Most business owners come to their bank when they need a loan, a line of credit or a new account. That’s a reasonable starting point, but a lot of value is left on the table if it’s no more than a transactional relationship.
Commercial bankers working in an advisory role are well-positioned to provide a proactive financial analysis conducted before a specific need arises — that shows business owners a clearer picture of where their company stands, what’s possible and where opportunities are hiding. This can include benchmarking data on key performance ratios specific to their industry. At First Business Bank, our framework typically covers three areas: working capital management, debt capacity and business value creation.
How do you know if your working capital is working hard enough?
Most businesses have untapped cash potential sitting inside their operations. The key is understanding the cash-to-cash cycle: how quickly a company buys inventory, fulfills orders, collects receivables and manages payables. Accelerating that cycle generates more cash internally, which means a company may be able to fund growth plans without borrowing as much as expected. Treasury management tools that automate collections and payments can also play a meaningful role in improving the cycle.
How much debt is the right amount?
Debt capacity analysis answers a question many business owners find hard to get a straight answer on: how much can we realistically take on without putting the company at risk? The answer depends on cash flow, industry type and business model. A company with steady, predictable revenue carries debt differently than one with seasonal swings. Understanding that distinction helps owners use debt strategically, rather than reactively.
Why does business value matter even when you don’t plan to sell?
Business valuation is typically expressed as a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization). A 5x EBITDA multiple means that every dollar of earnings improvement adds five dollars to the enterprise value. Owners who understand what drives that number can take concrete actions to increase it. Tax planning connects directly here, since the structure of a business and how profits flow through it affects both the valuation and what an owner ultimately keeps. More than half of businesses expect a leadership change within the next decade, and for many owners, the value of their company is also the foundation of their personal wealth and retirement plans.
At First Business Bank, these conversations happen as part of how we prioritize our relationships with clients. If this type of analysis sounds useful for your business, reach out to us to start a conversation about how we provide value to our clients beyond loans and lines of credit.
17335 Golf Pkwy, Brookfield, WI 53045
firstbusiness.bank
(262) 792-1400
