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Why We’re Leaving Our Giant Bank

And why we didn’t do it earlier. UPDATED Jan 2013

Wells Fargo is likely the “great bank” among the big ones, with the highest integrity and the lowest tolerance for bad banking practices among the bigs. But if my experience is typical as I believe it is, that should scare us all.

In early 2009 Wells Fargo took away our business credit line without so much as a letter to tell us why – it just vanished from our online banking screen one night. They did this to every single small business account in America without regard to the viability of the business. The $25 billion in 2008 Federal bailouts to WF never trickled down from Wells to their clients. I personally know of many very healthy businesses that were destroyed by this single act, and tens of thousands were damaged for years after because of it.

IT’S ALL ABOUT THE BANK
When it happened, we showed our local Wells Fargo branch manager our perfect credit and they said, “Frankly, we took away everyone’s business lines with no regard for their credit. We just had to make our own balance sheets look better.” That honest Wells Fargo manager said their credit requirements had tightened to the point of being “ridiculous.” She’s no longer there.

Many business owners switched to using their personal credit lines and had their interest rates jacked up right AFTER using them, not before. We did this to see what would happen and sure enough, within a week our rate was jacked, too. All while Wells Fargo was receiving the lowest interest rates from the Feds in history and had lined their pockets with $25 billion in free bailout money that had no strings attached to it.

This is the great bank, the good one amongst all the bad ones. If this lack of integrity is how good one acts, what are the bad ones like?

OUTTA HERE
In 2010 after more incidences of bad customer service, we told our Branch Manager we were leaving and were looking for a small local bank that wouldn’t make macro-decisions that ignored their customers. We also told them we would wait until our revenue was significant enough to make Wells Fargo stand up and take notice.

UPDATEJANUARY 2013
We set up our one international business with a local bank in early 2012, not Wells Fargo. But our main focus is Crankset Group, which grew 392% from 2008 to Dec 2012, which has been with Wells for six years. They requested a meeting in December to introduce us to four business bankers they now want us to work with, and told us we didn’t have to interact with the regular branch folks anymore. We’re special now that we’re big enough.

Our growth and the complex merchant account changover required is making it hard to invest time in changing banks. But we’re committed to doing it before the end of 2013. We are thinking of hiring a marching band when we do. And when we meet with Wells Fargo to close out, we hope they’ll learn from our experience, but based on their disregard for us as a client until we were “big”, we’re not holding our breath.

Do the small banks do better? Our experience with our other business is that they are much more better at paying attention and meeting our needs. And much less expensive.

2013 – MORE FEESCHARGING FOR THE LOLLIPOP?
Pert of the 2013 update – we got a form letter from Wells Fargo yesterday, January 3, stating that they will now be charging their clients for cash deposits. They are now charging you to put cash deposits in their bank so they can make interest off of it. Mind-boggling, but not surprising.

In the same letter they outlined three other new fees, including charging their clients for transfers from Wells Fargo savings to Wells Fargo checking – $15 a pop to do that. My community bank will transfer to another unrelated bank anywhere in America for $7.50 and sometimes nothing. Watch closely – Wells is taking their cues from the airline industry. Next they’ll be charging to use their pen, and then for the lollipop.

GO LOCAL
Our lesson? Go local whenever possible. It’s not a panacea, but it can never be worse and more than likely a local bank, as with any local business owner, is more likely to pay attention because they live there, not in some skyscraper 1,000 miles away.

What’s been your experience with big banks/big business vs. small banks/businesses?

 

 

We Don’t Find the Sandbars With An Anchor in the Water

Our desire for safety is paralyzing. We’re so afraid of hitting a sandbar that we’re willing to just sit in the harbor for years on end. Then we have the audacity to wonder why our business never grows up.

Think of the Steering Wheel on a boat as “Purposeful Direction”, and the Engine as “Commitment”. I’m a big fan of both commitment and purpose. One without the other is of no value. Nothing is more important to how quickly you will get where you’re going than the size and fitness of your engine combined with ongoing attention to the helm. Most of us don’t pay attention to either. We’re just sitting at anchor most of the time.

