It’s a recipe for mediocrity.
I have friends approach me time to time about starting a bank with them.
I never take them up on it, but “don’t be a generalist banker” is always the advice I offer.
“Begin with the end in mind,” as Covey said.
Be laser-focused on a few things – Forget everything else.
Don’t just offer anything you can to anyone who will come inside your building.
When you try to be everything to everyone,
Your loan portfolio quickly ends up all over the place.
Long-term loan here
Short-term loan there
Fixed interest rates here
Floating interest rates there
Various collateral advance rates
Little to no focus on match funding the loans
Process for perfecting on collateral is all over the place
You have to deal with so many different things that you never become great at any of them.
But if you decide from the beginning that you’re going to be THE BEST bank in your community for auto loans, $1M+ commercial real estate loans, and near prime mortgage loans –
That’s a recipe for success.
When things like subprime mortgages, student loans, and small business revolving lines of credit come your way – refer them to another bank that does them better than you.
Don’t take them just because you can.
You’ll end up with a scattered loan portfolio in no time if you do.
In the same way that a Cardiothoracic Anesthesiologist for Congenital Heart Defect Repairs in Infants and Children gets paid more for being really good at 1 thing,
Your bank will make more money by specializing in fewer things.
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