Mike Dillon Takes Reins at the SMH Workshop Group

By Bob St. Meyer, President, St. Meyer & Hubbard

Throughout our history, we have fielded calls from both community-based financial services firms and large national franchises asking whether we offer targeted learning interventions on both the business and consumer sides of the house. After two years of research, we are pleased to announce the creation of a new core business line that does just that and the addition of an experienced practice leader to direct this effort. The new division offers sales and coaching training in a modular format. This new unit is: The SMH Workshop Group.

Mike Dillon Named President of SMH Workshop Group

We were thrilled that Mike accepted the challenge to lead this new division. He has been with SM&H for more than five years and he brings more than two decades of training, coaching and consulting experience to our clients. He earned a BA degree in Economics from the University of Illinois in 1981 and his financial services career spans 27 years with such prestigious organizations as Bear Stearns, Sungard, the Institute for Financial Education and several top financial consulting firms. A published author, Mike is a regular presenter at state and national workshops, including facilitating sales management programs for the Bank Insurance Securities Association.

The business and retail modules in this division are built on a training camp theme. The Business Training Camp modules include:

• Industry Intelligence Playbook: how to use First Research and similar tools effectively
  
• Prospecting Playbook: based on the best selling book Conversations with Prospects
  
• Discovery Playbook: early cycle sales calls
  
• Presentation Playbook: how to make engaging presentations
  
• Networking Playbook: how to network and how to develop a COI referral strategy
  
• Clients to Advocates Playbook: how to create lifetime partnerships
  
• Talking Business Playbook: how new calling officers gain confidence by understanding how small businesses operate and make money
  
• Coaching Playbook: how to sustain traction for the long haul

The Retail Training Camp modules include:

• Branch Conversations Playbook 1: introduction to a client-focused conversation model
  
• Branch Conversations Playbook 2: how to link needs to solutions through benefit statements and how to deal with concerns
  
• Branch Relationships Playbook: how to deepen current relationships and how to use an Onboarding process to welcome clients through proactive telephone conversations
  
• Referral Playbook: how tellers and other associates can spot and refer opportunities
  
• Talking Business Playbook: how branch managers gain confidence by understanding how small businesses operate and make money
  
• Coaching Playbook: how to observe and coach in a branch setting

We developed several workshops that have proven successful for our client partners and have packaged them into a series of one-day modules that can be easily integrated into a company’s current curriculum on a stand-alone basis or as a series of advanced workshops. This is a 21st Century way to take proven best-practices to the field, quickly and effectively.

What You Need When You Need It

The goal of the SMH Workshop Group is to provide next-level skills to the right people at the right time. In today’s economic climate it is vital to keep every associate at the top of their sales conversation game. Organizations may purchase one or all of the Playbooks. We help clients select modules that best match their strategic objectives and needs. Trainer Certification is available for each Playbook.

Mike Dillon can be reached at mdillon@stmeyerandhubbard.com or by telephone at 815.725.9588.

The Fa La La Folly Rant

By Jack Hubbard, Chief Experience Officer

Rantmaster’s Note:
This commentary originally appeared in the October 2006 edition of this newsletter. We received so many e-mails and telephone calls from the column, we thought it timely to repeat it. The Rant has been updated to reflect the 2008 environment.

It’s that time of year when the marketing department, or someone else at your organization, is pulled off a vital, revenue-centric project to take on the task of getting the Holiday cards out the door. Maybe it’s easier now, but “back in the day” it took untold hours, weeks even, to scrub the card list, add new names and, in general, be certain not to miss anyone important. We always missed someone important.

