One of the most common mistakes made by small business, (and some much larger businesses), is that they don’t know their banker.
Which means the banker doesn’t know them, and that can be a serious problem.
Whatever your business at some point it is entirely likely that you will need a loan or some sort of financial assistance from the bank. It is much easier to get that assistance if the banker is already familure with you, your company, your goals, and your business history.
That’s why you should become best friends with you banker today—you will need him sometime in the future. Maybe tomorrow.
While visiting the banker at the bank may seem like a good thing, it actually isn’t. You’re on his turf, and he could easily be distracted by any one of a hundred different things. Get him to your business. Show him around, even if it’s a one room office. Let him experience the “feel” of you and your business.
Have a Business Plan ready for him. Even if it is a simple plan, at least he now knows that you are taking your business serious. (Which means you’ll take his money serious and not be as likely to squander it.)
Explain how things are currently going, and what you might need his assistance for in the future. Warn him about possible problems that could arise, and how you plan on dealing with those issues if and when they do occur.
If disaster does strike be sure to tell your banker immediately, don’t hide it. Full disclosure to him about the bad as well as the good builds trust. Provide them with regular financial reporting, a Balance Sheet as well as an Income Statement every quarter should be more than enough. Give him a copy of your tax return every year.
The more comfortable the banker is with you and your business the easier it will be to get his support when you need it.
And you will need him eventually.
What seems a lifetime ago I started an Advertising Specialty business, (pens, coffee mugs, etc.). The biggest potential problem I faced was having a huge order that would need to be pre-
This was one of the issues I addressed in my Business Plan, and that I discussed with my banker. Since I was just starting out there was no reason to think that a huge order would come my way for a while, but the banker appreciated the “heads up”. Less than a month after our meeting I got an absolutely huge order. I went to the bank and told him the news, and he agreed to give me a short-
You could have knocked me over with a feather.
That solid relationship lasted for several years until I decided to try my hand at something else; but it proved to me that bringing your banker in at the earliest possible date was a wise move.
While the banker want’s you to be profitable, he also want to know that you are thinking about how to grow the business. That’s the importance of a Business Plan. Developing a Marketing Plan, even if it’s just an outline is also a plus. You will find that when you write things down like this it takes on a life of its own.
When I created my first Business Plan I looked five years into the future for potential growth, problems, and solutions to those problems. I thought it a bit presumptuous on my part to think that far ahead, but I’m glad I did.
What was supposed to happen in five years happened in eighteen months. On the one hand I was excited, the business was growing much better than I had expected; on the other had, I was in shock, but very grateful for taking the time and effort to construct a workable plan.
So know your banker. Have them in your office at least once a year. Give them a Business Plan, and hopefully a Marketing Plan. See to it they receive your financials on a regular basis, (I always hand delivered mine).
Your banker can be a lot of help if he knows you in advance and feels comfortable with you and the way you run your business.