For CUs looking to share resources and expand their reach, the CUSO model is an obvious choice. Some CUs chose to collaborate in less formal, more ad hoc structures, but the CUSO is the established standard. That doesn’t mean that starting one is easy. A CUSO, like any other business, needs careful planning if it’s going to make sense for your CU and become a viable business. If you and your CU are thinking about starting a CUSO, what should you be thinking about? Katherine Weber, a partner with Messick & Weber P.C., specializes in CUSO formation. She suggests keeping the following notions in mind:
1. Make a CUSO business plan that makes sense for you.
CUs often explore the idea of a CUSO before they know what sort of CUSO they want to start. Different CUs arrive at their ultimate CUSO business plan by different paths. How can you hone your ideas into a felicitous business plan? Some CUs look for existing CUSOs as models. Others look at their own strengths and identify an area in which a CUSO might complement that strength. A CU heavily involved in mortgage lending may, for example, frequently use a local title insurance agency. “That’s a lot of money they’re leaving on the table,” said Weber. “That’s a great opportunity for a CUSO.”
2. Ask yourself: Does your potential CUSO need to exist?
CUSOs have been around for a number of years and there are a lot of them out there. It may be that the CUSO you and your CU have in mind already exists. Its partner CUs have already put in the work and revised the business model. It may ultimately be a better idea for you to partner with them, rather than start a CUSO from scratch.”It doesn’t make sense to reinvent the wheel,” said Weber. “If there’s the potential for a good partnership and a good relationship with a CUSO in the same geographic region, why not?”
3. Find good partners.
CUs that form CUSOs need to work well with the CUSO’s management and with any other partner you choose to bring to the business. If you already have a good working relationship with another CU, if you’ve partnered with one another on other ventures successfully, that relationship may make a solid foundation for a new CUSO, says Weber.
4. Understand your CU’s needs.
A CUSO may sound like a good idea, but unless you’re adding value for your membership, it may not benefit anyone. That’s why you need to consider your CU’s needs and your membership’s needs before you start the CUSO, said Weber. “If you can’t sell member business loans to your members, then maybe you should think twice about forming a member business loan CUSO,” she added.
5. Convert your staff to the CUSO’s cause.
If you don’t have buy-in from the entire CU team, you can be in for trouble. It can ultimately sink a CUSO, says Weber. “Too many times, [the addition of a CUSO creates] an us-versus-them mentality,” she said. “You can have a management team that is gung ho about the CUSO and the services it provides, but if your front-line staff doesn’t understand that the CU is now offering products through its new subsidiary, the CUSO, then your members aren’t going to know about it.” CUs with CUSOs that offers products directly to the members need to have the support of the front line staff. Ideally, they’ll know what your CUSO offers and they’ll pitch those products and services to the members. “Obviously, you don’t want to condition a loan on the purchase of insurance from a subsidiary,” she said. “But, there’s nothing wrong with saying, ‘Hey, do you know that the CU’s subsidiary is an insurance agency and they can give you a quote on your homeowners policy?” It may not be so apparent, but the usefulness of this strategy holds even for CUSOs that offer back-office functionality. Executives at CUs network constantly, said Weber. When those executives communicate with their counterparts at other CUs, they could promote your CU’s CUSO and its services. “Word of mouth is such a powerful marketing tool for CUSOs,” she said. “It’s just as important for your credit union employees to know that the service is being offered and to have the confidence to offer the service to another credit union.”