Then there’s the “should we send a Christmas card or a generic holiday card?” question. What card to select? We bought from the Girl Scouts last year so we have to give equal funding to the Boy Scouts this time. Then there’s the process of getting the right cards to the right group of senior managers to sign and “personalize” the message (oh sure, they personalize) and find someone good at calligraphy to address the envelopes. Add to that the cost, hassle and expense of working with the U.S. Postal Service…

There is a potential solution to this holiday madness. Go to the card store or to www.hallmark.com or www.americangreetings.com and send a Thanksgiving Card this year—EVERY year. It’s easy, fun and a clear differentiator. Sending Thanksgiving cards is easy. When your people use the internet, the process can be done from home in the evening and on the weekends, so as not to take away time from clients and prospects during the sales week. The sender knows when the e-card is read too because when the recipient clicks on the card, an e-mail is generated back to the originator. E-cards are fun too and many are totally free to send.

There are several caveats to this process. First, the e-card industry has been hit hard by spammers in 2008 and some firewalls aren’t permitting cards to get through. If that’s the case in your area of the country, the other option is sending them via regular mail. Sending Thanksgiving cards electronically requires lots of coordination too. You might not want someone to receive an e-card from the branch manager, business banker and president. Or do you? Sending traditional Thanksgiving cards through the mail does require the same type of coordination as the Christmas card process, so you don’t really save any time doing it. It is a differentiator though and that’s why the sales of Thanksgiving cards rose 26% in 2007.

Having trouble with those holiday gifts? Maybe this year there won’t be as many holiday gifts. Some of our clients have bagged the fruit baskets and candy and are choosing to give something that keeps on giving: a sales book. Marketing ideas found in Never Eat Alone by Keith Ferrazzi, one of Jeffrey Gitomer’s sales tomes, Trust-Based Selling by Charles Green or Small Giants by Bo Burlingham provide lasting value.

Don’t let 2008 lead to a Fa La La Folly. Be different and think about sending Thanksgiving cards.

I’ll wait by the mailbox…

Success Practices from Their Home Offices

By Debra Kavalos-Delaney, President, Memorable Entertaining
www.MemorableEntertaining.com

SM&H Note: We met Debra Delaney when she was a retail sales manager at Harris Bank, Barrington in the 1990s. She advanced through the ranks to become a high-performing Private Banker at Harris. From the first time you meet and shake hands with Debra, you feel the passion she has for life and for her clients. After concluding her successful financial services career, Debra decided to move into the ranks of entrepreneurdom. Her best practices article is below and the timing is perfect.

Entertaining Clients During the Holidays

Entertaining clients is a vital part of relationship-building. It is an excellent way to deepen and solidify relationships. The holidays are a perfect time to show clients how much you value their business. It also gives you the opportunity to touch them one more time before the year ends.

Follow these simple tips to leave a lasting impression when you entertain this year.

1. Deciding Where to Entertain Clients

• Listen to clients for hints on favorite restaurants, sports, foods or interests (if your organization does not have some type of Share of Heart program similar to what St. Meyer & Hubbard recommends, it should develop one for 2009)
  
• Know time constraints of clients
  
• Make the location convenient and comfortable for the client
  
• Choose venues that are conducive to conversation and have good service and food

2. Restaurant Preparation

Pay attention to every detail. You want the occasion to be special and ensure your client receives “5 Star” treatment.

• Relay details to your client: location, directions, phone numbers (your cell and the restaurant)
  
• Confirm time and location
  
• Prepare small talk conversation
  
• Brush up on your dining etiquette
  
• Arrive early
  
• Get a quiet table in a corner to allow for open conversation
  
• Let your server know ahead of time that you want the bill given to you

3. The Event

• Make certain your guest has the best seat: if there isn’t a special view, give your guest the seat looking into the restaurant
  
• Share appetizers, specialties, desserts etc. that you recommend. This also signals to your client what price level they can feel comfortable ordering
  
• Even in this relaxed setting, don’t discuss controversial issues
  
• If business is going to be discussed, it usually begins after everyone has ordered
  
• Listen
  
• If you need to take notes, bring a small notepad versus a large brief case

4. Entertaining Clients in Your Home

This is an excellent way to meet your client’s spouse or significant other and create a warmer and more personal setting. Over the years my husband and I have entertained many clients and business associates in our home. It does make a difference!

