Cut 'em loose

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Sometimes, it just isn’t easy to say, “No.”

Dean Haberkamp, executive vice president of marketing for National Century Financial Enterprises Inc., would have liked nothing more than to provide his firm’s accounts receivable financing to the California hospital that requested funding.

After the hospital shut its doors, the community rallied behind it, raising more than $8 million and hiring back about 60 percent of its staff.

Unfortunately, though, Haberkamp had to reject the funding request. The hospital, which reopened in July, didn’t meet the requirement of NCFE’s investors that clients provide 18 months worth of financial data to prove a good record of collecting receivables. Haberkamp needed evidence that he’d get NCFE’s money back.

“It’s a dirty shame because I can’t get that information to fund what they need to really grow,” Haberkamp says.

“There’s nothing more we’d want to do than help a community help a hospital to help a community,” adds NCFE’s Jim Nickell, associate vice president of marketing and communications. “But we have to have that 18 months. We can’t vary from the program, from the structure, because that’s when the problems really occur.”

NCFE funds 10 to 15 percent of the hundreds of requests it receives annually and restricts the accounts receivables purchased to payors such as Medicaid, Medicare and commercial insurance companies, Haberkamp says. By cherry picking its clients, the company limits its exposure to loss. In fact, since its 1991 founding, NCFE has a customer retention rate of more than 90 percent, Nickell says.

Sometimes, turning down a client becomes a welcome opportunity, as was the case for Andy Coen, president and CEO of Norman, Jones, Enlow & Co.

A service organization he’d gained as a client had tripled its $2 million sales volume in the three years he’d worked with the company. However, the company’s staff was overwhelmed by its growth and was not getting reports, audits and financial statements to Norman, Jones, Enlow in time for the firm to do its work. That made Coen’s firm look like it wasn’t doing its job.

When he finally told the company’s owners that he’d need to increase his fee nearly 15 percent in order to continue his service to them, they decided to go out to bid for the work. Coen didn’t submit a proposal.

“I knew these owners, and I just threw a lot of resources at it. We got the thing done, but clearly it was not as profitable an engagement as the majority of the other companies that we had,” Coen says. “Rather than have everybody unhappy, we just decided not to bid.”

Here’s how NCFE and Norman, Jones, Enlow weed out their client lists.

* Know what’s right for you.

Coen knows he needs many, various customers — his largest client approximates only 5 percent of his business — and clients who could expand their business with him or take advantage of the management consulting services he offers.

NCFE, meanwhile, looks for clients who have good records of their medical receivables, a system to track such information and a need to finance the company for a turnaround, an acquisition or other growth.

* At first, try to say, “Yes.”

“We say ‘Yes’ to the part we can do rather than say ‘No,'” Haberkamp says.

For example, a client asking NCFE to fund $6 million for an acquisition might have $5 million in receivables for NCFE to purchase. NCFE might agree to fund $5 million if the client can ask the seller to take a note for $1 million or reduce the price.

* Know when to end the relationship.

Even if you do as much due diligence as possible on potential clients, you still could end up with a dud. It’s better to cut ties than let the client drag you down.

Whether you’re suspending service to the client or the client has decided to go its own way, Coen says, simply be honest — and don’t burn the bridge.

“When this does happen, we try desperately to make the transition easy for them. We give their information to the other firm so they don’t spin a lot of wheels and cost the company a lot of money,” he says. “The clients think the pasture is greener, and when they get out there, it’s not. You might as well preserve that opportunity.”

“Life’s too short — you don’t want to tick people off,” Haberkamp says.

He gives suggestions to clients he turns away. For example, he told an Iowa hospital system that he turned down its request to fund the purchase of another hospital because there was too much competition in the area and it was planning to spend too much in the deal, among other factors.

“There’s a little bit of financial consulting that goes along with that,” Nickell says.

The hospital spent the past year restructuring its finances and growing its physician base to gain a better place in the market, and now it might eventually fit into NCFE’s funding program.

“It’s always a good reason to stand by your principles,” Haberkamp says. “Say, ‘Yes’ to the deals you can say, ‘Yes’ to, but say, ‘No’ to the deals that are not good for the relationship today.” How to reach: Dean Haberkamp, National Century Financial Enterprises Inc., 764-9944 or e-mail [email protected]; Jim Nickell, National Century Financial Enterprises Inc., 789-1196 or [email protected]; Andy Coen, Norman, Jones, Enlow & Co., 228-4000 or [email protected]

Joan Slattery Wall ([email protected]) is senior editor of SBN Magazine in Columbus.