The single biggest factor in getting somewhere is the steering wheel of your life and business – a purposeful direction (see last week’s post). But if you know where you want to go and you aren’t committed to getting there, I mean fundamentally sold out to that end game, the journey will take a very long time and you will likely lose steam before you ever get there. If your engine of commitment isn’t big enough it’s likely you really don’t have a clear understanding of where you want to go – the steering wheel has no direction.

The only way to find the sandbars in life and in business is to get the ship moving and then start taking soundings. And if you’re commitment is big, you’ll get where you want to go a lot faster and easier than those who are puttering around with little outboard engines.

It’s all about committed movement in a purposeful direction. Lack of committed movement is failure.

Are you fully committed to moving in order to find out what works, or are you sitting around wondering where the sandbars are?

Is it Harder to Start and Run a Business Than 30 Years Ago?

Almost everyone decrying the demise of entrepreneurship in America is blaming either Walmart or rising health care costs for making it more difficult to start a business. But the biggest obstacle is a long-term shift in American culture and society that has little to do with big box businesses or heart attacks.

In a recent article titled “Are we Becoming Less Entrepreneurial?” Scott Shane cited 30-year trends going back to 1977 that fewer people are starting new businesses over that time. Other research conflicts with that to some degree, but virtually everyone seems to think that it’s harder to start and run a business these days.

As with most things, there is rarely an easy one-line answer. I see at least four factors that someone running a small business has to fight through these days:

  1. Long-term cultural shifts in the way we view life and opportunity
  2. The constantly increasing costs of running a small business due to government controls and regulations and other factors (such as health care)
  3. Pro-active resistance and disincentive by the SBA to start true small businesses.
  4. Pro-active support and incentive to mid and large-sized businesses by the congress and SBA that create artificial competition for small business.

The overwhelming uphill struggle is against #1, cultural shifts. Numbers two through four added together don’t come close to the problems number one presents.

Entrepreneurship is not declining because of Walmart. He who makes the rules wins. If you play by Walmart’s rules, you will lose, but millions of small businesses are figuring out they can build businesses around rules that Walmart can’t touch and are doing fabulously.

Nor is health care the reason. It doesn’t help, but it is only one in a pile of factors in the decline Shane cites. People who claim they aren’t going into business for themselves because of health care risks wouldn’t go into business anyway. They are risk adverse and if health care wasn’t an obstacle they would find another one as an excuse. Health care wasn’t any better for someone 75-100 years ago but people started businesses.

Also, the SBA has spent 50 years proudly killing people’s dreams by showing them empirically that their dream doesn’t work as an Excel spreadsheet. It doesn’t take a genius to know this – almost no small business makes financial sense out of the box, which is why they go through 5-7 iterations before they find the pot of gold. That’s what entrepreneurialism is all about, and the SBA’s SCORE advisors – mostly middle managers from large corporations who never started anything – are hell-bent on keeping you from the joy of that journey. They would much rather have you sit in a cubicle than give wings to that once in a lifetime longing you have.

Government regulations and a burdensome tax code are also factors. Regulations are never put in place in response to small business abuses and yet small business has the same regulations and tax code as the biggest businesses. That’s why Goldman Sachs was able to make $2 billion last year and not pay a cent in tax while most small businesses will pay a significant percentage of their revenue in tax.

But all of these are just bumps in the road compared to the cultural shifts that are undermining entrepreneurialism in America. In the last 50 years we have undergone a dramatic shift toward an entitlement society. Only 1% of entrepreneurs come from the upper class while fully 27% come from the lower class. Being soft and avoiding the struggle has not made us better. When we receive things without working hard for them we gain a sense of entitlement that leads to dependency that results in a full-blown sense of victimization when the handout I’ve been used to is no longer there.

None of that helps us start new businesses. Way too often I hear from business owners that conditions around them are keeping them from succeeding. This is a mindset of victimization – it’s not my fault, it’s the world around me.

