How to Budget for Growth
By Rachel Lauren, Co-Founder and COO, Debbie
January 8th, 2025
Credit unions tell me all the time that their #1 goal is to grow the credit union membership. Growing the membership is critical to staying relevant in an increasingly competitive market, but it comes with some solvable challenges:
- Higher operational costs
- More potential for fraud as the brand grows
- Need for efficiency and automation for scale
- Flexibility in scaling marketing channels up and down
Though some of these costs are foreseeable and we can plan for, some of them are not – which is why it always surprises me that budgeting and vendor decisions are only made once a year.
My hot take: if a credit union is serious about growth, they must do the following two things:
- Track their LTV/MAC (what is this?)
- Review the budget quarterly
Let me explain how and why below.
Introducing…LTV/MAC
Budgeting for growth means being more disciplined in understanding your costs – the member acquisition cost (MAC), servicing cost, overhead, and average revenue by channel. A credit union that cannot put a number to each of these metrics will not be able to grow sustainably.
LTV/CAC is a metric most businesses track with great fervor – it stands for lifetime value / customer acquisition cost. Essentially, it measures the overall value generated over the life of a typical customer, divided by the cost to acquire them. A good LTV/CAC is generally 2x or more. Since credit unions don’t have customers – they have members – I propose a new metric: LTV/MAC (member acquisition cost). Since credit unions are not-for-profits, their LTV/MAC doesn’t need to be as high in order to grow sustainably – however, the higher it is, the more members the credit union can then serve.
Increasing Cadence
Budgeting for growth also means reviewing revenue and expenses more regularly (monthly or quarterly) and adjusting the budget as you see results throughout the year. This will require some buy-in from the board, or to create a voting structure that allows for some tolerance level on changes to the budget without board approval. Here’s are some scenarios to illustrate why this is important.
Scenario #1: Your Brand Goes Viral
Something very real happened to one of our credit union partners about a year ago – someone had posted about their amazing products on Reddit, and they saw an influx of new member applications come in. Typically, the account opening team is used to a steady influx of applications, when suddenly, they saw hundreds of applications in a single day. This means staff were working longer to approve these accounts (they did not have automated checking account decisioning). They wanted to approve a lot of these members, but 1) they didn’t have the infrastructure, and 2) they didn’t physically have the staff. Being able to make decisions and budget flexibly means that the team can work to come up with solutions to pressing problems quickly, rather than leaving money on the table.
Scenario #2: You Exceed Your Growth Goals
Let’s say the team hits the member growth goal early. Fantastic! This also means that the operational cost of serving those members increases, though hopefully the revenue pays for this. You start to wonder, if these channels are working so well and are paying for themselves, why wouldn’t I expand them? Well, it’s June and you have to wait until December to get your budget approved for the next year. Again, you’re in a situation where you want to serve more members, but the decisions you made at the beginning of the year are holding you back.
Complacency Is the Biggest Risk
Now, some executives may say, “it’s fine, we don’t need to grow THAT fast. I’m perfectly fine with us meeting or slightly exceeding our targets.” That is not the mentality that is going to help CUs compete with the fintechs and banks. In fact, it is this exact mentality that has contributed to a declining overall market share for credit unions since the 70s (now at 9% overall). If credit unions are serious about helping the average consumer become financially healthy, and they understand that credit unions are best positioned to help the consumer, they must not remain complacent.
Connect with Debbie to learn more.
About Debbie
Debbie was built with the philosophy that the way to drive long-term financial behavior is by aligning positive incentives between consumers and financial institutions. That’s why Debbie is the first platform to reward and pay consumers to improve their financial habits, like making on-time payments, saving, and spending smartly, all while driving new members to you.