United States / Commercial Banking
A Banker's Guide to Understanding Unfamiliar Verticals
by Vilan Trub
Aug 20 2018

Issuing more loans happens when preparation meets opportunity. For a Relationship Manager (RM) it’s important to identify a good borrower and to understand their industry and how it operates in the web of the overall economy. Sometimes an opportunity comes along that might seem interesting but a road block exists – simply not knowing enough to make a decision with confidence.

Preparation lies in learning about unfamiliar verticals and utilizing tools that offer deep insight stemming from key data points and analysis. These are the situations that IBISWorld Industry Reports were designed for and the utility they serve around the world. 

How Broad is the Industry List?

IBISWorld offers reports on over 1,300 industries found within the North American Industry Classification System (NAICS). The list is broad because the decision makers accessing these reports have varied needs.    

Ex.

An entrepreneur with a carpet cleaning business is looking to expand and requires a hefty loan. Leading RM’s know that background information is vital when heading into a discussion and relying solely on an internet search means relying on superficial data. Is this a fruitful opportunity? As much depends on the borrower as it does on the economic climate of the industry. Accessing the Carpet Cleaning Report gives the RM instant insight on the intricacies of the industry such as capital intensity, where capital investment is required, level of technology change, revenue volatility, and regulation.

Carpet Cleaning Industry Report

Looking at this specific industry we see that for every dollar spent on wages, operators typically spend an estimated $0.08 on capital investment and that investment is mainly in company vehicles, carpet cleaning equipment and vacuums.

It’s also important to look at the competitive landscape and the major companies currently dominating the field. Getting back to the carpet cleaning example the leading companies are:

  • Chem-Dry Inc. with an estimated market share of 4.2%
  • Stanley Steemer International Inc. with an estimated market share of 0.4%
  • Duraclean international Inc. with an estimated market share of 0.0%-1.0%

 

The carpet cleaning industry has low concentration and even the largest players only generated less than 10.0% of the industry's overall revenue.

This information only scratches the surface of what’s offered inside the report. The information provided is so deep-rooted because the reports are compiled by analysts that dedicate their time to researching key data points and interpreting the information, with a keen understanding that no industry operates in isolation. For an RM the ability to transform into a thought leader on a given industry that was foreign earlier in the day translates into better informed conversations and decisions in a shorter amount of time. It sheds light on the best questions to ask and the answers to expect. A borrower shouldn’t educate on their industry, they should showcase their mastery of it and that type of exchange occurs when both parties have done their homework.

Learn more about the extensive list of industries covered by IBISWorld reports.