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As I enter my 40th year in our family business, I'm reflecting on the strategies that I've developed along with my son, Daniel, that have been the most productive. Correct merchandising, creating an appealing environment with the best possible corporate culture, assembling the best possible staff for our business, and producing the most interesting marketing campaigns are all important. But what might be most important is something that is often overlooked. The relationship you form with your banking partner can, if handled correctly, have a tremendously positive impact on your business.
Bankers do nothing more than "rent" money. Given that, it's critical that we jewelers acknowledge that the secret to creating a healthy relationship with any banker is to simply live by the golden rule: Treat your banker like you would want to be treated, if you were "renting" your money.
We must have a positive, "both hands on the table" posture. We must remember that the more cooperation, information, and cordiality we can offer our bank officer, the more he or she can help us. Bankers have their "4C's" too: character, cash capacity, collateral, and capital/conditions. As banking customers, we must place ourselves in the best possible position according to these four criteria. If we do, the financial world will welcome us.
THE PROACTIVE APPROACH
Here are the basic steps that we at Samuel Gordon Jewelers use in our quest to create the perfect relationship with our bank. First, always ask your bank for exactly what you want, within the boundaries of your financial qualifications. In the beginning, present your financial statements, projections for the upcoming fiscal year (this is extremely important), and a specific plan for paying the bank back.
Whether the bank requires it or not, provide monthly comparative financial statements plus: balance sheets month by month for the past 12 months; income statements month by month, for the past 12 months; "rolling" income statements for 12 month periods for the past 12 months; an actual income statement compared to your projected income statement. Then add a final sheet called "Highlights" in which you give them data that, at a glance, will tell them the important comparative "this year versus last year" numbers and trends for the period at hand.
Setting these documents up is easy and, once they are created, they can be generated each month with minimal effort on the part of your accountant. You are, in essence, doing what the bank does anyway and they love the cooperation. Plus, these documents are helpful to your understanding of the dynamics of your business.
MAKE A DIFFERENCE IN YOUR RELATIONSHIP
Pay your monthly payment weekly. For example, if you owe $4,000 per month, pay $1,000 per week in advance, and on the actual due date, pay the interest due. You will save a little interest expense over the course of a year and you will show your banker that you are thinking of your obligation constantly. Also, if it's possible, pay more than the minimum principal payment, even if it's just a little. This, and the other tips I've listed, go a long way towards building credibility, and a history of superb performance, that all banks value highly.
Never let your banker be "surprised." I send brief e-mails to my banker twice a month with short numbered sentences telling him how sales are going, when the monthly interim financials will be on his desk, plus any other matter that I think he is possibly wondering about. If there is any news of any sort that he should know about, good or not so good, I will never, ever, cause him to be taken by surprise.
I hope these basic tips help you in your business; they have certainly helped us in ours. At a seminar at Centurion in 2009, I'll present more steps in greater detail. Bankers are people, too, and if treated well, they can open all sorts of doors: revolving credit lines that you can use to pay your vendors fast (enjoy the purchase discounts!), working capital availability during quiet times, and emergency funds for unexpected opportunities. We jewelers have to be everything now: great salesmen, talented buyers, and astute businesspeople. Good luck and enjoy the "change" you will experience in one of your most precious relationships—with your bank!
Gary Gordon, mrgarygordon@aol.com
Samuel Gordon Jewelers, Oklahoma City, Oklahoma
author: Gary Gordon