Business owners have two lives – business and personal. Both lives have multiple financial needs. Limiting your prospecting calls to business products only reduces the profitability, growth, and loyalty of your relationships with business owners.
“Many financial institutions have basically said to their Branch Managers, ‘We need small business loans, so go get me some,’” points out Buck Bierly, President of MZ Bierly Consulting, Inc. (Malvern, PA). “When you look at the data supported by people like Barlow Research, roughly 35-40% of small business owners borrow on a regular basis commercially. The other 60 to 65% of business owners do not borrow on a regular basis. If they borrow, it is typically through home equity lines or credit cards.”
By focusing on small business loans only, you’ve automatically narrowed the focus for conversations with business owners. You go into the meeting asking, “Do you borrow?” and if yes, “What kind of rates are you being charged? And would you like to lower that rate?”
Five Stupid Questions
“We have this expression…it’s called the five stupid questions, and this is what most inexperienced salespeople do in the banking world,” says Bierly. Those five stupid questions are:
1. Where are you banking?
2. What products are you using?
3. How are they priced and structured?
4. What are two things your current institution hasn’t done that you wish they had?
5. Can I have a copy of your statements to put together an offer of how we’d handle your borrowing relationship or your banking relationship?
“In the end, all those questions are doing is a product-to-product comparison for a single product, perhaps. Or a product-to-product comparison for multiple products,” Bierly says. “All you’re doing is setting up a price and structure competition.”
Expand Your Focus
An end-to-end relationship with a business focuses on the moment that an invoice is generated to the moment a payment is made for something like college tuition. Savvy bankers recognize that money is circulated all the way through the business and all the way through the owner’s personal life.
“The business owner has a business life and a personal life. Combine those two together using a phrase like in the business owner’s life, which really means from the moment that business owner generates an invoice,” explains Bierly. The owner sends the invoice to a client who then processes it through the accounts payable area of that particular organization.
The money from the invoice circulates through the owner’s business….paying off credit cards, paying employees, going into an investment account, paying down a line of credit, etc. At some point in time, the owner takes money out of the business through salary and/or shareholder distributions. The business then begins a new process….the money starts circulating through the owner’s life.
“There’s a high percentage of people who own businesses that have jumbo mortgages and second homes. So if all you’re focusing on is the business, you’re missing opportunities,” Bierly says. “If you focus on the business owner’s personal life, you may find opportunities that wouldn’t be apparent in their business life.” He cites these examples:
Buying a second home
Refinancing a mortgage
Private wealth management
“Don’t limit your sales activity to just business loans. Find out, ‘What does this business owner’s life require them to do at this point in time?’ Then focus on that. By doing so, each interaction with a business owner becomes more profitable and more effective because you’re focusing across a broader array of financial management processes and uncovering a broader array of financial needs,” says Bierly.
Consistent Calling Activity
Consistent calling activity means that you consistently get in front of specific types of relationships. Here’s how Bierly identifies these relationships:
Retention relationships are the top ten percent of the business relationships in your branch. “The top ten percent would have to be stacked ranking based on some metric. For example, aggregate loan and deposit balances or revenue contributions. Most institutions can’t measure the latter, so we suggest they use aggregate loan and deposit balances,” says Bierly.
Expansion relationships offer a lot of opportunity to expand the relationships. Let’s say it’s a professional practice that’s got $1.5 million in revenue. The business is using somewhere between 10 and 15 financial management products; that would include both the owner’s business life and personal life. So if you have somebody in your book of business who only has two product categories (6 DDA’s is commonly viewed as one product category) with your institution, you can pretty much guarantee that they’re buying another 8 to 13 product categories from someone else.
Acquisition relationships are the targeted businesses you’re trying to go after. “We [MZ Bierly Consulting] don’t call them prospects in our process,” Bierly says. “These are people that you and your bosses have agreed on would be good brand builders for your branch. They also match a credit profile and a profitability profile that your branch has defined.”
A Different Client Conversation
With a different client conversation you get deeper into what’s changing in the business. Instead of focusing strictly on financial issues, you focus on the business owner. If you’re calling on a business under $3.5 million dollars, MZ Bierly Consulting always recommends taking an owner focus. Instead of focusing on financial issues at the business management level, focus on how you can help the owner optimize some of your solutions for where the business is going, not where it’s been.
Have a conversation about…
Where do you want your business to go over the next one, two, three years?
How is that likely to change your day-to-day business operations?
How are those operational changes likely to change your financial management processes?
EXAMPLE: Let’s take a look at some of the products you’re buying from my competitor. At XYZ Bank you bought some of those products three or four years ago. Are they still working as effectively for you as they did when you bought them? And as you look down the road over the next year, two years, three years, do you see how that effectiveness could potentially change based on our conversation?
Change is the common thread in having a different client conversation. Whether it’s change in the business itself or the owner’s life, successful salespeople identify and address emerging financial needs. Having the skill to look ahead is key to developing relationships with business owners.
“Stop selling products, sell to change,” emphasizes Bierly. “What’s changing in the business owner’s life? Look at the end-to-end relationship. And whatever is changing is what you sell to, because that creates more momentum to change the banking relationship than selling a single product does or campaigns or blitzes do.”
The Quality Factor
“You can make more calls on businesses talking to the business manager about financial issues…and you keep making more and more calls at that level, but it always leads you to the same thing. You end up with a product focus and selling one or two products at a time, if you’re lucky,” Bierly continues. “Changing the conversation and staying focused on what we call key relationships [includes your retention, expansion, and acquisition relationships] results in more opportunities with fewer calls because the calls are better focused, better planned and you’re spending more time understanding the business owner’s total life rather than just one element of their business.”
Honing your relationship development skills isn’t just changing the activity; it’s changing the quality of the activity by…
Changing the quality of the clients and prospects you’re calling on
Improving your conversations with business customers
Examples are focusing on your key relationships and being better prepared. “In the end, you change that client conversation because you are better prepared,” Bierly says. “You’ll find more opportunities faster to get into a relationship and create more momentum in moving those relationships from whatever institutions currently are fulfilling them.”
This article by Lana Chandler was originally published in the “Branch Manager Letter” in October 2014.