Broke Banks

If ever there was an industry that needs some positive public relations, it is banking. Bank failures have become common place. In Georgia, for example, there have been five bank failures in the last five months and the hits just keep on coming. Another fifteen banks are expected to go under this year, more than twice the number that collapsed there during the savings and loan crisis twenty years ago. Until last year, California had seen only 3 bank failures during the previous decade – in 1999, 2000 and 2003. According to the FDIC, California suffered 5 bank failures in 2008 alone.

Banking is a highly regulated business. Despite news commentaries that bankers got greedy as banks were deregulated and became corrupt, bank consumers have protection. In the recent case of IndyMac Bank, the third-largest bank to fail in American history, a run on deposits and rising defaults made Federal regulators seize it.

The mortgage loan portion of the banking business earned derision for being lax and, in some cases, predatory in its lending practices. Federal Reserve Chairman Ben Bernanke says that a sustained economic recovery may require additional bailouts of financial institutions. However, the business loan portion of banking has become the collateral casualty that threatens the country’s economic recovery.

As a business management consultant experienced in dealing with bankers on behalf of my clients, it is clear to me that business loan criteria are in flux. Even clients with excellent credit, strong assets and positive history are being denied new loans and are incurring decreased credit lines. New financing does not seem to be happening. Does that mean banks are not lending money to small businesses? They say that they are but that assertion is inconsistent with my clients’ are experiences.

Banks make money by selling the use of money, right? “If the borrower provides the bank with both a belt and a pair of suspenders,” Joe Nocera wrote in the New York Times, “the loan is being granted.” However, “[i]n addition to not making new loans, the banks are systematically withdrawing commitments and capital from the economy.”

So what about the Economic Stimulus Package of 2008? It is about tax breaks for businesses that spent money on property and vehicles last year while their credit lines were getting trashed. According to the Package’s press release, “This new legislation will not only benefit small businesses in a variety of ways, but it will also provide an economic boost to the entire nation.” Bold words in that generalization do not change the fact that “there are exceptions and additional requirements.” Tax credits for small businesses that create jobs sound fine, but it takes money to make the payroll to pay for the jobs to qualify for the tax credits.

Bank accountability is about to change with the new administration. Specifically, the government might force banks to make loans they would otherwise avoid. It is certain that the Obama administration wants to avoid more stupidity, such as those of the Bush Treasury secretary, Henry Paulson “who sold Congress on an elaborate strategy for shoring up banks and then shifted to an entirely different approach before he even got started.”

Meanwhile, forces for the benefit of small business—the largest aggregate employer in the United States -- are seeking the administration’s ear. The National Development Council wants a $75 billion small business stimulus package and a Cabinet-level position to coordinate federal resources for small businesses. Additionally, the National Small Business Association is seeking congress’s ear, asking for 25 percent of TARP funds to be aimed at small business lending and a mandate that 23 percent of stimulus infrastructure funds be contracted out to small businesses. Both are debatable requests.

Small business needs direct financial help to grow our pillaged economy and to create the jobs promised by the new administration. Tax credits alone cannot make job growth happen. The new congress and administration need to hear from us. We will have to make prosperity happen. They will have to help us.

Your People Inventory

Whether we like to admit it or not, we are you are in the sales business. Professional sales people know that there is something called the sales cycle. Think of the sales cycle as a circle that begins and end with prospecting. If you already have a client base, we are going to take an inventory. If you are just starting and looking for that first customer or client, we are also going to take an inventory.

Successful businesses maintain customer databases of various degrees of sophistication. The only difference between a customer and a prospect is history, a customer being someone who bought from us in the past. Satisfied customers make the best prospects. The more we know about our prospects, the better our opportunity for successful selling, and selling is the business we are in.

We want to create a prospect database that contains both quantitative and qualitative information. We will start with some initial questions about our prospects and work from there. We can always add more layers of sophistication as we develop our inventory. If you have existing customers, be as detailed in your answers as you can. If you do not have a customer base, look at who buys from your competitors.

