Getting into the business of small business banking
If there is one market that is in financial institutions’ blind spot, it’s small business. Given the 30.2 million small businesses in the United States, financial institutions are beginning to understand the need to provide these customers with their own banking services. But first, they need to understand who we’re talking about.
There are 58.9 million employees who work for a small business in the United States. That’s almost 2 out of 10 people; they are your neighborhood lawn service, your friend the restaurant owner, your cousin the photographer…your community. These valuable members of society have created 1.9 million or 66% net-new jobs. Businesses trust their financial institution to provide the proper tools to manage finances. And, financial institutions are in the unique position to help these businesses thrive.
Bankers can start understanding this market by breaking down SMBs (small and medium-sized businesses) into more relatable categories. Consider these five market segments:
1. Medium businesses – between 100-999 employees with more than $50 million in annual revenue but less than $1 billion;
2. Small businesses – under 100 employees with total assets less than $50 million in annual revenue (i.e. church organization or local restaurant);
3. Gig economy – viewed as freelancers and independent contractors, data may vary (i.e. freelance writer);
4. Lifestyle business – operate a business that allows owner to live a certain lifestyle or level of income (i.e. blogger/influencer or the local pharmacy); and
5. Microbusiness – employ less than six people or self-employed (i.e. personal trainer or photographer)
Many of these businesses are hiding in consumer accounts but need much more than free checking accounts and financial management tools. So, they’re turning to Square, QuickBooks or PayPal for help when they would rather be working with their bank or credit union. The key is for financial institutions to recognize these business types and offer easy ways to manage invoices, payments and accounting.
Making small business banking simple solves a big problem for small businesses. Bankers that can better understand who they are can market toward their needs, ultimately expanding their relationships and growing deposits.
At Autobooks, we’re small business obsessed. Follow our blog to learn more about how financial institutions across the country are tapping into this timely and vitally important market.
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