Who doesn’t love that new bank smell?
The grand opening of any new bank or credit union is typically cause for celebration. Ribbon cuttings, community leaders posing for the local press, and free hot dogs for the kids. These images remind us of a simpler time, when simply opening a branch was the key to success.
But for all the time spent on decor, messaging and branding, and even what type of potted plant is most appropriate, it’s the not-so-glitzy stuff that really determines if the new location will be a success. That’s not to discount the importance of branding. Marketing communications and advertising help differentiate one bank from another. But in truth, design decisions represent only 10% and 15% of a new branch’s costs. Surprised?
The unseen iceberg
With much to-do about what’s going on above the surface, too many executives put emphasis on design, rather than projecting a realistic budget, determining schedule and controlling construction costs. These massive costs represent the iceberg. The 85% that can cause you to, yes, sink or swim.
If you don’t effectively impact the major centers of gravity for costs (size of the branch, building materials, time and quality) then branch performance will suffer.
What we found…
LEVEL5 looked back at historical spending by banks and credit unions on the total cost of projects. Here’s what we found:
First, branding is important, from the color schemes to retail merchandising to point-of-purchase displays. But, too much focus on this may not be the best use of creative energy for a component representing less than 5% of total dollar spend.
Second, store layout, furniture decisions, and even floor finishes matter. Materials can be expensive, and the need to create a space to fit your local community’s desires can result in costly considerations. Still, these costs are often just 7-10% of the entire spend.
Third, total cost projections of a branch should reference three data points:
- National cost databases
- Historical cost data
- Market pricing
Whenever client budgets run over, it’s almost always because whoever was estimating the project at the bank or credit union overlooked something crucial.
Market pricing and schedule
While clients and other design-build firms spend most of their time and energy on the visible 15%, LEVEL5 understands that the 85% below the water drives performance.
Determining what the credit union or bank is willing to spend and aligning that spend with design, and the supply chain is what we do well. At LEVEL5 we specialize in solutions that go beyond design-build, by helping you decide what kind of branch solution works best for your markets and needs.