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Damion McIntosh Shares Why Your Bank Matters More Than You Think · Budget Your Business

• 0:00
  Speaker 1: Welcome to the Budget Your Business Podcast, where small business owners go to learn how to financially plan for every aspect of their business.
• 0:07
  Speaker 1: Let's get started with your host, Scott Geller.
• 0:10
  Damion McIntosh: You want your banker to anticipate your needs.
• 0:13
  Damion McIntosh: You want your banker to know what are the risks that are present in the environment.
• 0:18
  Damion McIntosh: You want your banker to see advantages and opportunities for your business so that they can be proactive in engaging you with new products that they may offer to the market or new opportunities for you to explore as a business.
• 0:33
  Damion McIntosh: Your banker shouldn't be reactive.
• 0:35
  Scott: Hello, and welcome to Budget Your Business, the podcast for small business owners who want to financially plan for every aspect of their business.
• 0:44
  Scott: I'm your host, Scott Geller.
• 0:46
  Scott: Today I'm joined by Damien with Auburn University, professor at Auburn University, to talk about to be a part of our banking series where we're bringing in different representatives of banks.
• 0:59
  Scott: But this is going to be a little bit different perspective with Damien simply because he's not a banker, but he has a very interesting background in banking, or at least an aspect of banking, and he's now a professor at Auburn University, which Damien War Eagle as a fellow Auburn or Auburn along.
• 1:19
  Speaker 3: War Eagle.
• 1:20
  Scott: Well, thanks for joining us, Damien.
• 1:22
  Scott: And why don't you I'd love to hear a little to give the listeners a little bit of a background of your background of internationals, roles regulation, and kind of how you got to where you are today.
• 1:35
  Speaker: Oh, absolutely.
• 1:36
  Speaker: First of all, thank you for having me.
• 1:38
  Speaker: And I do want to add that I'm probably like a sort of hybrid because I have worked in the industry, but my principal expertise is in financial institution regulation and supervision.
• 1:53
  Speaker: That is the bulk of my professional experiences.
• 1:57
  Speaker: Um, but I have had stints in the industry.
• 2:00
  Speaker: I was a chief compliance officer for a financial institution in the Cayman Islands, and I was also assistant vice president of finance for a financial conglomerate in Jamaica.
• 2:13
  Speaker: And so my primary responsibilities span their commercial banking subsidiary as well as their investment banking and securities firm subsidiary.
• 2:24
  Speaker: Currently, in addition to being a professor at Auburn University, I'm also a financial institution advisor to both the International Monetary Fund as well as the World Bank.
• 2:37
  Scott: Well, thanks, Damien.
• 2:38
  Scott: And the reason I was really excited about getting you on was that you you sat on what I consider both sides of the table: the bank side, the regulatory side, and now you know the you throw in the educational academic side as well.
• 2:53
  Scott: So Damien, we've talked about this, but the whole purpose of this series is for business owners to find their perfect bank or the bank that would work best for them, whether it's size, geography, type of banker.
• 3:08
  Scott: Um and I've broken down banks into uh for this show into the global systemic banks.
• 3:17
  Scott: So there's those couple that are global, you see them everywhere, as well as Auburn.
• 3:22
  Scott: I'm a Carolina Panthers fan, so Bank of America, right?
• 3:25
  Scott: They're all over the state.
• 3:26
  Scott: I mean, you see them everywhere.
• 3:27
  Speaker 3: Yeah.
• 3:28
  Scott: The next are the just the large regional banks or the large banks, where they're nationwide.
• 3:34
  Scott: You've got the regional banks that are in that, you know, like 10 billion to 100 billion.
• 3:40
  Scott: Um, then you have your your community banks, and then you have some other some other types of banks.
• 3:45
  Scott: What I'd be interested in is from your perspective is like how do you categorize or how do you kind of see banks on a high level?
• 3:52
  Scott: Like how do you do you categorize them in different buckets, or do they align with that, or do maybe you see it a little bit differently?
• 3:59
  Speaker: It's kind of interesting because whenever I'm asked the questions about categories of banks, there are just so many different dimensions on which you can categorize banks.
• 4:09
  Speaker: And it's really a function of what your interest really is.
• 4:13
  Speaker: So you just categorize banks based on their asset size, because oftentimes that's how we see banks, we focus on how big they are, or their geographic span, or the market um in which they serve.
• 4:28
  Speaker: But from an educational perspective, for example, I could categorize banks based on their business models.