· Who are your prospects?
· Where are your prospects?
· How many prospects are there?
· What do your prospects want from you?
· What do your prospects know about you?
· How much will prospects pay you?

Who are your prospects?

A prospect is anyone who needs what you are selling and can afford to buy it. Suppose you own a commercial cleaning company that does offices and retail stores. Prospect characteristics might include: people who own or manage buildings, have a budget for janitorial service, employ at least 5 inside people, have three lavatories, a kitchenette, a reception area, and a sales floor. They are serviced once a week after 7 P.M. by two people who and take 45 minutes on the job. Less than 10% are government accounts and about a third of them are retail operations.


Where are your prospects?

Prospects may be anywhere if we are selling online or by catalogue and delivering products by transportation we provide. Otherwise they usually live or work with a defined geographical service area, whether you go to them or they come to you. Assume you own a health club. Prospect characteristics might include: able bodied men and women, aged 35 to 55, who live within 13 miles of the club. Half of them want some training. Half of the men and a quarter of the women use free weights.

How many prospects are there?

This is referred to as market size. Do your homework and keep your estimates conservative because your projected sales will be based on your estimate. Whether your business is land based and dependent on traffic or it is web based and dependant in page views, you can search for and find data on the Internet. Another source of such data is your competition.

What do your prospects want from you?

Prospects want what you sell and they want satisfaction after they purchase. Regardless of product or service, prospects want quality, value and service. However, they want price as well, especially now. Warranties and guarantees enhance value and your prospects’ perception of quality. Sears Roebuck and Company understood the balance of perception by making the claim, “Satisfaction guaranteed, or your money back.”

What do your prospects know about you?

They know either what you tell them or what some else they know has told them. Professional sales people rely on an organized sales presentation to varying degrees. Such presentations contain facts about a product or service and the benefits to the prospect. The objective of the presentation is to build value and to get the prospect to start asking questions. When a prospect starts asking, they start owning.

How much will prospects pay you?

Prospects will pay exactly what they think the product or service is worth and not a penny more. Remember that price is relative to perceived value and to what similar products and services cost. That is called “what the market will bear.” Additionally, you want to be sure that you are not selling for a penny less than your product or service costs you. If a pizza costs you $10 to make, you do not want to sell it for $8.50. If that is all that the market will bear, find a way to make an $8 pizza.
Speaking about payments, prospects pay by check, cash or credit card upon receipt of your invoice or based on agreed, written terms. Otherwise they do not qualify as a prospect.

A sale is the process of turning qualified prospects into satisfied clients. The purpose of performing a people inventory is to be able to identify qualified prospects. Such identification helps us focus our efforts, streamline our marketing, and increase our sales – the business we are all in.

Make Your Message Clear

My hat is off to the entrepreneur who saw the intersection guy with the cardboard sign that said “Will Work for Food” and turned it into a business. Nowadays what intersection does not have the sign-waver with a professionally produced sign? “Mattress Sale,” “Liquidation Sale,” “Condos For Less” and the like must be working. They are everywhere. The messages are short and clear.

Let’s consider our “Will Work for Food” example. The message is clear. It is exposed to a lot of views. The prospect is well defined – people stopped in cars that have change or a couple of bucks to spare. The location is important, facing the driver’s side of temporarily stopped vehicles. The sign holders likely look as if they can do some kind of work. The “for food” bit suggests barter is acceptable and looks better than begging.

“Will Work for Customers” is our message. We can apply this message to finding customers and clients: a clear message, frequent exposure, clearly defined prospects and an organized presentation. I am concerned that many business owners make this more difficult than it needs to be. They think that their message has got to be more messagey, whether it is their business card or website, which is a digital business brochure.

Here are some tips on getting your message across.

