business negotiating with banks

Small Businesses Need to Negotiate With Banks and Bankers

Business negotiating is often described by small business owners and most other individuals as the one regular activity which they dislike the most. Of course there are also managers in many companies who enjoy negotiations of any kind, but professional enjoyment does not always translate to having the appropriate skills needed to negotiate properly.

So on the one hand there are potential negotiators who literally hate doing it, and on the other hand there are often managers who like negotiating but lack the specialized skills to be truly effective. If someone in either category is then required to negotiate with a bank about critical financial services for their company, should we expect that the discussions will lead to the best possible outcome for the company?

I have worked with small businesses for over 30 years, and my consulting efforts to help them with business negotiations and business skills development has consistently been one of my most rewarding professional activities. My personal estimate is that 95% of small business owners either dislike business negotiating or lack the necessary skills to be successful. When it comes to negotiations involving banking institutions, I would raise my estimate to 99%.

The good news is that this is most definitely a solvable problem. I have produced this overview to help the 99%.

Why Is It So Important for Small Businesses to Improve Negotiating?

Business negotiating is an activity that can impact a small business either positively or negatively in many areas beyond working with their banker. But my professional opinion is that improving bank negotiations is the best place to start for several reasons:

  • Most small businesses are currently paying too much for their bank services
  • Recent banking problems have caused most banks to raise prices even higher
  • Banks have always taken negotiating seriously because they know it produces substantial profits
  • Negotiation skills can be transferred to dealing with your next bank if you find it necessary to fire your current banker
  • After learning new business skills, the ability to negotiate more skillfully is also directly transferable to several other areas (see the following section for a representative sample)

When it comes to the prices that banks charge for their services, I immediately think of how colleges have continued to raise their tuition fees beyond the ability of most students to realistically pay without a full scholarship. Like universities which charge escalating fees despite their inability to improve employment prospects for graduating students, many banks have continued to raise their prices without any perceptible improvement in their services and products. 

As noted above, a small business owner is virtually guaranteed of overpaying for the privilege of dealing with their bank unless they take appropriate steps to prevent it. For more and more banks, small businesses are no longer the high priority that they once were. 

Improving business negotiating with banks is truly the best starting point to correct this unsatisfactory state of affairs.

Roger Dawson negotiating quote

What Other Small Business Areas Need More Attention?

As suggested by the Roger Dawson quote shown above, negotiating can produce substantial financial benefits to those willing to take the time and effort to improve their negotiation capabilities. I mentioned in the preceding section that banks learned this many years ago and are already busily adding to their bottom line by always being ready to negotiate anything and everything. 

In addition to negotiating with banking institutions regarding all variations of commercial loans and credit card processing services, here is a short list of additional candidates that should result in improvements to the bottom line of any small business that chooses to make their negotiations more effective:

  • Utilities
  • Suppliers of raw materials for manufacturing
  • Suppliers of all products and services (including attorneys and CPAs)
  • Customers (especially high-volume key customers)
  • Negotiated fees for products and services sold through business proposals
  • Credit card processing fees (if not handled by your bank, in which case this should be negotiated when you start with your bank to reduce all bank fees)

More effective business negotiations can help (almost) everything.

Where and How to Start?

I have produced a short video about business writing and negotiating and have included that below. Effective business writing is an essential part of most negotiations, and unfortunately that practical observation is frequently overlooked in the rush to negotiate.

For those who like reading as much as possible before jumping into a complex problem, I have also included the negotiating books below which I think are the most likely to be helpful to any individual trying to become more skilled at all of this. Negotiation skills will prove to be beneficial in all walks of life and business, so these books should not be thought of for small business purposes only.

To learn business skills effectively often requires more than the desire to develop a particular skill area. Specialized help in the form of business training or business consulting might be a prudent element to consider when formulating the most appropriate course of action. Because mistakes can happen even with the best planning efforts, don't forget to consider a Plan B in the event that something goes wrong.

Always Have a Plan B

You have probably noticed that I include this practical wisdom in multiple places throughout this blog and other websites. That is one measure of how important I think Plan B is.

A Book to Help Negotiate With Banks

Roger Dawson is truly a renowned negotiating expert, and anyone wanting to improve their ability to negotiate should benefit from his observations. This is one of many excellent books written by Roger Dawson. If you decide to read more than one, I consider "Secrets of Power Negotiating" to be a superb starting point.

Another Important Negotiating Book

"The Power of a Positive No" is the third in an excellent and effective "Yes and No Trilogy" written by William Ury. Each book is a masterpiece and can be read separately. I recommend starting with this book and then moving on to the other two if you want to learn even more.

business negotiating solutions

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