Circumstances don’t make me who I am. How I respond to them does.

Relearn the joy of the struggle and shed your sense of dependency, entitlement and victimization. It’s a deadening mindset and will keep you from getting where you want to go.

He who makes the rules wins. If you decide you can’t make any of the rules (victim), you lose.

Being a business owner isn’t any harder than it was 30 years ago, it’s just harder to convince people they don’t have to lose.

I had a shower yesterday… #Kenya

Finding time to blog has been difficult, but these tweets tell it all. I’ll share more tomorrow.

Day 4

  • Candle wax being melted on the table to hold our light while dinner is made. Rieva and Karina (kids) enjoying darkness. #Kenya
  • Unpainted plywood ceiling in main room of house is luxury. Stone walls, concrete ceiling in most others. #Kenya
  • @GoSocialMobile I know. But here we call it getting through the crowd in a car. Life has different rules in different places. #Kenya
  • Diesel smell everywhere. Will take weeks to get it out of my head. I have that option, they don’t. #Kenya
  • Yesterday we visited another school with 250 kids. No electricity, dark dirt floored rooms. Beans for lunch – only meal of the day. #Kenya
  • .@ColoradoFoothil No Mexican food, but Mexican soap operas translated into English – biggest hit on TV here by far. #Kenya
  • Brian was down for almost two days with stomach problems. #Kenya
  • .@barrymoltz Don’t tell Charles that (owns soap stand). He says “no problems, only challenges” #Kenya
  • .@prolificd The actors are different than India, but the play is the same. Poverty & hope together. #Kenya
  • I’ve seen hundreds of kids, only one crying. So much hope w/ so much less “proof” then in Colorado. We are spoiled. #Kenya
  • After all the desperation we’ve seen, tomorrow we go to the slums of Kibera. How could it possibly be worse? #Kenya
  • Hope is not a commodity here. There are no atheists in a foxhole. #Kenya
  • The battery is almost gone. No electricity/water. The world will get smaller in a just a few minutes. #Kenya
  • Every day I know less and have more to learn. What can I possibly say that will change anything here? #Kenya
  • I’m supposed to talk for two days straight Thurs/Fri. to tell bus. owners how to create wealth. I wonder – can they afford lunch? #Kenya
  • Church on Sunday was loudest event of my life, more than any concert. Drowning out the sounds of poverty for just 2hrs of the week #Kenya
  • Chuck – this must be so humbling RT @ChuckBlakeman: I’ve seen hundreds of kids, only one crying. So much hope . We are spoiled. #Kenya
  • .@barrymoltz I would think that, too. But Charles is just one Kenyan, and lives it out every day. #Kenya
  • .@AlanBoothCoach Adults must be disoriented to learn. I’m learning. #Kenya
  • Can you help? #Kenya
  • The battery is gone – Good night!