Less is more

You do not need an hour long documentary when all you need is a half-minute commercial. If you start with five hundred words to describe who you are, what you do and how to get ahold of you (and I hope you do start with 500-words), whittle them down to fifty.

Use a pro

Unless you, your spouse, child, sibling or in-law is a professional – i.e., gets paid regularly for their expertise – do not think you can save money having them create your cards, brochures, websites, logo or signage. By all means let them help with the 500-words but that is it.

Organize your presentation

The key elements to keep in mind here are that you sell what you show and that you want your prospects to ask questions. When a prospect starts asking, they start owning. Do not interrupt them.

Expose your business

Carry extra cards with you at all times. The person standing behind you in a line, the person checking you out at a counter, anyone you speak to is one of two people: someone who is a prospect now or in the future or someone who knows another person who just might be a prospect now or in the future.

Remember your name

Unless your business is named “My Company,” always refer to your business by its name. In fact, go out of your way to repeat your business name at least three times when it comes up in conversation and you offer your card. Make repeating your business’s name a habit. Rehearse it.

Share some enthusiasm

With whom do you want to do business – someone who has got a job to do or someone who enjoys their work? While you are rehearsing your business name, do it with a smile. If it seems silly to practice in front of a mirror, my advice is Get over it.

We are all in the sales business whether we hire salespeople or not. That is why it is of utmost importance that we have a clear message and get it across to people as often as we can. The effort takes practice and consistency, to be sure, but the rewards are gratifying when we do. You will see them on your bottom line.

Practice or Business: What’s the Difference?

I have met many business consultants who are either working on a book or at least thinking about writing a book. I have known several who actually have a manuscript they tote with them from client site to client site. These consultants have two problems in common: having manuscripts does not necessarily make them writers and books do not sell themselves. The mental exercise of putting experience into words can be its own reward, but what it reveals is a personality trait that says those consultants would prefer a consulting practice to a consulting business.

There are two kinds of consultants: financial oriented people and management oriented people. Financial folks love spread sheets and can write love letters in Excel. They tend to have finance and accounting backgrounds; many are CPAs, others have MBAs, some have both. Management folks love organizational charts and can write sonnets as PowerPoint presentations. They tend to have corporate backgrounds; many have business degrees, some have MBAs. Others have been business owners and are former entrepreneurs. All are familiar with the relationships between finance and management.

Regardless of their orientations, consultants share one common trait – they dislike, or at least distrust, sales people as a group of slick-talking, promise-anything-to-get-the-deal, glad-handing, tap-dancing liars and thieves. What sales people think about consultants is similar, but that is not my point. The use of professional sales people to acquire clients characterizes the difference between consulting practices, which do not, and consulting businesses, which do. Neither approach is better than the other. The significance is the difference in overhead.

Other differences in overhead include advertising, depth and size of support staff, and location. They may have large corporate structures to serve corporate customers, such as publicly traded companies, that employ hundreds to thousands of people, generating many millions of dollars in annual revenue. Consulting businesses have greater resources than many consulting practices and may offer layers of specialty in the services they offer, such as proprietary software, IT, tax consulting and financing.

Consulting practices are more entrepreneurial in nature and structure. They may be highly specialized themselves, depending upon the orientation of the consulting staff they employ. They may also be general practitioners whose services range from QuickBooks to websites. Because of their nature, consulting practices serve entrepreneurial clientele, most often privately held firms, who employ less than a hundred people and generate less than twenty-million dollars in annual revenue.

From a consultant’s point of view it is not about the money. It is all about the work. As I have previously written, when I worked for consulting companies my clients ranged from restaurants to general building contractors, from convenience stores to slaughter houses, from liquor stores to RV dealerships. For anyone who wants to become a professional consultant, I recommend the experience with the caveat that the travel can be torture.

From a client’s point of view it usually is about the money, what they think they need and they think about the work that is performed. So what is the difference between a consulting practice and a consulting business? The difference is in the overhead and in the specialties. Change is the product that the client buys or is sold.