Why Your Business Won’t Get A Loan.
Mark Overbye
Business Alchemist | Turning Vision into Market-Leading Companies Through Strategy, Leadership & Execution.
The right climbing parter will take you to the top.
“Hey Walt, I see your business is set up in your garage.?And you’ve got to be kidding me with these little mouse characters.?No loan for you, move along.”?That’s probably how Walt Disney’s initial banker meetings went.
Today, Disney’s parks and resorts are the most visited in the world, entertaining an average of 58M people a year.?Aside from operating 4 theme parks, 36 resorts and 30,000 hotel rooms on 43 square miles, be amazed at the food service alone at Disney World in Orlando:
“Your request to buy some paint, easels and canvas is ridiculous.?These funny lines you’ve drawn and weird colors are in no way bankable.?Your loan won’t happen here Mr. Picasso.”?Another probable banking scenario.
Today, Picasso’s works of art are the number one target of art thieves.?He is the top ranked artist based upon sales of his work at auctions.?His collection exceeding 45,000 pieces is displayed world wide and his estate is valued at $1.3B in today’s dollars.?
Like Walt, Pablo wasn’t bankable in the beginning. They sure are today. ?
Bankers are not paid to predict the future.?For them, their business is like being at the horse race track.?They see the race but the variables of horses, riders, mood, plus the unexpected creates hesitation.?And staying at the track longer only provokes the myriad variables to amplify the confusion. ?As a result, they prefer to bet on winners after the fact.
Ever been to Greece??Let’s say you’re a typical American unexpectedly dropped off in Athens. You’d suffer beyond belief just trying to get something to eat much less find your way around.?Why??Because the language is foreign ciphers and every sign, menu or printed piece you encounter shows symbols you’ve never seen.?You can’t decipher which freeway exit to take, your restaurant menu looks like hieroglyphics, your hotel name is unpronounceable.?Unless you speak Greek, you are stuck, struggling to function.
I remember trying to get an operating line of credit when I started my first boat company.?“These boats are so cool, water skiers love them and magazines are raving about their performance,” is what my banker heard.?Made perfect sense to me, why shouldn’t I get a loan??We even had a nice order backlog.?I now understand that my lips said one thing, his ears heard the comical tv satire sound, “Waa Waa Waa….”
Wisening up, I hired a fantastic CFO who speaks fluent banking.?Instead of me waxing poetically about the beauty of boat building and improving people’s lives through water sports, I learned to be quiet and let the master paint.?Jay enthusiastically trotted out detailed charts and glowing spreadsheets showing ROI, KPIs and EBITDA while using words like depreciation, GAAP, sources and uses, margin projection, P+L, balance sheets, debt service and more. ?
Fumbling with a lock I found perpetually perplexing, Jay was the key.?Bankers love Jay. ?Jay and bankers go together like apples and pie.?When Jay became our metaphorical guide in Athens, the credit lines opened up.?Jay knew the intricacies of my business though a different lens and conveyed that in a language bankers found comfortable. ?Through that language my business looked appealing.?And bankable.
Recently I read an article profiling an angle investor who loved a project but refused to invest. ?Saddened, the business owner learned the investor only backed projects where the project management had previous failed attempts.??
If you want to climb Everest, your best chance of reaching the summit includes an experienced team with members who speak Sherpa.
In May 2006, British climber David Sharp arranged a solo climb of Mt. Everest through Asian Trekking, a climbing services company.?The climbing package Sharp selected included a permit, trip into Tibet, oxygen equipment, transportation, food and tents.?Sharp’s package did not include any guide services or Sherpa assistance.?Although an accomplished climber with several high altitude climbs under his belt, Sharp died on Everest on May 15, 2006 near the summit at 28,000 feet.
Sharp’s insistence on climbing alone, without sufficient oxygen or radio for help nor any guide services cost him his life.?Sharp believed his skill set combined with ambition was sufficient for success.?The adage, you can go faster alone but further as a team proved fatal in Sharp’s case.?
It’s the same in business.?An experienced team member who knows the path, with finish lines in their hindsight is crucial to your success plan.?Take inventory now, is that person on your team?