• 4:35
  Speaker: And I want to expand the category of banks to include more of a deposit-taking financial institutions categorization, which not only include banks, which we often refer to as or commercial banks, but you also have your savings and loans institutions, and you also have your credit unions.
• 4:57
  Speaker: We cannot ignore them because they are becoming an increasing phenomena in terms of the pace at which they have been acquiring banks over the last uh two years.
• 5:08
  Speaker: So that is definitely something to take a look at.
• 5:11
  Speaker: From a regulatory perspective, we will probably categorize banks based on how they are regulated.
• 5:18
  Speaker: The United States is unique compared to any other country in the world in how they regulate banks.
• 5:25
  Speaker: Most countries in the world regulate banks at the national level.
• 5:28
  Speaker: But in the United States, we regulate banks at the federal level and at the state level.
• 5:34
  Speaker: And then there's a new categorization that is developing because of technology, where we have those traditional physical brick and mortar banks, and now we're having these new types of banks, which are online banks, purely an online presence.
• 5:51
  Speaker: So it depends on the audience that you're talking to and what your interest is.
• 5:55
  Speaker: That categorization may actually be a little bit different.
• 6:00
  Scott: You make a really good point, and I am trying to bring in some of those others, but the credit unions, this is I I don't really have a lot of data around this because I'm not done a lot of research, but maybe maybe you know a little bit more in that.
• 6:11
  Scott: It seems like these credit unions are getting a little bit larger.
• 6:15
  Scott: Yes.
• 6:15
  Scott: And maybe there's not many more volume of number wise, but they're getting large.
• 6:21
  Scott: Is it is that is that accurate?
• 6:23
  Speaker: Oh, you are you are absolutely accurate.
• 6:25
  Speaker: So large that they may be as competitive as some of the community banks in the services that they offer in the market that they're competing for.
• 6:36
  Speaker: And what gives them a sort of edges, so to speak, is their business model.
• 6:41
  Speaker: Their business model as a nonprofit, because they're technically nonprofit organizations and so designated as such, um, are so specialized in the services that they offer, which is very membership driven.
• 6:55
  Speaker: And so there's a degree of discrimination not being used negatively, because that's the that's a type of customer profile that they offer in terms of you you have to be a member in order for them to provide you with that service, compared to a community bank where there's no membership that is required, it's a it's it's a service that is being offered, but certainly they're becoming increasingly large either through acquisition of other types of credit union, or as I mentioned over the last two years, they have been acquiring, they've been acquiring banks, which is gonna make it interesting because if their business model is a non-profit-making one and they're acquiring a profit-making sort of business structure, it's gonna be interesting to see how that dynamic works out over the next couple of years.
• 7:41
  Speaker: But it's that name.
• 7:47
  Scott: I didn't realize that they were acquiring actual banks too, but that's a big change going from taking a for-profit bank or a bank that's hopefully for-profit, and rolling it into a uh non-profit.
• 8:00
  Speaker: Yes.
• 8:01
  Scott: Well, let me ask you the other really the perspective that I'm I'm looking forward to from you is that you know I'm interviewing bankers.
• 8:09
  Scott: Obviously, they're a little bit biased.
• 8:10
  Scott: They're biased towards their bank, they're biased towards their type of, you know, their size of bank or their style of bank.
• 8:16
  Scott: But you you you bring a unbiased opinion um to the show today.
• 8:22
  Scott: So what should small business owners be looking for in their bank?
• 8:28
  Speaker: That is such a great question, and it's a discussion I even have with my students, not just about small businesses, but just for individuals, because oftentimes we probably select a bank out of convenience in terms of its proximity, or maybe it's because of word of mouth, someone says, let's use this bank.
• 8:49
  Speaker: But for a small business, it's a little bit more than a personal decision.
• 8:54
  Speaker: You know, it is a business decision.
• 8:56
  Speaker: So there's so much that should be considered in ultimately making that decision.
• 9:01
  Speaker: And there are several factors that should be considered.
• 9:04
  Speaker: There are some banks that specialize in a particular industry, and that specialization is good because it means that it's a bank that understands the the risk, the challenges, and the needs of that industry.
• 9:18
  Speaker: So if you operate a small business where there are those types of banks that operate in that industry, then you may begin to compare what your objectives are as a business enterprise and whether or not this bank that specializes in that industry suits your particular set of objectives.
• 9:38
  Speaker: There is no one single factor that should be taken into consideration.
• 9:42
  Speaker: So that is just one factor.
• 9:44
  Speaker: Here are some other factors that should be taken into consideration.
