and he can’t build a fire big enough to burn his cash.

The moral of the story is that if you want to continue to be a commodity; you will run yourself into the ground. But if you want a life where clients recognize your value, are willing to pay for it, and chase after you; you MUST find a niche.

So how does this apply to commercial bankers? That is when the lightning hit. I looked at some of the most successful teammates and I realized that they were serving in a niche market that was created by the bank. One banker served in the dealer floorplan group, and was known across the entire state as THE go-to floor plan banker. Another, was a CRE lender that supported some of the most high-profile developers and projects in Texas’ major markets. I started to observe them and ask what set them apart. I realize that it was not the product or structure that was particularly impactful and led to their success. What really set them apart and won the majority of their deals was the knowledge that they brought to clients. Knowledge of what was going on in the auto dealer industry or what local planning and zoning changes would do to future development projects.

Now, a fixed mindset banker would say something like “Of course they can niche down and be successful, the bank sets them up to serve only as specific client segment” or “Of course they are able to have enough clients to be successful, they can go wherever they want, I am restricted to my town”.

A MK42 banker would observe this and may say something like: “I love the idea that they get to pick the clients that they work with, and while I sure the negotiate over rate and structure, I bet it is not as much of a dog-fight as it is with my clients. How do I go about breaking my own mindset and refining my personal business practice to create niche practice?”

The danger of not creating a niche practice is that if you are a commodity banker – when Amazon Credit Union’s top commercial banker (Alexa) figures out how to extend large business loans, you not only are exhausted from chasing after clients, you are out of a job.

So, I followed Mike’s process for figuring out how to find your perfect niche. I modified is slightly to fit the banking industry and to account for the fact that I worked for a larger organization, which places some boundaries (i.e. credit and risk appetite, industries that they avoid, etc.). You really need to read The Pumpkin Plan to get the most out of this exercise, but I will go over high level the steps (and modifications) that I took to define my nice practice.

Step 1. Break your own mindset. The role of the commercial banker is radically changing and you have to change with it. So, don’t allow your own prejudices or norms keep you from exploring your growth path. One example of this is the fallacy that you have to only have clients in your own town, and you have to be able to visit them. While there is tremendous value in being able to do this, the entire world has gotten used to zoom and video conferencing. Last year, I closed a loan for a client that operates a fast casual franchise. The first time I met the client, face to face, was at loan closing. This is just one part of my fixed mindset that I had to overcome. A word of caution: you have to be very discerning about this, as there are definitely local market conditions that are imperative to credit decisions; but push yourself. This may also mean you need to help change the mindset of your teammates. I would suggest that you be wise, respectful, and factual as many of them may not be ready to accept this mindset change just yet.

Step 2. Define your perfect client.

To do this, I started with a list of my clients. I then made 7 additional columns titled: Profitable, Responsive, Respectful, Time, Likability, Industry, and Opportunity. I then put a “??”, “??”, “--” beside each category for every client. It looks like this:

Here are a few questions to ask for each category:

• Profitable: How does this client impact your bottom line? Do they beat you up for every dime?
• Responsive: Do you have to chase after this client to get answers from them? Do they pay on time?
• Respectful: Do they value what you bring to the relationship, or do they see you as a preferred vendor, or worse yet commodity provider?
• Time: How much time to they take out of your day (especially in relation to the profit number)?
• Likability: When you see their number on your phone, do you pick up with a smile – or let it go to voicemail?
• Industry: Is it an industry that you enjoy working with? Is it one that your bank has capacity and/or risk appetite for?
• Opportunity: Is there more business that can be done with this client? Are they growing? Can you increase your share of wallet? Do they have ongoing needs for bank products and services? 

These are my categories, but if there are others specific to your company – feel free to add them

Step 3: Circle all the clients that have 4+ ?? / Cross through all the clients that have 4+ ??

Step 4: Create a list of characteristics that are common amount the circled clients. Are they in a specific industry? Are they a certain age? What is their revenue size? Is there a common thread in their background? Is there a club, organization, or group that they are all part of? What else makes them similar? Don’t be ashamed to do a little bit of social research (not staking, research).

Be specific and go deep. If you are a restaurant, it does you no good to note that all your clients are hungry. Instead, maybe you notice that all your clients are fitness conscious, but crave your restaurant on their cheat day because they can get comfort food that they don’t have to spend the rest of the week working off.

Step 5: Determine what they value the most in their banking relationship. Hopefully you work with clients that fit your niche market already. If you do, go and interview them and find out what they like, hate, love, and wish could be changed/ improved in the banking industry. This is a key distinction, you are not asking them about what they like, hate, love about YOU. You are asking them about your industry. This allows them to vent about things that bother them, but they don’t want to tell you because they like you, need you to approve the next loan, don’t want to hurt your feelings. Push them for details, because the clearer you can define maximum value to your niche market – the more effectively you can build a banking practice that exceeds that value.

 Step 6: Share your findings with your team as well as your plan to create maximum value for your niche market. This will not only bring them along on this transformation journey, but they can start to find ways in their area of expertise to serve your niche market. Another benefit is that you will no longer get referrals for companies that are outside your niche market, because your team knows that it is not a good fit and they can introduce another of your teammates to help the client. The client gets helped, your teammate and your bank get the business, and you are able to focus on the clients that make your heart sing. A true win-win-win.

In 2019, I was able to join Jim Young on the Bank on Purpose podcast and we talked about commercial banker finding riches in the niches. If you are a commercial banker and you do not listen to this podcast, you are missing out. You can listen to our episode HERE.

I would love to know what your niche market is and encourage you anyway I can. Together we are going to uncover how you are going to thrive for decades. I would love to connect with you on LinkedIn or Facebook. When we do, tell me about the niche market you have/ want to serve and I will gladly share mine.

Greg Martin is a former Airborne Ranger that has been a banker since 2006. He firmly believes that every person is uniquely crafted by God to accomplish something special. When he is not helping clients, he is nerding out by watching Marvel movies and playing with his amazing son and supremely talented wife of 18 years. For more content, check out his personal blog HERE.