• Ask about food preferences or allergies
  
• Let them know the attire for the evening
  
• Share your spouse or significant others name with guest(s) in advance
  
• Provide some background about the client to your spouse or significant other
  
• If you haven’t met the spouse or significant other, ask the name in advance of the event
  
• Be sure you send directions and your home phone number

5. Holding an Open House

• Don’t skimp on the quality or quantity of food
  
• Be sure you work the room versus getting comfortable with one or two “best friends”

6. After the Event

• Send a handwritten note! This is truly a dying art—take the time to send a hand written note to your client if you really want to stand out from your competition and be remembered

Where you entertain, how you entertain and how you handle yourself is a direct reflection of you and your organization. It’s like making a sales call, isn’t it? Preparation, execution and follow-up make the difference between an average event and a “5 Star” rating for both you and your company.

For additional tips on holiday and year-round entertaining read: Manners That Sell: Adding the Polish That Builds Profit, by Lydia Ramsey.

If you have a success practice that you can share, send an e-mail to jhubbard@stmeyerandhubbard.com or call 847.717.4328 and we’ll work out the best way to highlight your accomplishments.

Feature Article: Financial Statement Analysis

By Tom Carlin, President, Financial Training Group

“I hate this stuff!” lamented one of my students during a recent seminar on basic underwriting skills for a major New York bank. “I’d rather go to the dentist than do financial statement analysis.”

I have heard this complaint all too often in the 20 years I have been teaching bankers the basics of commercial lending. The landscape of banking is radically different than two decades ago and in this new financial services world, branch managers and platform personnel are expected to cross-sell many different services (or cross-solve as SM&H suggests). One of the products they struggle with is how to recognize and refer commercial lending opportunities. Too often they feel inadequately equipped to do this. In many instances an office leader has never studied accounting or basic financial statement analysis. Most have never had a class in cash flow analysis or loan structuring. It’s no surprise they feel overwhelmed.

The good news is that they don’t need to be skilled in the art of underwriting to recognize and refer appropriate lending opportunities. With a little practice, they can learn basic techniques which will help them to successfully refer the right business opportunities to the right people.

Getting Started

Underwriting does not start with the financial statements. It begins by getting basic information about a business. Many lenders think the financial statements are going to provide all the answers, but, in fact, it is the opposite. In most instances, financial statements raise questions. The answers customers provide during the all important screening interview provide most of the information needed to determine whether the potential borrowers are referred on to the underwriters.

There are at least two things that every branch manager should do when interviewing potential borrowers:

1. Relax, it’s not a test of your business acumen. It’s not “Larry King Live.” It’s closer to “Late Night with David Letterman.” Enjoy finding out about your customers’ businesses. The buyers have the answers and the sellers have the questions. What business owners don’t want to talk about their babies: their businesses?

As clients have been taught by St. Meyer & Hubbard and many other training firms, open-ended questions are best! Some questions to ask might include the following:

• What are the finished products/services?
  
• How do the customers plan to use the money (salaries, taxes, inventory, payables)?
  
• How are the companies structured? Who are the clients and suppliers and who are their competitors?
  
• What differentiates their products/services from their competitors’?
  
• How many employees do they have?
  
• What are their existing financial services relationships?

2. Focus on the financial statements as a way to stimulate further conversations and help determine borrowing needs. Don’t forget: your job is not to determine the creditworthiness of potential borrowers, but rather to assess borrowing needs and weed out those requesting loans for the wrong reasons.

An example of a loan request for the wrong reasons might be the case of the underwear manufacturer wanting to borrow money to invest in a ski resort (true story—which of course resulted in a loss for both the borrower and the lender).

Many times prospective borrowers will say they need “working capital”. Often, they don’t really know what working capital is. Your job is to find out exactly what they mean by that and of course, determine that there is a real borrowing need.

Gut checks are always necessary throughout the process. Have you understood the information customers have provided in interviews. If not, have the confidence to say so. Perhaps they can give examples of how their businesses work. Customers recognize, and even respect, that it’s in their best interest that you understand the business.

