Banking relationships should evolve through the business life cycle

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When business owners think of banks, two things often come to mind: time and money—as in “How much time do we have to pay back borrowed money?”

The truth is there’s merit in this thinking; the working relationship between business owners and their banks is about time and money. But to think of the relationship simply in terms of lending and borrowing overlooks the true value of the relationship: Banks succeed when their clients succeed. This is why banks develop and offer their expertise to business clients. This is also why forward-thinking business owners look to banks for help with strategic planning and achieving long-term goals.

Partners for the long haul
Business is a wealth engine. The role of the bank is to help maintain it by providing business owners with the support and services they need to be successful. This is true whether the business is launching, expanding operations or planning its exit.

In other words, the most successful business and banking partnerships are long-term. For business owners, this means two things:

•  Developing an understanding of where you want your business to go.
•  Choosing a banking partner that can combine the personalized service you deserve with the diverse product offerings you need.

For bankers, this means taking the time to understand a business’s short- and long-term needs. It also means thinking through the potential issues the business may encounter as it moves through its life cycle.

Generally speaking, the business life cycle has four stages: startup or early stage, growth stage, maturity and exit. Each poses challenges that require different solutions.

For example, business owners launching their first venture often need help with financing. A banker can help them obtain capital through either a conventional loan or a loan guaranteed by the U.S. Small Business Administration. However, that same banker can also help the business owners structure financing that taps into other available resources, such as lines of credit, personal savings and small investments from friends and family.

As the business expands, the banker can offer ideas on managing cash flow and leveraging mobile banking to boost business. The banker can also help the expanding business make smarter decisions about how to invest early proceeds. As the business continues to move through the growth cycle, opportunities to diversify products, add employees or expand through merger or acquisition will continue to present themselves.

Thriving through growth
Growth can be measured in different ways, and it is the primary goal for most business owners. However, growth does not produce a guaranteed outcome. It is merely a catalyst that can create new opportunities to succeed.

Banks can and should play an important role for businesses during this stage of the business life cycle. For example, a fast-growing company with thin margins can benefit from asset-based lending. A company struggling to attract and retain top talent can and will benefit from an improved employee benefit program that offers features like health savings accounts and financial education.

Other ways your bank can help you through this stage include:

 Improving management of payables and receivables.
 Offering a broad range of financing options, from loans and lines of credit to equipment leasing, commercial mortgages and industry-specific lending programs.
 Providing access to investment banking solutions, such as debt capital markets, institutional equities and mergers and acquisitions.
 Development of employer solutions, including payroll services, health savings accounts and performance rewards and incentive programs.

Each stage of the business cycle presents its own set of challenges. Likewise, each industry has its own characteristics. Your bank should have expertise within your industry. It ensures that your banker can identify the right combination of services that will make your business more operationally sound and more valuable.

Exiting the business
Throughout every business’s life cycle, there will be ebbs and flows. However, the desired outcome for most business owners is the same: the opportunity to walk away on their own terms. This requires planning that should start well in advance of the exit.

The exit can occur by sale of the business or by transition of ownership to a family member. Bankers can aid businesses throughout this process by developing a succession a plan or helping with valuation, identification of prospective purchasers, transaction structuring and agreement negotiation. In addition, a banker can help the business owner invest the proceeds from a sale to finance a new business opportunity or meet retirement goals.

Ultimately, the needs of your business will constantly evolve. Your bank’s role through this evolution is to evolve with you. It’s a relationship predicated on growth. This ensures your bank can provide the trusted analysis and guidance you need to develop targeted strategies that optimize the value of your business.

James Barger is president of KeyBank’s Rochester market. He may be reached by phone at (585) 238-4121 or by email at [email protected].