Small business banking largely remains an execution business, one in which the day-to-day actions of the bank result in success. That is not to denigrate the importance of strategy. Banks need to make strategic choices concerning topics such as which customers to focus on and how to differentiate the bank. However, too often, banks develop the basics of a strategic plan and then fail to implement the action steps that are required for its success.

Based upon what we are seeing in the marketplace today, here are five questions related to execution that small business leaders should be asking themselves. Top management, which while talking support all too often seems to have only minimal real interest in the small business space, should also ensure that they understand and address these issues.

1. What are you selling? The old rules related to generating small business earnings no longer apply. Banks cannot rely on loan sales to generate earning growth. First, banks have narrowed their lending focus in reaction to higher losses during the recent downturn. Appropriately, many banks have narrowed their credit appetite, limiting the target universe. But many borrowers also have a reduced appetite. They, like many banks, are also deleveraging, hesitant to take on debt in what many view as a time of uncertainty at least until the next election. Lending is now a game of stealing share from other players with the carrot often being reduced rates and/or easier terms. For example, one bank we know lost a deal to a competitor based upon that lender’s willingness to do without the owner’s guaranty or SBA status. Deals like this should cause a red light to flash at the “winning” bank.

While good loans are hard to generate, the value of DDA deposits has also declined in a close to zero percent environment. While deposits will increase in value some day, that day keeps moving further into the future. So what is there to sell beyond the traditional products? This is where banks need to work across organization lines in order to have impact. Cash management, retirement planning, and wealth management have to receive much high priority. Bankers need to be able to recognize these opportunities and then bring in the sales specialist to mold and close the deal.

2. What is the working relationship with other groups in the bank? We have seen instances in which the business banker thinks his group is doing a fine job of bringing in the specialist and touts the bank’s success in some of the areas mentioned above. However, when you ask the cash management or wealth specialists at those same banks, the answer is very different. They often express frustration at the lack of leads or their quality. Banks need to close this gap, particularly in light of revenue constraints.

3. Do you have a rigorous sales management system? All banks say they operate with a sales management process, often based upon software that captures activities. But few banks actually manage sales activities in a sufficiently hands-on and consistent manner across a bank’s footprint. At one bank we know a regional manager meets monthly for up to two hours with each of his sales staff. These “individual operations reviews” include attendees from other businesses within the bank. These meetings diagnose opportunities, set priorities, and help to build the plan for the next month which then gets reviewed a month later.

There is nothing new about this type of sales management approach, but few managers conduct this type of rigorous and consistent review. In some cases, small business management believes each regional manager should have flexibility; in other cases management simply does not want to do the hard work required to make an approach like this work.

4. Do you have the right people? We are emerging from a period in which portfolio and risk management were key and the banker needed to spend increased time monitoring accounts rather than focusing on sales. No longer. Many bankers grew up during a different era, one in which offering credit was the key to success and other products were second thoughts, if thought of at all. Today’s banker needs to be much more knowledgeable, solutions oriented, and relationship driven. Banks cannot afford to grant tenure to long-term employees whose skill set fails to match the realities of the market.

5. Are you fishing where the fish are? Relatively few banks are pursuing businesses owned by Gen Xers or Yers. These companies tend to be younger and, therefore, are viewed with greater concern from a risk perspective. But, boomers and their companies are slowly disappearing, and it is unlikely that many will expand the companies they own. Gen X and Gen Y now represent the majority of people in the U.S., but most banks continue to be run by Boomers who are not necessarily in sync with the younger groups.

Younger companies are more likely to need loans than established firms, but they may require lending that is more secure, for example, merchant advances or other structured financing in which the oversight is greater than with a traditional C&I loan. Banks may not have the internal product set to meet these needs and, therefore, should consider whether to team up with third-parties that offer the expertise and technology support that the banks lack.

Concluding thought.

Small business should be a major franchise for many banks; yet, instead, it often fails to receive the resources and focus it deserves. Addressing questions like the ones outlined and acting on their implications will improve the bottom line. It is that simple … and that difficult.