Looking forward Featured

8:00pm EDT October 26, 2009

For all intents and purposes, 2009 was the most challenging year for business owners since the Great Depression. The changes that occurred in the financial service industry were of historic proportions — with more to follow on the regulatory front.

The severe economic downturn almost took “growth” out of the business vocabulary, attempting to replace it with “shrink.” Most companies suffered from declining sales, and in some cases and industries, the declines were as much as 40 to 50 percent. Consequently, businesses did have to learn how to adapt as they faced these extreme challenges.

“Last year, I said: ‘the more reliant you are on a bank for capital, the more you need to be in contact with your banker,’ and this turned out to be an absolute truth,” says Nicholas Browning, president and CEO of FirstMerit Bank’s Akron region. “Given the challenges to banks and their customers, both parties needed to be in contact with each other.”

As always, your banker should initiate thoughtful conversations with you about the goals and needs of your business in the upcoming year. Those conversations may not take on the same tone as when the economy is booming and growth needs to be fueled by bank financing.

Smart Business spoke with Browning about how business owners should approach 2010, while including their banker in the process.

What should a banker be able to do for your business?

Each company’s needs continue to be different and may include more dynamic or uncertain variables than ever before. Let your banker be part of your team as you shape your plan.

Here are a few suggestions:

  • Brainstorm your 2010 business plan. Your banker can refer you to resources to help you if you don’t have a tried and true process to develop a plan.
  • If you do have a plan, let your banker play the devil’s advocate. Your banker has seen a lot and learned a lot over the past year, so use this knowledge and experience to your benefit. Allowing your banker to identify gaps or holes will make your business plan stronger. Also, now more than ever, have a Plan B. 2009 was tumultuous, and 2010 is shaping up as an enigma. Don’t be caught unarmed when things don’t go as planned. Let your banker challenge your assumptions to your plan and ask: ‘What if?’

What should a business owner look for in a banker?

I have found that the old credo of ‘business owners do business with individuals they know, like and trust’ is exceptionally true in this environment. During less challenging times, some bank and banker qualities and services are taken for granted. When times are challenging and rapidly changing, you want a reliable partner who is a good counselor as well as a good business person in their own right. Business owners should identify what qualities or services are important to their needs and businesses.

How do you recommend business owners approach their 2010 business plans?

Utilize the SWOT approach to identify strengths, weaknesses, opportunities and threats to your business. Obviously, the economic landscape has changed dramatically and the inputs to this type of analysis have likely changed, too. New challenges have presented themselves in different ways — declining revenues, lost customers, receivable collections, inventory levels, expense reductions, just to name a few. Slow pay and limited credit were identified last year as potential challenges and both became very real issues for many businesses.

Are there any approaches to running a business you recommend business owners take in 2010?

The business owners who have survived through 2009 are the real experts. I advocate wading into the unknown of 2010 by keeping your costs low. Low costs mean flexibility to deal with uncertainly. And when an opportunity for growth presents itself, you’ll be fiscally fit to take advantage of it.

While pursuing a lower cost structure and greater efficiency, business owners should take time to have a relationship review with their bankers to make sure they have the necessary products and services the bank offers to meet their needs of increased efficiency.

In light of the financial insecurity in 2009, are there steps business owners can take to increase financial security in 2010?

Here are three steps I recommend:

1. Understand your access to capital. This is a good time to take inventory, if you will, of the financial resources you have available to your business. Your bank loan facilities and your personal assets that you can make available to support your business are an integral part of your plan.

2. Know more people at your bank than just your banker. I’ve said this before. Your banker is your advocate and the more advocates you have, the better understood your business is.

3. Network. This is a powerful tool to get ideas from other business owners about how they’re dealing with the same or similar challenges you are. Don’t reinvent the wheel; someone has the answer for you.

NICHOLAS BROWNING is president and CEO of FirstMerit Bank’s Akron region. Reach him at nicholas.browning@firstmerit.com or (330) 384-7807.