Day 6

  • The rooster next door that woke me up at dawn the last 2 wks. did not sing this morning. Dinner. #Kenya
  • Here I am just “Mzungu” (mah-zoon-goo). http://en.wikipedia.org/wiki/Muzungu #Kenya
  • Electricity back on today. Water still off. Just another day in #Kenya
  • Saw my first refrigerator in 6 days today. The Other #Kenya
  • Visit Kean Blixen estate today (Out of Africa author) – 600 acres. The Other #Kenya
  • Filmed orphaned elephants today 3 mths to 3 yrs. They sleep under a blanket in single rooms. Not so in Kibera. The Other #Kenya
  • @drjoyce_knudsen Visited the wealthy side of Nairobi today. Their water works just fine. The Other #Kenya
  • Govt. coalition falling apart. Kofi Annan called in to hopefully stitch it back together. Locals here in Nairobi are concerned. #Kenya
  • Open door to Room 1 – 30 5yr olds in dark (no elect) happily learning ABCs. Room rt. beside? 100 chickens in dirt/crap laying eggs. #Kenya
  • Locals here in Nairobi say President Kibaki is creating instability and is “nuts”, “crazy”, and other more descriptive phrases. #Kenya
  • Had tea in an upper middle class home in Nairobi today. Vastly different than the lower middle class home I’m staying in. The Other #Kenya
  • Saw my first microwave today in a week – left Kayole and traveled over to the wealthy “Westlands” and Karen, Nairobi. The Other #Kenya
  • ZnaTrainer RT @ChuckBlakeman: Electricity back on today. Water still off. Just another day in #Kenya {{{ WOW!
  • Steep, rickety wooden stairs (almost ladder) to 2nd flr of grade school wouldn’t have been safe in a tree house. 100’s of kids #Kenya
  • @drjoyce_knudsen Especially in #Kenya. The roads are quite good leading to the President’s house
  • Great conversations on sustainable business for the Kibera slum yesterday. #Kenya
  • @drjoyce_knudsen No, it’s in a bit of chaos right now-coalition falling apart; Kofi Annan back to try to fix it; locals say Pres. is “crazy”
  • .@drjoyce_knudsen FYI – Someone from Nashville built a school for my host’s wife who is now School Director for 300 kids. #Kenya
  • C7Design @ChuckBlakeman – welcome to Mother Africa! Once her dust is in you, you will always want to go back. #BornAndRaisedAfrican
  • .@C7Design The diesel fumes are in me & the dust is soon to follow. Bugs bite here, but so does Africa herself! Magnetic people. #Kenya
  • #Kenya has two halves – the “haves” and the “have nots”.
  • 8 yr old Andrew came back to school today. Refugee from Rwanda via Uganda. Our host has a safe house they fund themselves. #Kenya
  • Tomorrow we go to “the other #Kenya” to do biz owner wrkshops w/ shipping magnates, CEOs/college grads – wealth. The other #Kenya
  • My host’s wife has asked me to kill a goat. I told her it was woman’s work. She laughed. I got away with it. #Kenya

Buy my book for a small business owner in Kenya. I’ll take it to them.

February 7-20 I will accompany The 1010 Project to Kenya to explore ways to break the cycle of poverty by developing sustainable business models. Brian Rants, the Director of The 1010 Project asked me to work with them to think big and go beyond the typical craft-making and handwork solutions. We’ll be looking for ways to fund real businesses that work for the local economy – it’s an exciting and daunting opportunity.

We’ll be working in the Kibera slum with a population density of 1,250 people per acre. We lived on one acre in Farmington, CT for years, backed up against 75 acres of state forest. Kibera will be a different world. We’ll also meet with some nationally connected business leaders to involve them in the solution.

The size of the problem is overwhelming. Our solution will be simple – change everything; one person and one small business at a time.

What can you do?

Three things:

  1. Sign up for The 1010 Project Newsletter here – and keep updated about our trip and what we plan to do to.
  2. Make a donation to help fund the trip by clicking here. I will be funding my own travel costs; your donations will go to fund the in-country costs of the trip and the travel costs for Brian Rants, The 1010 Project Director, and to support the in-country permanent presence of The 1010 Project headed up by Keith Ives.
  3. Buy a copy of Making Money is Killing Your Business that we can take with us to Kenya and donate to a small business owner. I wrote this book as a comprehensive reference book for starting and running a small business, and I believe the principles work in any culture. It is normally $28.95, but if you want to buy one specifically to send on our trip, we’ll take it with us (it will be shipped in advance), and the cost will be only $15. This will pay for the printing, handling, shipping and for having your name placed in the book (address info will not be provided).

To buy a book to send with us to Kenya and present in your name, go to our pre-order site and click on the Book for Kenya button. We’ll present the book on your behalf to a small business owner in Kenya. We’ll only be able to take 150 books, so please order your Book for Kenya right away.

The SBA and Politicians Get Another Empty Photo Op With Small Business

What would have happened if we bailed out only the banks and big corporations that didn’t need it? How dumb would that have been? That’s exactly what we’re doing with small businesses.

I’ve been working to get the politicians, the SBA, and the banks to work to support small businesses and live up to the expectations they’ve been putting out there for that support. Media is beginning to take notice. Fox Business Channel may have us on live in the next few weeks, and CNNMoney.com published an article using some of our info today.

