Banking Budget Analysis Opportunity Bank Budget Analysis

Banking Budget Analysis

Opportunity Bank Budget Analysis

Opportunity Bank is a convenient store for other professional banks. Essentially, it takes the stance that all people reserve the right to bank as they please and deserve an opportunity to do. This then provides them a greater sense of opportunity for each and every individual that walks in the doors. Opportunity Bank helps provide credit to those most in need, and thus believes that credit is a human right. This then provides the sensibility needed for Opportunity Bank to provide the benefits it does to its customers, including unbiased financing and the additionally benefits provided to the customer's family. Yet, opening a bank is a costly endeavor. In fact, research shows that it could amount around to $2 million within the first three years of the banks operations (Bancology 2013 1). Thus, planning carefully for costs is essential for the success of the bank branch within the first few years of operation.

The opening year for the bank is the most important in terms of building a clientele base and keeping customers. The first year of operation will ultimately have its own challenges and demands. Opening a banking institution anywhere in the United States is a risk during this currently volatile financial time. Yet, the benefits Opportunity Bank stands to provide its customers are worth the potential costs. First and foremost, Opportunity Bank will have to pay for the cost of renting space here in New York City. Planners are quite lucky, as rental prices across the city of New York have been dropping recently because of the ongoing nature of the financial recession (Well 1). Still, New York rental prices are some of the highest in the country for small businesses wishing to open within the Tri-State area. Once, rental prices were sky high, but have recently dropped to a more reasonable range. Today, one can find rental space for commercial property at around $50 per square foot (Well 1). Recent trends in banking show that most banks have taken smaller commercial leasing spaces. Thus, a space of 1,200 square feet would be more than enough space and thus rent would amount to around $60,000 annually. Space could also be subleased from another, larger banking organization in order to save some initial costs on rent during the first few years of operation (Well 1). Additional costs would include employing branch members. According to the research, the average bank has dropped in size and now has around 13 employees per branch (Hannan & Hanweck 3). Since Opportunity Branch is just starting out, about 10 employees would suffice. This would include three managers at a salary of around $60,000 annually; with six tellers at a lower price point of around $29,000 in hourly wages each (Indeed 1). This would be a total of $174,000 in bank teller salaries annually. The first year would also require the initial investment in equipment costs. This includes office furniture, equipment such as printers, and also computers and ATMs. According to Bancology, the average start up costs for all equipment costs for a bank branch would be around $190 per square foot (Bancology 2006 3). As such, for the 1,500 square foot branch planned, the initial investment for all equipment costs would be around $285,000. Another essential cost for the first year of launch will be the marketing budget. Although marketing needs to be an ongoing process, the first year needs additional cost funding as a way to help promote the branch's launch. As such, the first year's marketing budget needs to be higher than the subsequent years the branch is open. The initial budge for marketing for that crucial first year would be set at $90,000 (C-Metrix Solutions 2).

For the second and third years, there will be continuing costs from the first year as well as additional maintenance costs. First and foremost, rent and employee salaries will continue at the same rate. Rent would be around $60,000 annually. Additionally, manager's salaries would be $180,000 annually and bank tellers would be $29,000 each for a total of $522,000 for all three years for six bank tellers. According to the research, once a bank is set up, its maintenance costs should be around 20% of its overall operating profits (VFA 4). In the second and third years, it will also be important to work on generating a unique and completely tailored database software system so that bank customers can also do their banking online as well. Marketing will continue to be a huge cost for all the first three years, but the second and third year would need less of an initial investment. Thus a total of $50,000 a year for each the second and third year would suffice for the budget for marketing (C-Metrix Solutions 2).

Type of Expense

Cost

Year

Total for 3 years

Rent

$60,000 a year

First-Third

$180,000

Manager Salaries (3)

$60,000each for a total of $180,000 a year

First-Third