• 9:47
  Speaker: Every business should have a sort of growth plan or a strategy.
• 9:53
  Speaker: And so it's important for that small business owner to really understand whether or not the geographic reach of the financial institution suits strategy.
• 10:05
  Speaker: So you mentioned earlier uh a community bank will often just serve the needs of the community.
• 10:12
  Speaker: So if you're a small business, your focus is on the community, your strategy is not necessarily to expand beyond that, then maybe the offerings of a community bank serves your purpose.
• 10:23
  Speaker: You mentioned a regional banks that tend to operate in multiple states.
• 10:29
  Speaker: They're not necessarily yet national, but they tend to offer services in a cluster of states.
• 10:35
  Speaker: So maybe the southern states or the just the Midwest, so to speak.
• 10:39
  Speaker: So if you're a small business, despite your size right now, if your strategy is to expand, but that expansion is to be consistent with a regional focus or a regional footprint, then a regional bank would certainly serve your purpose.
• 10:55
  Speaker: But if your hope, even if the next five years or beyond that is to expand nationally, or to engage in more international cross-border sort of offerings.
• 11:08
  Speaker: You may have customers overseas, you may have suppliers overseas, and so you are interested in engaging in international banking activities, not necessarily now, but in the future, you want to begin to have that relationship with more of the national type of banks, with more of the multinational type of banks.
• 11:24
  Speaker: So that also has to be considered.
• 11:27
  Speaker: The safety and soundness of the bank is also important.
• 11:30
  Speaker: So understanding the financial strength of the bank, the risk profile of the bank, deposit insurance coverage is also important because not every type of product that is offered by your bank is covered by deposit insurance.
• 11:46
  Speaker: So you kind of want to know the ones that actually are.
• 11:48
  Speaker: And of course, the reputation of the bank also has to be considered.
• 11:52
  Speaker: Different types, size, and business model of the bank will determine the types of financial services that it offers.
• 11:59
  Speaker: So again, understanding what the strategy of the small business is, what the business model of a small business is, will determine what type of bank the small business needs to engage.
• 12:13
  Speaker: The banks that offer a full suite of financial services may be consistent with your growing risk profile, the growing activities of a small business.
• 12:25
  Speaker: But if it is that you prefer to remain very micro, very community-based, um, your activities are considered simple, not necessarily risky.
• 12:36
  Speaker: You just are interested in the basic financial services, having a deposit account, maybe borrowing a small loan every now and then, then a community bank may be quite reasonable for that.
• 12:48
  Speaker: Transaction volume is also an interesting aspect.
• 12:53
  Speaker: Um, and the types of transactions that you engage in, whether it's credit card transactions or cash transactions, because if you're going to engage in cash transactions, you're going to need to transport that cash.
• 13:05
  Speaker: Does the type of bank that you engage with have the capacity to manage that cash flow and that cash management?
• 13:12
  Speaker: If it is credit card processing, the volume of credit card transactions.
• 13:17
  Speaker: And I think ultimately, from a small business perspective, having personalized, customized financial services from your bank is extremely important.
• 13:28
  Speaker: You tend to find, despite the advantages of engaging with a very large bank, that you don't necessarily get that personalized, customized service from a very large bank.
• 13:40
  Speaker: And sometimes you want that from your banker.
• 13:43
  Speaker: You want your banker to anticipate your needs.
• 13:46
  Speaker: You want your banker to know what are the risks that are present in the environment.
• 13:51
  Speaker: You want your banker to see advantages and opportunities for your business so that they can be proactive in engaging you with new products that they may offer to the market or new opportunities for you to explore as a business.
• 14:06
  Speaker: Your banker shouldn't be reactive.
• 14:08
  Speaker: It shouldn't be a circumstance where, as a small business, it's not until you approach your banker for financing, for treasury assistance, for payroll assistance.
• 14:19
  Speaker: Your banker should be proactive in engaging with you.
• 14:22
  Speaker: And by the way, just to even add a little side note, you saw a little bit of that with the onset of COVID, where many financial institutions were contacting their customers, but that was a national crisis.
• 14:35
  Speaker: That's not what I'm referring to.
• 14:37
  Speaker: I'm referring to a banker that understands your business and the industry that you operate in and the customers that you have and the suppliers that you have.
• 14:47
  Speaker: And because your bank is in tune with your business model, your business strategy, your business plan, they're always thinking for you and therefore able to communicate with you your needs and your risks, even sometimes before you see it, and therefore offer you opportunities and services that will help to um to facilitate your business model.
