By Cathy Planchart, Senior Project Manager

Small businesses, generally defined as independent businesses having fewer than 500 employees, account for 99.9% of all U.S. businesses.¹ They employ nearly half of the American workforce and represent 43.5% of America's GDP, making small businesses a critical part of our economic ecosystem.²

Banks play a vital role in fueling small business success, providing accounts, services and financing that small businesses need to grow and thrive. The reverse is true as well, with small businesses representing an important customer segment for banks. According to McKinsey & Company, small business banking represents about $150 billion in annual revenue for the US banking industry across all products – deposits, loans, cards, cash management and merchant services. That is about 17 percent of the US banking industry as a whole.

So what do banks need to do to support small businesses and capture their fair share of this important, revenue-generating customer segment?

Let’s start by taking a look at what’s important to small business owners. Identified by doing an informal survey of a small sample of small business owners, here are three things they value most about their small business bank.

1. The relationship they have with their banker.  

2. Receiving guidance and advice from their banker, not just a product or service. 

3. Connecting with their banker routinely in the manner that works best for them.

Small business owners value having a personal relationship with their banker (and bank) that’s been developed and nurtured over time. A strong personal relationship between business owner and banker provides the business owner with confidence that they have an advocate who is proactive in ensuring they have the right financial services to support their success. This strong connection, more often than not, also results in business owners having both business and personal accounts at the same bank, which makes banking easier for the customer and the relationship more valuable for the bank.

Some small business owners said they look to their bank for financial advice regarding saving money, paying off debt, etc. and appreciate a routine (annual) review of their loans. Others indicated that they value a visit by their banker to their place of business, which demonstrates the banker’s genuine interest in understanding the business and the specific needs of the business owner.

When a sample of small business bankers were asked how they could best support small businesses, their ideas closely aligned with what matters most to the business owners!

• Know your customer. Invest in the relationship by learning about their business and understanding how it operates. With this intimate knowledge, bankers can better recommend solutions to their needs, helping small business owners achieve their goals and build a company that has lasting value.

• Provide advice. Work with your small business customers to understand their short-term needs and long-term goals and offer your recommendations for how best to achieve them from a financial perspective. Work closely with other business advisers (e.g., CPA, attorney) as part of the small business customer’s team to help ensure your customers make the best decisions to achieve their goals.

• Be available, flexible and responsive. Small business owners are busy, often wearing multiple hats to keep their business operating; so, cater to their preferred place/channel and time for connecting. This could mean a phone call, text, email or face-to-face meeting, which may be after banking hours or even on a weekend. When they need a solution to a problem, small business owners are looking for a quick response.

It's Personal

In today’s digital world, it’s interesting to note that when it comes to small business banking, personal relationships still take center stage. Small businesses certainly value the time-saving benefits of online and mobile banking and other digital tools, yet having a trusted banker is most important.

Small Business Month is a great opportunity for bankers to reach out to their small business customers, letting them know they are here to provide help and support. Business bankers (and banks) who “are there” for their small business customers are those who enjoy the most success.

MKP communications inc. is a New York-based marketing communications agency specializing in merger/change communications for the financial services industry.

¹Office of Advocacy.gov

²U.S. Chamber of Commerce