Jeff Judy

Jeff's Thoughts - July 16, 2014

Small Business Survey Delivers Insights

Most banks, large and small, are interested in more profitable, productive relationships with their small business markets. Not all of them understand, however, that even as underwriting practices for small businesses move in the direction of consumer underwriting, business owners of any size still want to be treated as business owners. (See my earlier e-zine article, Too Much "Small", Not Enough "Business". )

Recently, TD Bank performed a survey of small businesses, looking at the reasons people start businesses and what they like and dislike most about running their businesses. Some of the responses they report provide clues to how business owners think about their work, their lives, and their interactions with financial institutions.

For instance, I find it interesting that two-thirds of the respondents (68%) said they "love talking with clients/customers". This is one of the best things about running a small business, namely, that the owners interact with their customers in ways that are unimaginable for the decision makers of larger companies.

But that also means they are keenly tuned to customer interactions ... and that they will certainly be judging every interaction they have with you. If your staff are not truly interested in their small business customers, or invested in making those customers successful, small business owners will know it. They demand your best attention during your conversations with them.

And banks must deliver that level of attention if they are ever to become trusted advisors. Right now, the survey indicates that the most valued sources of business advice came from trade associations (41%) and from family and friends (35%). Since every small business has some kind of banking relationship, shouldn't we be a trusted source of advice for more of them?

Banking and finance tasks tied for next-to-last (22%) in terms of appealing business tasks. Now, managing finances is never going to be a lot of fun for most businesses. But that's a reminder that we're already dealing with these customers over a disliked task, another reason to make an extra effort to serve them well.

One of the toughest things about the credit side of financial services to small businesses is negotiating things like a personal guarantee or appropriate loan covenants. Why do so many small business owners not only resist them, but seem to take it personally when they are requested?

The TD Bank survey indicated that "flexibility and control" were rated the best part of owning a business by 96% of respondents! In fact, 44% of them said that flexibility and control were the very reasons they decided to start their own businesses.

That doesn't mean we should not apply appropriate structure in our small business credits. But perhaps if we understand the personal perspective our small business customers bring to the credit discussion, we will find ways to have more satisfying conversations with those customers, to our mutual benefit.