• 15:09
  Speaker: I think that's very important.
• 15:10
  Speaker: Those are just some of the factors that a small business should take into consideration in selecting a bank.
• 15:17
  Scott: Those are great.
• 15:17
  Scott: And I want to I want to ask about one of those because it's a it's a factor that I think a lot of people might be have a hard time assessing, and that is the financial condition of the bank.
• 15:31
  Scott: I think a lot of people look at it the other direction of the bank, go into the small business and say, Well, are you financially stable?
• 15:38
  Scott: But what about the financial condition of the bank?
• 15:40
  Scott: How does a small business owner look at that?
• 15:43
  Speaker: That's such a great question.
• 15:45
  Speaker: And the reason why that's a great question, because there are many persons you will ask about, you know, whether they understand the financial performance or the financial condition of a bank, and they'll tell you it's not something they really think about.
• 16:00
  Speaker: And usually it is for two reasons, one of which is a bank is regulated, and so there is general reliance on the regulation, but that is more defense that comes later on, you know, because that regulation may not necessarily be fully enforced or enacted until a bank is approaching failure or has failed, you know.
• 16:24
  Speaker: And the second reason, which is a moral hazard, is deposit insurance.
• 16:28
  Speaker: You know, most persons know, or most businesses may believe that, well, I have less than $250,000 in a deposit account.
• 16:37
  Speaker: And so since that is covered by deposit insurance, if a bank goes under, then you know I'm secured.
• 16:42
  Speaker: But you still have a responsibility for a number of reasons.
• 16:46
  Speaker: And I want to share three positions that a small business may find itself in that tells you why it is so important that as a small business, you really should monitor the financial condition of your bank.
• 16:59
  Speaker: The first of which is you have a deposit in a bank, and your deposit in a bank is considered your investment, just as you invest in any sort of opportunity, and you want to know how well that investment is performing.
• 17:15
  Speaker: You want to know either when you need a return of your principal, when you want to get back your money, you can quickly get that back.
• 17:23
  Speaker: And so understanding the financial condition of your bank is important.
• 17:28
  Speaker: What is your bank doing with your money?
• 17:31
  Speaker: Because when you deposit money with a bank, the bank doesn't keep that money.
• 17:36
  Speaker: The bank lends that money out, which is its largest activity.
• 17:40
  Speaker: The second largest activity is that it invests it.
• 17:43
  Speaker: Both of those activities involve the risk that you may not get back your money.
• 17:48
  Speaker: You know, lending money to a borrower, a borrower may default.
• 17:52
  Speaker: Putting money in an investment portfolio, stocks and bonds, that can also lead to a default, either in terms of bonds or a company goes under and the equity investment is lost.
• 18:05
  Speaker: So technically, there's really no guarantee aside from deposit insurance that you're going to get back your deposit.
• 18:12
  Speaker: So monitoring the financial condition of a bank is a small business way of being proactive to determine whether or not, you know what, it's time to pull my investment.
• 18:24
  Speaker: Which, by the way, we saw that with the failure of Silicon Valley Bank, it's depositors who anticipated the risk of loss to their deposit who decided to walk with their feet by pulling their deposit.
• 18:37
  Speaker: The second role that a small business may play is just being a customer to the financial institution.
• 18:44
  Speaker: This is an intermediary that is providing a suite of financial services to the small business.
• 18:51
  Speaker: Customers may be paying their accounts directly to the small business bank.
• 18:56
  Speaker: It's the bank through which the small business is paying their suppliers, it's a bank through which the small business is paying their employees.
• 19:04
  Speaker: If the bank needs to transfer money to pay someone, it is using this platform.
• 19:10
  Speaker: So if that bank goes under, it can temporarily affect the business continuity of the small business.
• 19:19
  Speaker: So again, being proactive and anticipating the likely adverse financial condition a bank may find itself in will help the small business to minimize and plan for the likely impact on its business continuity.
• 19:34
  Speaker: And then the third aspect is the small business could be a borough of the financial institution.
• 19:40
  Speaker: And so what you may end up seeing is that embedded in the terms and conditions of the loan agreement is the likelihood that the loan could be transferred or sold to another banker, and then that new acquirer of the loan can change the terms and conditions.
• 19:59
  Speaker: So here you are, you have a loan from a bank, you're paying that loan as required, the bank goes under, the assets of the bank is transferred to another bank, and that bank has decided, well, as part of its own conditions and risk profile, it's going to make adjustments to your loan.
