[vc_row css=”.vc_custom_1548289356400{background-color: #bcbcbc !important;}”][vc_column][vc_single_image image=”4887″ img_size=”full” alignment=”center”][vc_column_text css=”.vc_custom_1753494900882{padding-right: 19px !important;padding-left: 19px !important;}”]Things happen, that is life. As a business owner, you need to plan for the unexpected as well as for the potential succession of your business, whether that means making a transition in ownership or selling the business. Planning ahead lays the foundation for success.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=””]

Chapter 10: Develop Succession Plans

Since so many baby boomers are now in a position to sell their businesses or transition them, I was curious about what the bankers would report regarding how many of their customers had succession plans in place. Most bankers reported that not enough had succession plans in place; but as you might expect, they also reported that the best-run companies were addressing this issue.

A succession plan does not mean that you are planning on selling your business right away. It does mean that you are planning for the future of your business should something happen to you prematurely. If you are thinking of selling or exiting your business, you should start preparing at least three years in advance. The sales or transition process takes time more time than most business owners realize.

One of the major upsides to thinking and planning for succession is that it forces you to take a hard look at your business. What is going well and what is not going well? What needs improvement? Is your business organized for success? Would someone be interested in buying your business in its current state? Is the business generating sufficient revenue and profits? Are you building wealth in the business or avoiding taxes?

When it comes to succession planning, I suggest that you focus on the management side first (as opposed to the ownership side). Without adequate management in place, ownership will not be able to have a smooth transition of the business internally or externally.

Without a succession plan in place your business and your personal wealth is at risk. If something tragic should happen to ownership the business is in jeopardy of failing. Good succession planning is a bit like insurance. It has great benefit later, but it also has benefits now in the planning process itself. It also pays off in your relationship with your banker, boosting their confidence in your business.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

Make Your Banker Happy

10 Keys to Unlocking a Good Relationship with Your Banker

The various aspects of your business are like links in a chain, and your banker serves as one of those links. Because any chain is only as strong as its weakest link, it’s vital to develop an excellent working relationship with your banker, even to the point where your banker is a trusted advisor. In this book, a leading consultant who helps his clients generate dramatic results you will show you the keys to unlocking a good relationship with your banker.

As a business owner, your relationship with your banker is essential to your success. Follow our series on the website and get your desktop reference copy from Amazon.[/vc_column_text][vc_single_image image=”4854″ img_size=”full” alignment=”center”][vc_column_text]

Get Your Copy

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[vc_row css=”.vc_custom_1548289356400{background-color: #bcbcbc !important;}”][vc_column][vc_single_image image=”4890″ img_size=”full” alignment=”center”][vc_column_text css=”.vc_custom_1753494622936{padding-right: 19px !important;padding-left: 19px !important;}”]In this chapter I cover some of the major issues that will undermine your relationship with your bank and your banker. Consider yourself warned.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text css=””]

Bonus Chapter: The Not So Good, the Bad, and the Ugly

In addition to the ten keys to making your banker happy, the bankers I interviewed offered some insight into the issues that give them pause. Consider these pointers as things you should avoid if you want to cultivate a good relationship with your banker.

Hubris

Sometimes business owners think they can handle issues without getting any help or guidance, or they choose not to take their banker’s advice. Sometimes pride and ego get in the way of common sense. Any sign of arrogance or hubris on your part is a red flag to your banker. Do not let your ego get in the way of your success. Remember: Your banker is there to help you. He or she wants you to be successful, but you have to be open to input and guidance. Your ego needs to be checked at the door if you want to be successful.

I have run into a number of business owners whose ego has gotten in the way of listening to not only their banker but also consultants and other advisers trying to help them. They think they can do it themselves, but if that were the case, they would have already done so and they would not be in their current predicament.

Success requires advice and guidance. Not only do you risk your relationship with your banker if you choose not to listen, you risk the ongoing success of your business. Rarely is anything of great significance accomplished alone; it always takes the help of others.

Business owners often are so caught up in the day-to-day of their businesses that they cannot see what is really going on. Input from another source, one without emotional involvement, is invaluable. Sometimes those on the outside can see more clearly. There is no need to let ego or hubris get in the way of seeking help. Just think of professional athletes who are at the top of their game. They still have multiple coaches to help them get better. They do not settle for the status quo, and neither should you.

Dishonesty

When bankers were discussing customers whose businesses are not performing well, the issue of dishonesty came up. Unfortunately, some business owners intentionally provide inaccurate financial statements to try to make their business look like it is doing better than it is. This will kill your relationship and trust level with your banker and the bank. There is no room for dishonesty in any of your business dealings, including with your banker. Integrity is paramount if you want to have a long-term relationship with your banker.

Lack of Understanding About Risk

Risk is a big issue with bankers. They want their customers to understand the risks of their investment decisions, and they want owners to discuss their plans with the bank before acting on those plans when it affects the bank’s interest. Taking unnecessary risk will create concern for your banker. They are there to help you manage the risk and not endanger their investment in you and your business.

It is a banker’s job to understand risk; my advice is to listen to them. Of course, a well thought out, comprehensive business plan, good values, clear direction, and goals will all help to reduce risk as well. Staying in compliance with your covenants and the necessary laws will also reduce risk. Paying attention to your financials on an ongoing basis goes a long way to reduce risk. Learning to maximize value will help to minimize risk for you and your banker. As a business owner, you should be well versed in risk management.

Taking Too Much Out of the Business

This is a common problem with business owners who are trying to avoid paying taxes or those who do not understand cash flow. A few bankers mentioned that some business owners take too much out of their business in the form of owner’s draws or dividends, putting the business at risk should things not turn out as planned. In that case, the owners need to come back to the bank to borrow additional funds. Bankers are concerned about business owners who are taking too much profit out of the business and are not building wealth and retained earnings. Remember that bankers look at retained earnings on your balance sheet to determine your ability to borrow.

According to the bankers, allowing for taxes at 30 to 40 percent and then a little more for lifestyle and return on capital to the owner is good business practice. It is important to communicate with your banker what this target percentage is. When dividends exceed 100 percent of profits, there is a lot of explaining required.

It is also imperative that you do not chronically overdraw your deposit accounts. Rare instances are okay and bankers understand them especially if there is an email from you saying you are sorry and that you made a mistake. But if this happens more than two to three times a year, it suggests that your internal controls are not adequate, and that will add strain to your relationship with your banker.

Bankers are notified first thing in the morning each time one of their customer’s accounts is overdrawn. These issues have a high degree of visibility since they are technically short-term extensions of unsecured credit. Then they have to spend a portion of their morning reaching out to you to figure out when a deposit or transfer will be made to cover the NSF items; this is a surefire way to kill goodwill at the bank.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

Make Your Banker Happy

10 Keys to Unlocking a Good Relationship with Your Banker

The various aspects of your business are like links in a chain, and your banker serves as one of those links. Because any chain is only as strong as its weakest link, it’s vital to develop an excellent working relationship with your banker, even to the point where your banker is a trusted advisor. In this book, a leading consultant who helps his clients generate dramatic results you will show you the keys to unlocking a good relationship with your banker.

As a business owner, your relationship with your banker is essential to your success. Follow our series on the website and get your desktop reference copy from Amazon.[/vc_column_text][vc_single_image image=”4854″ img_size=”full” alignment=”center”][vc_column_text]

Get Your Copy

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