The article was too short to say much. Following is more if indeed you even want more.

My position is that I don’t feel the government owes large or small business a handout or even a hand up.

My problem is that once again the politicians and the SBA have made claims about giving a hand up to small business that isn’t living up to any of the hype. Politicians have a bad habit of wanting to get their pictures taken with small business people to pretend that they are providing something commensurate to the help they give large businesses. Again, I don’t care if they help or not, but I do care deeply when they claim something that is not true and further their political careers with empty photo ops at the expense of small businesses. They are clearly not looking out for small businesses on either side of the aisle.

In February, Congress approved a new type of loan for small business called the ARC Loan, which, from outward appearances, appeared to actually be the first loan the SBA and the politicians have ever put out that was focused solely on true small businesses (under 20 employees, which is still 80% of all businesses in America.)

The director of the SBA, Karen Mills, was quoted as saying the ARC loan is for “immediate relief” for small businesses who could pay off “home equity loans and credit cards” used for business purposes. At no other time has the SBA recognized that, good or bad, this is the primary way most true small businesses fund at least part of their startup.

But banks are simply not allowing this loan to be used for this very purpose for which it was designed. And the banks have put so many further restrictions on getting this loan that it is actually easier to get a conventional loan than it is to get this ARC loan.

The restrictions have kept the applications so low that nine months after this loan program was conceived, only 20% of it has been distributed while hundreds of billions were distributed to high risk banks in a few days with no paperwork! But the real travesty is this:

Distressed small businesses can forget it – As a result of the changes the banks have made to the ARC loan requirements, almost no distressed small business can qualify. Most of these loans are going to very healthy businesses who would make it through the recession just fine without the ARC loan. This program, which was designed for “immediate relief” is being issued to healthy companies who don’t need it, and the SBA and the politicians are saying they’re helping distressed small businesses.

If you are lucky enough to have a conventional business loan with your own bank (most true small businesses don’t have these), they will allow you to apply. And if you get accepted, they will take $35,000 from their left pocket (the ARC loan) and put it in their own right pocket (applying it against your other loan with them). This simply reduces their at-risk loans. Paying off home equity loans and credit cards, the principle purpose of this loan program is simply out of the question.

I’m one of those businesses that don’t need the loan. I applied for one of these just to see what the experience is like since I recommended to so many others that they should do it before it was obvious it was so flawed. We don’t owe any money to our bank, Wells Fargo, so we will likely get rejected, but I needed to see if all the objections were real. They are- our initial submission was 301 pages. I’m sure they’ll want much more before we’re told we don’t qualify. Oh, by the way, the bank has already told us that with our good credit and low debt, we already qualify for their conventional business loans, which are much higher risk for them and should have a much higher qualification threshold. Hmm… seems upside down, doesn’t it?

The stimulus was $787 billion dollars. This ARC program is $255 million, or three-tenths of one percent of the entire bailout. Small business is 50% of the gross domestic product but get’s three-tenths of the bailout? The big businesses were given hundreds of billions of dollars in just a few weeks when not a single one of them would have been able to qualify for the $35,000 ARC loan. But nine months later, only 20% of the meager $255 million has been distributed, and that only for the purpose of banks taking money from their left pocket and putting it back in their right pocket.

Meanwhile the SBA and the politicians on both sides of the aisle continue to pat themselves on the back for another empty photo op with small businesses. Again, I don’t care if they help small biz or not – I’m not a victim in need of handouts. But don’t pretend to be helping when you’re actually just using the small business owner to promote your own careers with empty promises.

Continuing (almost daily) attempts to reach politicians and the SBA to get them to either fix this or stop pretending they are helping fall on deaf ears. They’re all too busy patting themselves on the back for once again giving the appearance they’ve been helpful to small business.

What would have happened if we had only given support to the banks and big corporations who didn’t need it? Sounds irrational, but that’s exactly what’s going on with “assistance” to small businesses.