• 20:17
  Speaker: And so not being able to sort of uh either comply with the new requirements, or if the new requirements is not consistent with the business strategy of a small business, then it can have an adverse impact.
• 20:32
  Speaker: And so, what is important in all of this is being proactive, monitoring the financial condition of your bank, holding your bank accountable to the risks that they're engaged in, and being able to enforce that accountability by walking with your feet, which is withdrawing your deposit from a financial institution.
• 20:52
  Speaker: Now, the question I'm often asked is well, where can we get this information?
• 20:57
  Speaker: Well, there's several sources that a small business can access financial information on its financial institution.
• 21:03
  Speaker: So if your financial institution has issued any type of security to the public marketplace, then it has to submit certain information with the Securities and Exchange Commission or the SEC.
• 21:16
  Speaker: And so the SEC has a database that it calls Edgar or E D G A R, which is publicly available.
• 21:26
  Speaker: And that bank is required to submit quarterly reports that we call 10 Q's, annual reports that we call 10Ks, and that information is publicly available.
• 21:39
  Speaker: So within, I think it's like 15 days at the end of the quarter, and within 45 days at the end of each year, you have access to these reports on the SEC website.
• 21:50
  Speaker: You can see not only the financial information on your financial institution, but you can see your financial institutions' management discussing.
• 21:59
  Speaker: All the risk, all the challenges that they foresee, and it provides you with information to give you some insights into how well the financial institution is managing its risk that is exposed to.
• 22:15
  Speaker: If you also want more detailed financial information, you can also get that from the Federal Financial Institutions Examination Council website, which is the FFIEC.gov website.
• 22:29
  Speaker: And that provides you with a whole host of information on your financial institution, separated in different categories, including risk categories.
• 22:40
  Speaker: And one of the things I love about that website is you're also able to compare your financial institution with how well it's performing against its competitors within a particular industry set of categories.
• 22:54
  Speaker: So there are information that is available.
• 22:57
  Speaker: And despite this just being financial information, but just being in tune with your bank.
• 23:03
  Speaker: Connect with your bank's website.
• 23:04
  Speaker: Several banks periodically will provide maybe quarterly newsletters, annual newsletters.
• 23:10
  Speaker: You will have the CEOs of banks that will, you know, conduct speeches or presentations and they'll publish those.
• 23:19
  Speaker: So reading and seeing what your bank is doing in the media, so to speak, is extremely important in advising you on just a general condition of your bank.
• 23:30
  Scott: And do you have any thoughts or tips around finding a new bank?
• 23:34
  Speaker: Yes, this is this is such an interesting thing because I share this with people and they're like, wait, I can do that.
• 23:41
  Speaker: Yeah.
• 23:42
  Speaker: Listen, as a small business, you're a customer of a bank.
• 23:48
  Speaker: A bank needs your business.
• 23:50
  Speaker: A bank needs you just as much as you need them.
• 23:56
  Speaker: So what I often say to a small business is shop around for a bank.
• 24:02
  Speaker: But the banks you're gonna shop for are consistent with what we just discussed earlier.
• 24:07
  Speaker: You know, there's certain factors that you must look for in a bank to determine whether or not it aligns with your small business.
• 24:14
  Speaker: But there may be more than one.
• 24:17
  Speaker: So how do you ultimately select the one that is best for your business?
• 24:22
  Speaker: This is what I say.
• 24:24
  Speaker: First of all, as a business, you should have a business plan, whether you're a new business or an existing business.
• 24:30
  Speaker: Share your business plan with these select set of banks and say to them, I'm interested in you being my banker.
• 24:40
  Speaker: Tell me why you should be my banker.
• 24:45
  Speaker: Now, whatever bank is looking for new business.
• 24:48
  Speaker: Because guess what?
• 24:49
  Speaker: Banks have quotas or targets they need to meet, either of new businesses, either of new loans, either of new deposits.
• 24:58
  Speaker: So it's important for them to want to sell themselves to you to persuade you that they want to be your banker.
• 25:07
  Speaker: So I refer to it as a pitch competition.
• 25:11
  Speaker: That's exactly what it is.
• 25:13
  Speaker: You say the banks, here's my business plan, tell me what services you offer that aligns with my business.
• 25:21
  Speaker: Describe to me what products you offer that aligns with my business.
• 25:27
  Speaker: And by the way, the bank that should ultimately win the competition is the bank that doesn't stick to your business plan but offers you more than what your business plan is describing.
