Shopping for profit answers.

• Author: Palm, Gene
• Position: Database Marketing

How you price the difference in terms of generating profit your bank.

Marketing-database software companies as well as consulting firms have developed a wide variety of solutions to help bankers find out the profitability of their products and their customer accounts. However, some of these solutions are better than others. If you're not reasonably careful, it's possible that a solution could aerially give you the wrong answer because it contains one or more fatal flaws. So, before you spend anything on additional software or consulting services to help you answer profitability questions, you need to ask a few more questions of your own in order to receive the best value for your money.

The first question you should ask is "How costly is this solution?" Like anything else in life, there are two extremes: lavishly expensive and ridiculously cheap! The sky is the limit on the expensive solutions.

On the other hand, it's just as much of a mistake to spend too little by using outdated publicly available national cost averages and having someone inside the bank who is not a financial expert work on this project.

To find the happy median, we suggest that for most community banks under $1 billion in assets, a good profitability software and consulting solution should cost less than $50,000.

The next question: How long will it rake to implement this solution? Again, there my two extremes: a really long time and too little time. Some custom cost-accounting solutions can take up to two years to implement because of rile complexity of their structure and the steep learning curve needed to master their features. Other, more automated solutions, take very little time to implement: however; they can be too simplistic and may not provide adequate information.

For most community banks, a good profitability software and...