The Mathematics

Using the financial statements to flesh out the borrowing reasons can be challenging and fun. One does not need sophisticated math skills or software programs to quickly pick out some causes for cash flow shortfalls that can result in a borrowing need. A simple calculator will do.

To begin, one needs to know six basic ratios. They are as follows: sales growth, gross profit margin, operating expenses as a percentage of sales, accounts receivable days on hand, inventory days on hand and accounts payable days on hand. The formulas for these ratios are laid out below:

It is not necessary to memorize these ratios. They can be kept on a reference card and strategically placed on the desk. Let’s look at each of these ratios in a bit more detail so you’ll have a sense of how they work and what they can tell you.

Sales Growth

Assuming a company can keep margins steady, sales growth is an engine that boosts the bottom line. However, the bottom line in accrual accounting is often not realized in cash. Cash from profits can be tied up in accounts receivable. Sales growth can cause inventory levels to rise which drain cash. The rule of thumb I give students is that sales growth above 10% can often cause cash flow shortfalls which need to be financed. This is most often accommodated through a line of credit—an opportunity to refer the business to an underwriter.

Gross Profit Margin

I refer to the gross profit margin and operating expenses as a percentage of sales as the fundamentals of a business. A business needs to manage these effectively in order to survive and prosper. Deterioration in these ratios has a very significant effect on a company’s income statement and cash flow statement.

The gross profit margin is the difference between the sales generated by a business and the costs paid out for goods or services. Small changes can have a very big effect. A 1% change can make a big difference in the bottom line and the company’s cash flow. Often this ratio is very difficult for borrowers to manage. Market forces can dictate what is possible. A declining number can signify a borrowing need.

Operating Expenses as a Percentage of Sales are those incurred in transacting normal business operations. Operating expenses include administrative and selling expenses but exclude interest, taxes and cost of goods sold. Rent, insurance, salaries, postage, advertising, commissions, utilities, etc. are all examples of typical operating expenses. As with the gross profit margin, 1% can make a big difference in the bottom line and the company’s cash flow. Management will typically have more control over some of these expenses than those connected to the gross profit margin. A rising number can signify a borrowing need.

To evaluate the effect of these variables together subtract the operating expense ratio from the gross profit margin. The answer will be the operating profit margin. A decrease can indicate a borrowing need.

The management of Accounts Receivable, Inventory and Accounts Payable Days on Hand can have a significant effect on the cash flow of a company. These variables are called the “swing factors” because a small change in one can have big impact on the company’s cash flow. For accounts receivable and inventory days on hand, a rising trend can indicate a borrowing need. For accounts payable days on hand, a declining trend can indicate a borrowing need. Movement of a few days in any of these variables can create a borrowing need.

A simple yet effective technique to evaluate all three variables together is to add accounts receivable and inventory days and subtract accounts payable days. A rising number will show an increase in the cash cycle and indicate a borrowing need.

Cash Cycle

Once branch associates are comfortable using these ratios (which doesn’t take long), they can be extremely effective in spotting lending opportunities for their institutions. My experience in teaching these classes is very favorable. The feedback I have received over the years from my students, particularly the ones that start off by comparing financial analysis to having a root canal, is that they are amazed at how easy this all is and how a little training and practice can help them be successful in exceeding their revenue targets on a regular basis.

Giving branch personnel the confidence to use a few basic skills will go a long way toward maintaining and developing profitable customer relationships.

SM&H Note: We have had the privilege of knowing Tom Carlin for nearly two decades. His fast-paced, practical teaching style has won him international accolades. Tom is a regular facilitator at programs sponsored by RMA as well as numerous in-house workshops. Tom can be reached by telephone at 914.834.4555 or via e-mail at tomcar1@mindspring.com.

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Jack Hubbard Chief Experience Officer 847.717.4328 jhubbard@stmeyerandhubbard.com Bob St. Meyer President 847.717.4322 bstmeyer@stmeyerandhubbard.com