• 25:41
  Speaker: It's the bank that makes you see opportunities, risk, challenges, and threats that you probably didn't even envision in your business plan.
• 25:51
  Speaker: This tells you that it's the bank that is thinking for you.
• 25:56
  Speaker: And building that relationship with that bank over time is important.
• 26:01
  Speaker: Most banks will have a business development function or maybe an outreach function.
• 26:06
  Speaker: And so that is their principal responsibility.
• 26:09
  Speaker: So once you are able to connect with that particular function in the bank, have them showcase themselves to you and you make that selection.
• 26:19
  Speaker: Approach this perspective that a bank needs you just as much as you need them, so they have to convince you why you should select them.
• 26:29
  Scott: That's a great point.
• 26:30
  Scott: I a lot of small businesses that they feel like they're in you know that the banks are bigger and more powerful.
• 26:38
  Scott: No, you're you've got the power, you have the selection.
• 26:41
  Scott: They can't make you go there or even stay there.
• 26:43
  Scott: So before we wrap this up, um, you know, we have listeners primarily in the US, but we also have some international listeners.
• 26:51
  Scott: And maybe you take a minute or two to just give some thoughts or or recommendations around how banking differs internationally versus in the US.
• 27:03
  Speaker: So one of the things about the US market is the US market is very deep, it is very developed, and the degree of regulation in the United States is much more um stringent, so to speak, than in some other markets and some of some other international markets.
• 27:21
  Speaker: I mentioned earlier how the US is very unique in the way in which the financial institutions in the United States is regulated, either at the federal level or at the state level.
• 27:34
  Speaker: The multiplicity of regulations, however, in the United States differ significantly.
• 27:41
  Speaker: So you will have some countries that may just have a singular regulatory body for financial institutions.
• 27:49
  Speaker: And that singular regulatory body may not necessarily cover things like market conduct, may not necessarily cover things like consumer protection or business protection.
• 28:01
  Speaker: Where in the United States it is much more fragmented, and because it's fragmented, it tends to be very concentrated.
• 28:08
  Speaker: So we have a separate agency with responsibility for consumer protection, and that is their focus.
• 28:14
  Speaker: We have a separate agency for market conduct in the role that the Securities and Exchange Commission plays, separate from the regulatory role that deposit insurance plays, separate from the functional regulators like the OCC or the Federal Reserve or state regulators.
• 28:34
  Speaker: That may not necessarily be present in some countries around the world.
• 28:38
  Speaker: And largely also because a developed market like the US provides a unique set of risks that some countries either prohibit or do not necessarily have the expertise to really regulate or provide the necessary oversight.
• 28:56
  Speaker: And so their banks or financial institutions are restricted sometimes in the activities that they can engage in.
• 29:04
  Speaker: One of the things that is very interesting, I should probably share, is that in the United States, which is typical of some developed markets, is the separation of the federal government from the regulatory function, which is with our Federal Reserve or the OCC.
• 29:33
  Speaker: But in some countries that might not be the case, there is still government determination and oversight in terms of how financial institutions are regulated, because there isn't that independence between the regulatory function and the governmental function in some countries.
• 29:49
  Speaker: So there are nuances and differences in how financial institutions are regulated across the board.
• 29:56
  Speaker: What is important, however, which is common across all regulators, is the ultimate goal of regulation, which is financial stability, ensuring that the financial systems of countries remain stable and resilient to risks that present themselves at the national level.
• 30:15
  Scott: Yeah, the most important piece, the last thing a country needs is a banking system falling apart.
• 30:23
  Speaker: You already saw the anxiety that we experienced with the three bank failures in the United States three years ago.
• 30:29
  Speaker: And that was just three bank failures.
• 30:31
  Scott: Exactly.
• 30:32
  Scott: I'm sure I I could probably keep you keep you going on this, but I was listening to something recently about the bank failures in Central and South America, some examples down there.
• 30:41
  Scott: Yeah, so it's it's a it's very interesting.
• 30:44
  Scott: If you're interested in that, definitely recommend looking into some of those.
• 30:48
  unknown: Yes.
• 30:49
  Scott: Because there's some good stories.
• 30:50
  Scott: And lessons learned.
• 30:52
  Speaker 3: Yes.
• 30:53
  Scott: Speaking of lessons learned, we we like to wrap up all of our shows with one to three immediate takeaways that our small business, our listeners, our business owners, as soon as they get off the podcast, can it can put in action.
• 31:07
  Scott: It could be something you you mentioned, it could be finding a bank, or even you know, just around business planning.
