“Your network is your net worth.”Tim Sanders
It goes without saying that what you know and who you know has the potential to help you to speed up your growth to new leaps and bounds. It is important to create networks that can help you sharpen your business acumen, build your business and open doors to opportunities. Equally important is nurturing and investing in these networks to help them grow bigger- instead of just taking and not contributing.
For an entrepreneur, these networks are paramount if you are to succeed in business. From building a good relationship with your accountant and business coach, to the lawyer that helps you with everything legal. Building a good relationship with your business banker is as important.
A business banker is the link between your business and the financial services provider (FSP). A link that is critical to help you manage your business finances better, access credit facilities to expand your business and help you grow your business savings.
The challenge for most entrepreneurs is that many do not know their business bankers. Some do not understand the role a business banker plays in their business. Worst still, entrepreneurs fortunate enough to have business bankers are frustrated and have sour relationships with them. Can this be improved?
Yes, I am of the view that this can be improved if we understand a few things as entrepreneurs.
Understanding segmentation from FSP’s perspective
The entrepreneurial landscape compromises of various types of businesses, categorised according to different segments i.e. micro, small, medium sized enterprises (MSME) and large businesses. This categorisation is usually based on the number of employees, size of the business and annual turnover.
According to a FinScope survey (2016) conducted by the FinMark Trust, there are 76 068 MSMEs in Lesotho, operating in various industries i.e. wholesale and retail trade, agriculture, manufacturing, transportation, construction and education to name a few.
The survey also found that the majority of these MSMEs had no employees where only 17% had employees and 83% being individual entrepreneurs. This is an indication that each business is different and has unique needs. Understanding how your business is categorised is key as this will help you appreciate how FSPs segment their portfolios.
Why is this important?
FSPs segment businesses based on annual turnover, size of the business, industry and sometimes geographic location in order to service each segment efficiently. This segmentation is also informed by the needs of various businesses. For example, agricultural, construction and retail businesses have very different needs and cannot be segmented in a similar fashion.
Different FSPs will have divisions that specialise with specific business segments i.e. Small Medium Enterprises (SME), commercial and corporate clients. Knowing which segment your business falls under will help you determine and assess whether your business needs a direct business banker or not. This being said, it is not every business that will need a direct business banker, because these services sometimes come at a cost.
Use digital platforms
Entrepreneurs need to understand that FSPs are in business and also need to make money. Employing a business banker is a cost for the FSPs and to manage this expense, most FSPs will charge business owners for the services the business banker provides.
So it becomes important to weigh your options when considering whether your business needs a direct business banker or not. An SME for example, could use digital platforms to manage and minimise costs. Most FSPs in Lesotho have digital platforms which are more affordable compared to having a direct business banker.
Digital platforms include for example Automated Teller Machine (ATM) to make business deposits. Using online banking platforms to make payments and sending e-mails and/or call centres to consult FSPs on financial matters.
Using digital platforms comes with a lot of convenience and will definitely save you money. It is key to emphasize the importance of being safe and protecting sensitive information i.e. passwords while transacting online and avoiding exchanging ATM cards.
Benefits of having honest communication with your business banker
It is almost inevitable that at some point a face to face meeting with your business banker will need to happen, especially for the medium to large sized businesses. So what can be done to improve the relationship with our business bankers?
a) Communicate your business plans ahead of time (Business Planning). Business Bankers are naturally under pressure, managing many business relationships. The more information they have about your future plans e.g. expansion plans or when you expect you will need credit facilities (business loan or overdraft) the better equipped they will be to process your business needs.
We cannot ignore how rapidly the business landscape changes. Thus having open, frequent and honest communication with your business banker becomes critical. This will help ease the pressure, because the business banker can already make arrangements ahead of time. This communication can be face to face or virtually i.e. e-mail or skype calls.
b) Prepare annual financial statements, management accounts and accurate cash flow statements. Most FSPs rely on your financial statement to make lending decisions. It is critical for entrepreneurs to prepare and submit quality financial statements on time.
If your business has credit facilities with FSPs, it is also important to know when such facilities need to be renewed i.e. overdraft renewals. Communicate with your accountant to prioritize this. Submit financial statements on time as it will ease the pressure and help improve your relationship with your business banker.
c) Help your business banker understand your business operations. Whilst it’s important for your business banker to understand your business operations, giving your business banker detailed information on the type of transactions and other operational issues your business depends on to function efficiently helps. This includes but not limited to salary payments, payment cycles etc.
Invite your business banker to see your business operations and meet your team and employees. The business banker will then be able to pre-empt what services you will need. For example Point of sale devices, internet banking etc., to name but a few and recommend new and innovative solutions to help you grow your business.
What we know is important, but who we know really makes the difference between thriving or being frustrated. A business banker is critical to the success of your business (depending on your business needs) and can help you grow.
Nurturing this relationship will help you reduce the administrative stress and help you focus on running your core business efficiently. Ask your FSP who your business banker is, understand the cost that comes with this service and intentionally work on improving the relationship. This network will assist you in penetrating your eco-system value chain.