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Banks Must Do Better for Small Businesses than Online Banking

By: Thomas Switzer

What is your bank doing to uniquely serve the small business?  I am not talking about a shrink wrapped, balance reporting tool that most banks offer.  I am also not talking about a minimum balance, free checking account. 

What I am talking about is a targeted guidance and advisory service that focuses on the individual owner’s challenge of managing the business.  It entails a management manual addressing all of the aspects of managing a business, an advisory process for nurturing the business and various models for monitoring the business.  It will set your bank aside from the competition, serve as a wedge to capture the lion’s share of the market and reduce the risk of doing business with the small business. 

One of the most intriguing perceptions or contexts about small business startup success is referred to as “theory of thirds:”

All of this raises the question of why businesses fail at such a rate, but this article is not attempting to analyze why businesses fail.  It proposes a bank product or service to inoculate against failure.  Most businesses have a strong core.  It does not seem to matter what the business is, the service or product on its own is healthy.  Builder, tool and die, funeral home, surveyor, appliance repair and sales, livery, dentist, beauty salon, truck repair, and on and on.  The fundamental business is good quality, well delivered, warrantable.  Except, the investment in the product and service is often at a cost to the business.  Simply put, the business of the business is compromised.  It is not what is produced or serviced that goes wrong and threatens success.  It is the lack of attention spent managing the financial management, human resource parts of the business that pose the threat.  

Banks have an opportunity and a duty to step in and provide their small business customers with a model for managing the enterprise, the business of the business.  By recognizing, applying and monitoring business principles and ideas, your bank will save the small business owner time, protect the owner’s investment and secure the bank’s investment in the small business.    
There are a number of implementation steps the bank must follow in order to assist its small business customer. First, the bank must identify the business management activities that facilitate control. These are issues with ownership (developing a business plan, establishing goals and objectives), organization (functional, roles of president/general manager) general management (supervisory responsibilities, management training, motivating and keeping employees), financial (accounting, cash management, purchasing), human resources (job description, hiring, orientation, personnel policy manual) and sales (planning, market expansion).

Next, the bank develops a forum group of like-minded business owners who represent targeted customers and prospects for a before or after work event that showcases the program.  Highlight one or two of the activities listed above and drill down into how it will help conduct the business and how the bank will help.

Then the bank determines unique activities specific to individual owners, such as setting up a telephone interview with owners and identifying several specific areas where the business needs help.  A specific owner may have problems with his management team, for example.  In this case, the conversation focuses on what the supervisors do, what the issues/problems are and what needs to be improved.  The goal is to get a lay of the land and to establish a point for more specific conversation.   

Next the bank reviews activities on the business site with the owner. The banker and owner meet at the business, continue the conversation with more detail and determine the business’ needs, costs and potential benefits. A tour of the facility includes observing and meeting the staff.  In addition, a brief interview with various staff is included to drill down further on the business’ needs and potential benefits resulting from the new initiative.

The bank next prepares a plan detailing how it will assist the business. The owner and banker meet to target two or three areas for focus.  Alternative solutions are explored and evaluated for ease of implementation.  Time frames, performance measurements and action items are determined and assigned. 

The bank provides assistance in rolling out and implementing any changes made to the business.  This entails attending a meeting to introduce the business staff and being involved on the day of implementation to provide psychological support.  Visibility and availability are key. 

Once the plan is implemented, the owner and banker review the results.  This includes what was done and how it was consistent or different from the plan.  Benefits and costs are determined and any modifications and next steps are agreed upon.  Measurement is conducted at regular intervals, usually after one month, three months and six months. 

Finally, the business owner and banker co-present results to the forum group as a case study.  These are not competitive issues, so disclosure is usually complete.  This provides an opportunity for the owner to “shine” before peers and for banker to “showcase” value add to the relationship. 

Multiple forums can be rolled out.  It is not necessary to spend a large amount of time with any one particular customer. Initial, front-end effort should be focused on developing a standardized project methodology and on introducing consulting skills to the bankers.  

In order for banks to capture the very lucrative small business market, banks must step in and provide their small business customers the necessary assistance to managing the enterprise. Once banks offer options, small business owners can select the services that have the greatest potential, are easiest to implement and will heal the greatest heartburn. The bank’s role is to encourage, nurture and mentor.

Thomas Switzer is partner and senior consultant with Phoenix-based CCG Catalyst. For more information, visit

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