Most people get a physical checkup at least once a year. Such things as blood pressure and heart rate tell a lot about one’s health and the direction it is going. Why not do the same with your business’s financial health as well?
Sean Richardson, NorthCoast president and CEO of FirstMerit Bank, says the idea of a fiscal — rather than physical — checkup is not a new one. However, it is typically overlooked in the rush to meet other deadlines.
“Many business owners get regular medical or dental checkups,” Richardson says. “Yet, when it comes to evaluating their relationship with their bank and bankers on a regular basis, they fail to do so. Periodic evaluations are a must for business owners.”
Smart Business spoke to Richardson about why the right bank and banker are essential as a company attempts to achieve its business goals.
Why are periodic evaluations with a bank important?
Regular evaluations are important primarily because companies evolve constantly. The banking industry is dynamic: consolidation and personnel turnover are constant within it. Therefore, it is important to assess your ever-changing needs and how your bank is meeting those needs.
As the business evolves, you need to evaluate if the bank can and/or will grow with you. You should ask whether your banker possesses the required skill set and whether the bank has the credit appetite and expertise to grow with your company and industry.
Banks and bankers — which are separate entities — need to be evaluated individually. You might discover that the banker may be right for your needs, but the bank is not. Or vice versa. You might have to change one or the other — or both — in your own best interest.
How do you know which bank to choose?
You should look at where the bank directs its money, energy and resources. Does the bank have a focus on commercial banking? If it does, what size companies does it serve best? A bank that focuses on very large institutional clients may not be the right fit for small or middle-sized businesses. A bank that claims to specialize in all sizes will be forced to spread resources over a wide array of clientele.
It is absolutely a necessity to have a bank that has accessible senior management and other decision-makers who can help process requests quickly, act as your advocate and respond consistently to credit needs.
How do you evaluate a banker?
The level of commitment and interest in the company is extremely important. A banker should want to learn how your company makes money and what is changing in the industry.
Personal attention is also a determining factor. Is your banker ready to handle the next problem — personally — if needed? Does your banker understand your company’s financial goals and operations? Does it know your key personnel?
Does the banker have the ability to act as a sounding board for your company? The more experience a banker has, the more likely he or she is able to help with unique business situations. Your company may have never had operations in a foreign country, but the banker may have worked with other companies that have.
Does your banker have strong decision-making skills? Can he or she make a decision quickly or have access to the people who can? All these factors determine the quality of your banker and should be evaluated regularly.
Who else should be consulted?
At least once a year, all of the individuals that are part of your banking team should review your relationship, just like an annual exam with specialists called in. Treasury management is the most common specialty area in which banks provide expertise. A private banker, international banker and your retail branch manager may be others who should be included in your team.
Is it more important to have the right banker or right bank?
Both are extremely important. A company that does not have the right banker is not going to get access to the right people or the right services. A banker can be extremely talented, but if the bank can’t deliver when opportunities arise, you need a different bank.
The right bank and banker combination delivers a relationship that is valued and beneficial. Having a strong relationship with a bank allows a company to take advantage of opportunities as they arise, especially when there are periodic checkups to keep the relationship strong and healthy.
Sean Richardson is NorthCoast president and CEO of FirstMerit Bank. Reach him at Sean.Richardson@firstmerit.com or (216) 802-6565.