Bank Mergers and Small Business

Bank merger mania is back. Generally, this is not good for their small business customers. Mergers are pursued for efficiency, and efficiency often leads to less personal service. A recent survey of small business owners reported over at Inc.com found the following:
“According to a recent survey by Greenwich Associates, 30 percent of small businesses (those with annual revenues between $1 and $10 million) and 23 percent of midsize businesses (annual revenues of $10 to $500 million) said that merger rumors concerning the banks where they do business would cause them to consider reducing future levels of banking business with them. The reason generally given was an expected decline in service quality.
“Among their quality concerns, 53 percent of the small businesses surveyed believed a merger would have a negative impact on their established relationship manager performance, making it the most cited area.
“The area midsize companies felt would be most affected was their banks’ responsiveness to information requests, with 50 percent saying they felt this area of performance would be hurt.”
The good news, which we recently discussed here at this site, is that there are many new community banks starting up in the wake of the bigger banks merging.
Not all mergers have bad outcomes for small business. When smaller community banks merge or banks with a more regional presence come together the outcome can be a stronger bank that can better serve the needs of a growing company. This happened when a regional bank we had moved our business to merged with another regional bank. We saw no change in service and a better ability to meet our expanding needs as their customer.
Changing banks can be disruptive for a small business, so take time to see what changes occur over the first six to twelve months post merger. If things start to change for the worse, remember what a former partner of mine once liked to say: “There’s a bank on every corner. One of ’em will be smart enough to work with us.”

From Great to Good

On the eve of the US Open golf tournament, I am struck by the consistent questioning of Tiger Woods? performance of late. Tiger is not winning as many major tournaments as he did a few years ago. In fact, he just isn?t winning as much as he used to.
The theories about this decline in golfing success are numerous. Among the most common theories are those that focus on changes in his life. He has gotten engaged. He is more and more active in outside activities such as his charity work. There are too many things that now take away from his golf.
What is most interesting to me is that there is always the implication that it is somehow bad that Tiger?s life has become more than golf tournaments. That he is somehow no longer great.
I remember an interview with his father years ago where he predicted that Tiger would not always be “only” a golfer. In fact, he predicted that Tiger would leave golf at a fairly early age. He saw in his son much more interest, passion and potential than golf alone could fulfill.
It is my hope that maybe Tiger is working on his goodness as a person these days. He is building a relationship with his fianc?that will be the foundation of a good family. He is working to make our communities better places to live in through his involvement in various charities. Tiger Woods may be willing to sacrifice his professional successes, his professional greatness, to strive for goodness as a person.
Imagine that, someone actually working on moving their lives ?from great to good?. If that is what is going on with Tiger, it should be a role model for all of us. I think we sell ourselves short when we only celebrate the great among us. It is much more important for humanity to spend more time celebrating the good.

Reagan and Small Business

Anita Campbell looks at President Reagan’s recognition of the courage and importance of small business over at Small Business Trends.
“Even today, two decades later, President Reagan’s description of small businesses and entrepreneurs remains as accurate as ever: (1) No guaranteed income. (2) Must anticipate their customers’ needs. (3) Must deliver before they reap the rewards. (4) Drivers of the economy.”

Time to clean the bathrooms

Along the same lines as President Reagan’s take on small business, Rob over at BusinessPundit offers his view of the drudgery that many entrepreneurs face each day.
“They cold call. They clean bathrooms and mop floors. They make copies and fix computer problems. They answer phones. They fill out paperwork. They work weekends, and holidays. They have to, because their employees just want to work 40 hours and leave, and they can’t afford to hire any more help.”
And most of us wouldn’t trade this life for the world!

Float Sinks

There is a new law that will have a profound impact on small business known as the “Check 21” banking law. For a full analysis of the pros and cons of this law for small businesses StartupJournal has a very thorough summary.
What jumped out at me is that the law changes the way checks are handled in the banking system (thanks in part to 9/11). Here is a summary from StartupJournal:
“For those unfamiliar with Check 21, the law was designed to facilitate the way banks move checks around the country. Currently some 40 billion paper checks are shuttled between banks each year by airplane and ground transportation before being cleared and returned to check writers in the mail.
“But the grounding of airplanes after the terrorist attacks of Sept. 11, 2001, underscored the need to make the nation’s payment system more flexible. So rather than require banks to transport original checks between institutions in different states, Check 21 will let these lenders transfer and print electronic facsimiles of the checks instead — otherwise known as “substitute checks” or “image-replacement documents.”
“When the law takes effect Oct. 28, it could theoretically cut the time it takes a check to clear from days to hours. “
This looks like the end of check floating, which was always one of the most creative aspects of being an entrepreneur! How many days would it take for the check to the telephone company to clear? How many days would it take for our payroll all to clear? The art of float financing may soon be sunk!

Private Companies are different

If you’ve ever even thought about taking your business public, or wonder why I rant so often about the beauty of staying private, check out Rob’s post over at BusinessPundit about Cargill. This is a private, family owned company that would be one of America’s biggest 20 companies if it were taken public.
Private companies are, indeed, different. Entrepreneurs make a huge mistake when they assume that an IPO is simply a financing mechanism. It begins a process of change the will forever alter the company culture and its purpose.
Cargill’s Staley is an amazing CEO and has a unique challenge being an “outsider” CEO of this family business. I had the priviledge of getting to know him when his son was one of my students at St. Thomas. You could see how well he fit into Cargill’s culture. It was clear that he was being groomed for the CEO role as much for his character as his business acumen.

latest economic report

The latest economic report is again quite robust. Here is the full report issued by the Joint Economic Committee.
Here are the highlights:
* Payroll employment rose by 248,000 in May, the ninth straight month of gains. Manufacturing jobs grew for the fourth straight month, and unemployment held steady at 5.6%.
* The economy grew at a 4.4% annual pace in the 1st quarter. Private forecasters see growth of 4.6% in 2004, the highest in 20 years.
* Energy prices, including gasoline, remain elevated and are expected to remain high at least through the summer diving season. Oil has rise to around $40 per barrel.
* First quarter productivity growth was revised up to 3.8%, accelerating from 2.5% in the 4th quarter of 2003. Real hourly compensation for the 1st quarter was also revised up.

culture and economics: the missing link

I have written from time to time about the need to look beyond the government controls versus free markets debate. Culture is an even more powerful force that can provide a context for our economic system that grounds it within a moral foundation. Here is an interview with Peter L. Berger on this topic that is fascinating. Prof. Berger is director of the Institute for the Study of Economic Culture and professor of sociology at Boston University. It was posted at the Acton Institute’s web site.
Berger states the following:
“I think cases exist where there are tensions that individuals who are in positions of responsibility have to work through. That is the subject matter of business ethics, which is a complicated and I think worthwhile undertaking. But there is a primitive business ideology that being good, being morally virtuous, will always lead to economic success. That is simply not true. The life of Jesus of Nazareth if nothing else would indicate that he did not start a successful corporation.
“So I think the relationship is not that easy. It does not mean on the other hand, that in order to succeed in business one has to be a brutal, immortal person. No. But there is a tension there. I don?t think there are any easily formulated general rules on how to resolve that tension, but I know many religious people in the business world who will struggle with this and sometimes come up with creative solutions.”