The lending and funding problems that have beset retail banking are spreading into small-business banking as well.

Overextended on credit lines that often were based on home equity, small businesses are increasingly hard-pressed to service debt in an atmosphere of slowing sales. Working capital, often held in bank deposits, is coming under strain as well.

Shifting into protective mode, banks are ratcheting up the emphasis on credit quality and core funding in their small-business portfolios. And this has created a particular problem for small-business banking officers, who are being redirected from a former bull market for loans to what increasingly is a bear market for deposits.

Oriented to loan deals, small-business bankers often lack the type of customer knowledge needed to win deposit balances and sell fee-based services. To help them along, leading banks are beefing up centrally supplied analytical tools.

Along with deepening local market analytics to include the full range of small-business products, leaders are working to identify priority trade areas and customer groups.

There's also push to create a fair and objective context for goal-setting and performance measurement, using sophisticated market and customer data.

Four initiatives can provide consistency and discipline in directing and managing the activities of small-business bankers.

Market analytics. Our company's research repeatedly shows dramatic local market differences within each region and metropolitan area. Market skews include deposit and loan growth rates, competitive intensity, retail and business segment mix, pricing conditions, advertising spending, and each competing bank's branch network strength.

However, many of these important variations still aren't reflected in small-business banking plans, which remain biased in favor of loan growth. Lacking a firm-by-firm analysis of the sales opportunity in each market, leaders often resort to political negotiations to make decisions, leading to poor planning and, often, poor results.

To address this problem, some banks are compiling and analyzing a wealth of market and company information to pinpoint the shape and scope of small-business sales opportunities in each local market they serve, including current penetration.

Some are refining this analysis to the level of micromarkets, or sub-MSA geographic areas where target small-business clients live, shop, and operate their businesses. Others go to the level of individual branches and sales territories. This guidance helps to improve regional resource allocation; budgeting, planning and goal-setting; and decisions on deploying sales staff and calibrating marketing spend.

Targeting. Even within a single attractive market, there can be significant differences in the scope and shape of the small-business banking opportunity. Medical, financial, and legal professionals, for example, have very different geographic placements and product needs compared with light manufacturing and transportation companies.

Instead of glossing over such variations, leading banks are studying them systematically, and using the findings as local performance improvement road maps.

Prospecting. Many centrally generated prospecting lists are a huge waste of time. Reps continually have trouble locating decision-makers, establishing a needs-based context for sales, and quickly positioning the appropriate array of products and services.

One answer is a database and analytical initiative called "wallet modeling." At the basic level, this exercise is aimed at fleshing out the banking wallet — or estimated total use of bank loans, deposits, and services — for both current and prospective customers.

From there, wallet modeling helps to identify the full extent of customer needs and sales potential within each company. Through a detailed analysis of market share, the bank can also assess its progress in tapping the customer potential in each market.

Harnessing geographic, industry, and household information, such analytics provide much clearer guidance on calling priorities and specific contacts.

Performance assessment. It remains difficult to objectively assess the performance of local small-business banking teams and individual officers. To plug this gap, leading banks are setting local performance goals in much greater detail.

In some cases, planning specificity extends to the amount and type of business expected in each branch trade area and calling officer territory. Goals are then based on at least matching local sales results with the strength of the bank's local presence.

A separate quest for objectivity centers on the sales behaviors of small-business officers. Leading banks have become keen students of the small-business sales process, using a variety of electronic and on-site techniques to audit the sales experience.

The goal is to identify and monitor the sales practices and behaviors that work best for the institution and its customers. Analytical findings on successes and failures then are used for focused improvements in training, coaching, and sales management.

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