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An overview for buyers and sellers of businesses in the changing and evolving printing and related industries.

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Why Bankers and Printing Owners are at Odds

Why Bankers and Printers are At OddsI’ve been talking to bankers a lot lately about how to help their clients and improve their portfolios in the process.  The problem is a “I-Win, You-Lose” mindset that I see permeating not only the lending industry, but the business world as a whole.

Let’s use relationship between bankers and printing owners as an example.  I recently posted an interview with Rory Johnson, a VP of Commercial Lending.  Rory talked about the difficulty of getting owners printing and print-affiliated businesses.  Of course, there’s a flip side to the issue.

Many bankers also don’t understand the printing business.  There’s a real chasm between the quantitative financials and the qualitative side of operating a business, and a great deal of mistrust separates the two parties.

  • The printer is wary of anything the banker puts on the table, as he views it as another way to tack on more fees, or perhaps even generate more lending opportunities.

  • The banker gets frustrated because many of the financial issues are being overlooked, and he feels like he and his money are being taken for a ride.

It’s a chronic disconnect that happens over and over again.  It doesn’t only happen with commercial bankers either. 

At the recent AWA Mergers and Acquisitions Executive Forum I attended in Chicago, I heard continuous tales of how businesses seem to be harboring a greater distrust of investment bankers and private equity groups, and more deals are headed south as a result.

In a typical commercial banker’s portfolio, you’ll likely find 30% of the clients taking off every year, heading for a better deal elsewhere. 

Why the chronic mistrust?  Why are so many relationships souring, time and time again?

 

Is it Win-Win, or is it I-Win, You-Lose?

Part of me wonders if it’s a reflection of the times and our political world.  I don’t want to date myself and reminisce about the good old days, but in the past the signature of a good deal was that it was a “win-win” for both sides.

Everyone had to compromise to make the deal happen.  Everyone gave up a little of this to get a little of that. 

Today, that doesn’t seem to be the case.  Today it seems like it’s a “I-win, You-lose” situation, and it seems to be happening between people who are supposed to be collaborating!  The cartoon at the top of the post indicates that nature of today’s beast.

How did we arrive at this state of being?  Is it a trickle-down effect from our political leaders, who seem completely incapable of compromise, even as the country continuously nudges up against financial ruin?

Is it a hangover from the recession, a kind of New Normal where the going is not so good, and you scrape and claw for every cent you can get?

I couldn’t tell you for sure.  To be honest, I don’t really care.  Sociological trends are for the academics and the philosophers to evaluate.  I’m here, as are you, to figure out how to adapt to the current state, and make my clients successful in the process.

While I can’t seem to put my finger on a cause of “I-Win, You-Lose” mentality, I do think I have a cure:  Communication. 

 

Lack of Compromise Creates Lack of Communication

It seems that we’re so busy drawing lines in the sand that we never take the time to step over that line and visit our neighbor’s camp.  Let me draw upon the commercial banker as an example.

The banker and the printing owner both have a lot on the line. 

If the owner’s business goes south, he loses his livelihood, as well as the company he’s spent years to build. 

The banker is sweating bullets because defaulting on a $3 million dollar loan means he’ll lose his job, or at least a significant chunk of his paycheck. 

As I alluded to earlier in the post, this crisis situation doesn’t always lead to trust and collaboration.  Instead, it fuels distrust and suspicion.  You can tell a lot about people when their back is up against the wall.  It tends to bring out the ugly side in all of us.

The unfortunate thing is, both sides could benefit tremendously if they collaborate and communicate on the issues.  Here are a couple suggestions:

-Owners can expose their finances to the banks.  When I work as an intermediary between bankers and their clients, I’m often amazed at how printing owners keep their finances so close to the vest. 

Whether it's shame or the fear of being cut off, owners don’t tap into all the financial expertise and resources a commercial banker has to offer.  Being upfront and open about your books will get you a lot further than if you stick your head (and your finances) in the sand.

-Don’t wait until it’s too late.  If you’re not open about your finances, you get to the point of no return.  You start going late on your loan payments, or your deposits begin to dwindle. 

The banker will call you at this point, and if he doesn’t know the state of your financials, he won’t be able to evaluate your problem.  If you don’t seek outside help, and the bank has to turn the file over to its internal “workout team,” your goose is cooked.  It’s a legal matter from that point forward.

-Bankers need to understand more than numbers.  I don’t mean to pound on the printing owners.  In many cases, bankers wash their hands of the situation, and put all the pressure on the business owners. 

The smart commercial lenders are the ones who take the time to really understand your business, and if they don’t, they find an industry-specific specialist who does.  It’s not just a matter of waiting until the you-know-what hits the fan, either. 

A banker should be proactive and try and establish a more in-depth relationship when things are going good, so there isn’t a mad scramble if the company hits an iceberg.

 

Easier said than done, I know.  With resources scarce, perhaps this is why bankers are turning to third-party advisors with industry specific expertise to help resolve issues.  I know my phone has been ringing more than ever before.

Why?  Maybe because it’s the fact that I harken back to the olden day, when a Win-Win situation was the key to success.   It’s not about winning or losing.  It’s about growing, and contrary to the comic at the top of the post, that usually doesn’t happen alone.

 

Rock LaManna is the President and CEO of the LaManna Alliance.  The LaManna Alliance helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic transition – including mergers, acquisitions, organic growth, and exit / succession plans.

Comments

Thank you Nair for your comments.
Posted @ Thursday, April 11, 2013 1:29 PM by Rock LaManna
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