• 31:13
  Scott: What would you like to share with our listeners today?
• 31:17
  Speaker: That's that's such an interesting uh and it's a great way to end, by the way, having those inactable, you know, action-driven takeaways.
• 31:25
  Speaker: Um let me share this because this is all part of selecting a bank, and it is all part of the business plan development that I just mentioned.
• 31:35
  Speaker: Um, it's important for small businesses to set smart financial goals.
• 31:41
  Speaker: And when I talk to my students, um, I you know, you can apply this on a personal level, you can apply this on a business level.
• 31:48
  Speaker: And so I always rely on the SMART acronym, you know, ensuring that your financial goals are specific, are measurable, are achievable, are relevant, and are time bound.
• 32:04
  Speaker: So if you have developed a business plan already, review your business plan to see if it meets these SMART requirements.
• 32:12
  Speaker: Ensure within your business plan are these financial goals, which include selecting the most appropriate bank for you.
• 32:19
  Speaker: Your bank, by the way, if you have a bank right now as a small business, even if you've had that bank for the past 10 or 15 years, you should be periodically evaluating whether or not that bank is still meeting your needs.
• 32:33
  Speaker: Are you evolving?
• 32:35
  Speaker: And if you're evolving as a business, is your bank also evolving with you?
• 32:40
  Speaker: Because this affects the financial goals that you have set for yourself.
• 32:44
  Speaker: So that's the first takeaway I think every small business will have.
• 32:47
  Speaker: The second takeaway is irrespective of the level of sophistication of your business activity, whether you are technologically driven, in other words, you're using Microsoft, Excel, and the necessary technology equipment, or you're using pen and paper, the manual process, track your income, track your expenses, compare it periodically with your goals that you have set and conduct what I call a variance analysis.
• 33:16
  Speaker: You know, are you off target?
• 33:18
  Speaker: And if so, why?
• 33:19
  Speaker: And it's whether or not it's good or bad.
• 33:21
  Speaker: So if you're doing more sales than usual, why?
• 33:25
  Speaker: What is contributing to that?
• 33:27
  Speaker: If your sales are less than usual, what is contributing to that?
• 33:31
  Speaker: And part of that will also allow you to engage in effective data analysis because it could be the time of year, it could be the season, it could be the geography, the market in which you're engaging.
• 33:43
  Speaker: So that kind of tells you, you know, how off-target you might be.
• 33:47
  Speaker: The third thing, and I think I learned this uh because of the global pandemic, is that you must have a contingency plan.
• 33:55
  Speaker: As a business, you must.
• 33:57
  Speaker: We did anticipate the pandemic, it happened, it shut down a lot of businesses, some weren't even able to recover.
• 34:05
  Speaker: So, what is your contingency plan?
• 34:07
  Speaker: And it doesn't have to be something as national as a pandemic, it could be just an emergency that your business has experienced.
• 34:16
  Speaker: It could be a downturn in the industry in which you operate.
• 34:22
  Speaker: So, what is your emergency plan to ensure that you can continue to operate as a business?
• 34:28
  Speaker: And Scott, I know you asked for three, but I just thought of one that I think is so important because I know it significantly affects a lot of small businesses surviving.
• 34:39
  Speaker: The income from your business is not your personal income.
• 34:44
  Speaker: So pay yourself as a regular employee, let it be a fixed pay.
• 34:50
  Speaker: And not because your business has done great this year means you should get us a bump up in your pay or or a bonus.
• 35:00
  Speaker: You know, reinvest your funds in your business because that is how you grow.
• 35:07
  Speaker: And by the way, you can get a lot of that guidance from your banker, that personal relationship with your banker, because he should be able to advise you from seeing your increase in cash flow and how you're managing your cash, how you may invest it, what opportunities are available for you to use that income instead of thinking, well, my business is doing well, so that means I can take a vacation to Italy this year.
• 35:34
  Speaker: That's not how it works for the sustainability of your small business.
• 35:38
  Speaker: So that is it.
• 35:40
  Scott: Well, I wouldn't say that is it.
• 35:42
  Scott: I could take those last few minutes, those four takeaways, and put them on repeat for any collection of small business owners.
• 35:48
  Scott: So thank you for that.
• 35:50
  Speaker: Yeah, that's great.
• 35:50
  Speaker: No problem.
• 35:52
  Scott: So, what one more question is we enjoy a good podcast or book recommendation.
• 35:56
  Scott: Just wondering if you have one for us.
