With loan volumes rising and equipment finance demand increasing, more equipment finance companies are looking to expand into new areas of business development. Trying out new industries and/or asset classes or establishing a “vertical” can be a great way to grow revenues. As many of you have discovered, the “throwing it together” plan is less than optimal. Here are some fundamentals to follow:
Understand there are two types of “verticals”
- A hard vertical. This is where you have sales, marketing, legal, asset, doc and even senior management that has extensive in your new “vertical”. These are often completely separate business lines. (Think GE Healthcare) It is very hard to build one of these from the ground up, more expensive and less common but they are often most successful in the long term.
- A “marketing” vertical. This is where your existing team learns the language, emotion, financing and other needs of the space and is able to messaging to them “as though” they have spent extensive time in their industry. You may have a few vertical experts or even one, but it’s not really a separate business it is just an area that your existing business has some specialty. This type is easier by far, but typically less successful and there are many “pretenders” that say they have some expertise that really don’t. Don’t do that.
It is important to pick one, but do not choose lightly.
Start with data
Your “feeling” that new asset class is going to be awesome is not enough to build a successful effort upon. Define the market opportunity. Pull some UCC data and other demographic lists to identify
- Number of companies/dealers in the “new area” to target
- Any geographic concentrations
- Any competitive concentrations
- Research competitor offerings
- Research industry associations, talk to their representatives
- Join LinkedIn groups and monitor conversations and issues
Examine your expertise and resources
Now that you have a strong idea of magnitude, issues and competition in the new market, ask yourself a few questions:
- Do we really have unique expertise or a deep understanding of their needs?
- Do we have funding or credit expertise in this area?
- Are we comfortable with all the assets or just some?
- If we don’t have the expertise, could we develop it? And what would that take?
- Do you have budget attached to this? If so, how can you spend it, If not, how do you get blood from a turnip?
Develop a plan
So you’ve made it this far and are still excited. Chances are, you’ve got a shot at this point. So build a plan.
- Messaging plan (Value Proposition)
- Marketing Plan with goals (open rates, web visits, leads, etc)
- Sales Plan with goals (Be reasonable here if this is a de novo.)
- Quarterly initiative reviews (Your key players all in a room asking if we are getting it done.)
Take a long view
Don’t jump from one “hot topic” to the next. Be serious about developing an expertise and monetizing it over a longer period of time. This is not a “campaign”, this is a business growth strategy. Stay focused, committed, work the plans and evaluate. More often than not, the longer view wins, where equipment finance companies chasing news headlines fail and even invite larger portfolio concentration and credit issues.
Whether you are the one of the biggest players out there or a relatively small broker, it is important that you stop guessing at new areas of success, and start shaping the future of your business. Professionally planning a new launch like this will help ensure success. If you ever wanna chat about this kind of thing…give us a holler.