Home » Features » Products & Services » Bold business banking

Bold business banking

Ben Martin imageEvery estate agency business has to have its eye on profitability. Winning the trust and business of potential sellers and those wishing to rent their properties and matching those properties with the right buyers and renters is key, but, you can also boost your profits significantly by some £20,000 – often more, by keeping costs down in one, often overlooked, area.

Wise up to banking

banking meeting imageThe key lies in your banking relationships. It’s likely that you have a range of banking requirements – long-term capital financing, or short-term development finance, together with operational services to ensure daily cash flows are managed, payroll is funded and payments are made. That’s not untypical for estate agency businesses. The issue is that banking products and services that were once a good fit may not be the right fit now. So, you could be wasting money on products and services that simply do not serve your business.

The onus is on you to get the best deal from your bank and to review that annually. That means making your business more attractive to banks. How? Firstly, remember that modern banking is not a ‘one size fits all’ approach.

You need to ask your bank how it views your company. Ask if they understand its strengths (scale and coverage of clients, number of offices, sales and rentals per year, which offices are performing strongly.) Provide them with up to date financial information, how you are achieving your targets and budgets and your future plans. You have to educate your bank about your business. You then need to assess your banking relationships to get the best deal.

Spotting the gaps

Conduct your own initial assessment – answering ‘No’ to these questions will highlight potential gaps that need analysis and where measurement and improvements in your banking relationship are needed:

  • Do you review the products and services you receive from your bank to ensure they are ‘fit for purpose’?
  • Have you checked that your banking costs are fair and reasonable? And compared these against other estate agency businesses or similar sized UK companies?
  • Have you reviewed all financing options (or still using traditional bank finance)?
  • As your business has evolved, (new offices, increased staff, higher sales/rentals) has your bank kept up?
  • Are you receiving useful ideas from your bank that allows more efficient rent collection?
  • Are you able to use offset surplus cash received against your financing costs?
  • Does your business fully understand any interest rate hedging products previously entered and the simplications of these on your banking relationship?
  • If you are multi banked – do you have a framework that ensures you are taking the right mix of products and services from across all banks? Is this formally measured and tracked (or a ‘gut instinct’)?
Question banking relationships

Addressing potential issues will strengthen your banking relationship. Banks need customers, and in this strong property market, with lending to property firms back to pre-financial crisis levels, estate agency businesses will look attractive to banks.

To benefit from this ensure your business stands out – be willing to share information with your bank, use a range of banking products/services from your main bank and show that you know the reservations banks have in working with estate agency businesses (aggressive expansion with under-performing offices, lack of management/financial information, poor or unrealistic sales, rentals and cost forecasts).

The onus is on you to get the best deal from your bank and to review your relationship annually.

By addressing their inbuilt concerns head on you can then engage with your bank to question their pricing and lending appetite. Ask your current banks, “Why are my costs set at this level and how can we work together to reduce them?” This is not as crazy as it seems, in my experience, banks welcome this debate. The idea of analysing your banking relationship in more detail might feel overwhelming but you can, in fact, start the process quickly and easily through the free to use Business Bank Measured service, at www.bmbal.com

If you fail to regularly measure your banking relationships you may be needlessly incurring higher costs – hitting profitability. Measuring ensures you get the right products and services from the right mix of banks, reduce costs and increase benefits due to better aligned banks. After all, you don’t buy cleaning products, confidential waste disposal and light bulbs from the same provider – so why should this apply to your banking services and providers?

Ben Martin is the CEO of bmbal, a provider of specialist banking and treasury advisory services to UK business. Business Banking Measured is a free, online, banking measurement tool, available at www.bmbal.com.

What's your opinion?

Please note: This is a site for professional discussion. Comments will carry your full name and company.

This site uses Akismet to reduce spam. Learn how your comment data is processed.