• 35:59
  Speaker: That's an interesting question that I get asked often, especially when I do these interviews, and I think it disappoints listeners when I say I do not have one.
• 36:07
  Speaker: But let me let me give you a caveat.
• 36:09
  Speaker: The reason why I do not have one is because of the work that I do in financial institutions and financial systems, that is so dynamic and ever-evolving.
• 36:21
  Speaker: And so I love reading and I do read, but what that means is I always have to keep pace with new things uh that are happening.
• 36:31
  Speaker: And so what I connect myself with are websites, so to speak.
• 36:35
  Speaker: So the Federal Reserve, the World Bank, the IMF, especially because of my international activities, the Bank for International Settlement.
• 36:43
  Speaker: And oftentimes these are organizations that are entities that publish research papers where heads of um governments or heads of institutions do presentations and speeches, or it might just be news or media reports that are put out on certain things that are happening in the market.
• 37:03
  Speaker: And so that interests me.
• 37:04
  Speaker: And so wherever I can get information on, that's where I do my reading.
• 37:08
  Speaker: So maybe I could share uh maybe topics wherever those readings are, that's where my interest lies.
• 37:15
  Speaker: And so, right now I'm I'm very excited, I'm very interested about what is happening in the crypto asset space and how that affects financial institutions and what that may even mean for small businesses, because we're pivoting to the use of stable coins in our markets.
• 37:33
  Speaker: And to what extent would that actually replace our use of cash in the market?
• 37:38
  Speaker: So I'm very much interested in that.
• 37:40
  Speaker: And the second thing that I'm very interested in is climate risk and how that affects our financial goals, how does that affect our or budgeting?
• 37:51
  Speaker: Um, I saw the news just this week that this has been the first year in a very long while, 2025, where there has been no hurricane that has and that has threatened the United States.
• 38:04
  Speaker: So if if you're a small business on the coast, like the Gulf Shores or in Florida, that is often prone to be affected by um hurricane, I would think that in your business plan and your business activity, hurricane risk is one of the things that would affect your financial goals, it would affect your business plan, it would affect your contingency.
• 38:26
  Speaker: If you're a small business, say in California, that is known for droughts, um, flooding, and fires, you know, those are things that you would be um very sensitive um about.
• 38:36
  Speaker: And I could probably say if you haven't figured out, I do have an accent.
• 38:40
  Speaker: I am of Jamaican origin, and a couple weeks ago, we were affected by one of the most devastating hurricanes we've ever experienced: 215 miles per hour.
• 38:53
  Speaker: There's an estimated recovery cost for the country of about $1.5 trillion.
• 38:58
  Speaker: So you can imagine small businesses and a lot of small businesses in that country has been demolished.
• 39:05
  Speaker: And I'm using that word intentionally, demolished, little hope of recovery, including the fact that they didn't even have insurance to be able to recover from um that sort of devastation.
• 39:18
  Speaker: And insurance would not have covered a category five hurricane of that magnitude.
• 39:23
  Speaker: In fact, it has been so bad that the NOAA is contemplating adding another category of hurricanes, category six, um, for any hurricanes that exceed 200 miles per hour.
• 39:34
  Speaker: So I'm interested in those things.
• 39:36
  Speaker: So wherever I can get information, knowledge, and insights in those particular areas, that makes me interested.
• 39:42
  Scott: Well, may not have been a book or a podcast, but you definitely added a few topics for me to start looking into a little bit more a little deeper.
• 39:50
  Speaker 3: Yes.
• 39:51
  Scott: Well, Damien, this has been even better than the perspective than I anticipated.
• 39:55
  Scott: And I ran way over the time you provided me.
• 39:57
  Scott: So thank you for that.
• 39:58
  Scott: And I really appreciate you joining me today.
• 40:01
  Speaker: Thank you for having me.
• 40:02
  Speaker: I do appreciate it as well.
• 40:04
  Scott: All right, folks, that's it for today.
• 40:06
  Scott: If you like the show or found something useful, please share it with another business owner or someone else that may also benefit.
• 40:14
  Scott: I'm Scott Keller and I hope you join me next time on Budget Your Business.
• 40:19
  Speaker 1: If you like the show or found something useful, text someone right now and say, I have a podcast recommendation to check out, budget your business.
• 40:26
  Speaker 1: You can also like the show or find more at your favorite podcast locations, Apple Podcasts, Spotify, and Amazon.
• 40:35
  Speaker 1: Thank you for listening, and we hope you join us for our next guest on Budget Your Business.