Like most other relationships, the
relationship between a business
and a banker is an ongoing affair…a process.
“A small business should use a banker
like any other part of the team,” says
Ron Hongosh, Business Banking Division manager/senior vice president at
FirstMerit Bank in Cleveland. “They
should work with their banker the same
way they would work with their CPA or
attorney.”
Smart Business asked Hongosh about
the process of working with a banker.
What’s the most efficient way to work with a
banker?
If customers engage their banker in
four areas, they will have a successful
relationship.
- Have a plan and discuss it with your
banker. - Anticipate your needs in general.
- Use your banker for financial representation.
- Use your banker as a trusted adviser.
What advice do you have on planning?
Every customer needs to have a plan
and to discuss it with his or her banker. I
know it sounds simple, but often businesses don’t do that. They are reactive
rather than proactive. A plan does not
have to be elaborate or amazing but
needs some foresight.
A good plan has to be transparent. A
business can’t half-tell its story. A banker
cannot work with a business if management is not being open. A good plan can
not be created in a vacuum. Use your
banker as a sounding board. Share ideas
and work with your banker.
What sorts of benchmarks are important?
To anticipate its future needs, a business should establish benchmarks. Every
business should have a three-month
(short-term), a nine-month (mid-term)
and a two-year (long-term) outlook.
Anything past two years is dicey, unless
you are anticipating a major project.
Be honest with yourself and your
banker. Know the plan’s pitfalls. Sometimes you need to see the glass as half
full, and sometimes you need to know it
is half empty.
Lastly, have a rainy-day fund or a plan
that will let you raise money against a
rainy day. Too many business owners
live without a reserve.
What do you mean by financial representation?
A good business is represented by
three legs: the owner, the banker and the
CPA. The idea is to get all three legs
working together.
Financials need to be prepared well. But
be sure the statements are representative
of the business reality and not tinted by
tax concerns or other considerations.
Good CPAs are worth their weight in gold.
Most owners are tied up in their business or their craft, but you need to know
if you are meeting month-to-month
goals. Sometimes business owners are
surprised with what they are making
month to month. A CPA or banker can
help quantify revenue and earnings. It
sounds trite, but if you don’t know
where you are going, you will not know
when you get there.
What kind of advice, beyond things like
loans or checking accounts, can a banker
offer?
As an adviser, a banker is a great
resource for exploring alternative investment avenues, learning ways to manage
cash or talking about retirement plans.
Whether it is with FirstMerit or any
other bank, your banker should be your
confidant. He or she should know more
about your business than anyone else in
the world except you.
Bankers have the experience and the
access to measurements that can determine whether your business condition is
typical or normal. It’s like going to the
doctor when your arm hurts: If you do
not know if a sore arm is normal, how
are you going to be able to take care of it
properly? Financial metrics are similar,
so you need expert advice.
Finally, bankers often have links to
other resources, like the SBA [Small
Business Administration] that can provide additional assistance. Banks like
ours should be service-driven organizations, so use their resources.
RON HONGOSH is Business Banking Division manager and
senior vice president at FirstMerit Bank in Cleveland. Reach him
at (216) 694-5686 or [email protected].