Don't Build a Box. Build a Growth Strategy.

When planning a new branch, it can be tempting to skip the upfront market research and put those dollars directly toward the building itself. Find a growing community, secure a visible piece of land, build an attractive and functional branch, and open the doors. On the surface, it seems like a practical way to save money.

But a branch is far more than a building. It is a significant, long-term investment expected to generate deposits, loans, relationships, brand awareness and growth for years to come. When millions of dollars are at stake, saving money by eliminating the research that informs that investment can be an expensive gamble.

The Cost of Getting It Wrong

Market research requires an upfront investment, but eliminating research does not eliminate risk. In many cases, it simply moves that risk further down the road, when correcting a mistake becomes much more expensive.

Without the right analysis, a financial institution may enter a market that appears attractive but lacks the right consumer or commercial opportunity. It may select a highly visible site that is difficult to access, build a 5,000-square-foot branch when 2,500 square feet would accomplish the same objectives, or design a facility around assumptions about how consumers will use it rather than evidence of how they actually bank.

The cost of research is relatively small when compared with the cost of land, construction, staffing, technology and decades of operating expenses. More importantly, research can help ensure those dollars are being invested where they have the greatest opportunity to produce a return.

A Growing Market Is Not Enough

New rooftops, strong traffic counts and commercial development can all signal opportunity. So can a competitor opening nearby or an existing customer base already doing business in the area. Those observations matter, but they should be the beginning of the conversation, not the entire growth strategy.

A comprehensive market analysis goes deeper. Demographic and socioeconomic trends, household growth, competitive saturation, deposit and lending potential, existing customer concentrations, traffic patterns and future development can provide a much clearer picture of whether perceived opportunity translates into sustainable growth.

Sometimes the data validates exactly what leadership suspected. Other times, it identifies a stronger opportunity a few miles away or reveals that a market is already more competitive than it appears. It may even show that building a branch is not the right move at all.

That is not a failed project. That is valuable information obtained before millions of dollars are committed.

Data Should Determine More Than Where You Build

Market intelligence should not stop once a location has been selected. The same research that helps determine where to build should also influence what you build.

Understanding the market can help answer important questions about the size, function and experience of the branch. Does the opportunity justify a full-service location or would a smaller footprint make more sense? Will the branch primarily support transactions, advisory conversations, commercial relationships or a combination of services? What staffing model is appropriate? Which technology investments will improve the experience? How much space is actually necessary to accomplish the institution’s goals?

There is no reason every market should receive the same branch simply because that is what the institution has always built. A branch in an established suburban community may need to function very differently from one entering a rapidly growing market or serving a strong commercial customer base.

When those decisions are informed by data, financial institutions can right-size their investment rather than simply building a box and hoping the market responds.

Start With the Business Case, Not the Building

Too often, the conversation begins with the facilities size, shape, and cost.

The better starting point is the business case:

• What opportunity are we pursuing?

• Who are we trying to serve?

• What can we realistically expect this location to produce?

• What type of physical presence gives us the best chance of capturing that opportunity?

Only then should the building take shape.

This approach can also lead to a more efficient project. If the research shows that a smaller branch can accomplish the institution’s goals, there is no strategic benefit to building unnecessary square footage. If the data indicates that another site offers stronger long-term potential, discovering that before purchasing property is considerably less expensive than discovering it after opening day.

Build With Confidence

No amount of research can guarantee the performance of a new branch. Markets change, competitors react and consumer behaviors evolve. But there is a significant difference between accepting the normal risks that come with growth and taking unnecessary risks because the homework was skipped.

At La Macchia Group, we believe major growth decisions should begin with data. Research helps financial institutions understand where opportunity exists, how significant that opportunity is and what type of investment is appropriate to capture it. Just as importantly, it can identify when an investment does not make sense.

The goal is not to build the biggest branch, the cheapest branch or simply another branch. The goal is to make the smartest investment possible in your institution’s long-term growth.

Don’t build a box and hope the business follows. Build a strategy, then let the data determine what comes next.