With almost 20 years of financial services experience, Jeff Brown is currently the Head of Retail Business Banking at HSBC Canada. In this role, Jeff oversees the development and execution of HSBC’s Small Business proposition. Prior to this role, Jeff was Vice President of Retail Banking at Meridian Credit Union, where he led a very successful branch expansion strategy in the GTA. Jeff graduated with his MBA from Laurier, and holds the Chartered Financial Analyst, Chartered Professional Accountant and Certified Financial Planner designations.
During your career, you’ve worked at several different financial institutions. If you were to compare the benefits for SME owners that HSBC provides compared to other banks, how would you go about it?
The most obvious difference that stands out from my experience at other financial institutions is that HSBC is a global bank. We have the capabilities -expertise and knowledge -as well as the products and services that can help Canadian businesses with global ambitions move ahead.
In my opinion, that is probably our biggest differentiators when you consider other products and services, including trade, multicurrency capabilities or establishing banking relationships in other countries through the HSBC global brand. All the Canadian banks have some level of foreign exposure, but none of them are in the number of countries that HSBC is in (particularly in Asia and Europe).
How do you believe your experience has prepared you for your current role as Head of Retail Business Banking with HSBC?
I started as a small business advisor. At my first job, the bank where I worked was opening up small business accounts, and I worked with a lot of small business owners who faced the same common challenges that SMEs face today: access to working capital, providing products or services, and dealing with banks. I had a customer service background prior to banking and really saw how the traditional banking experience could be improved with better advice and service.
I then moved into a leadership role and began managing teams. I was able to work with small businesses and the advisors on implementing ideas on improving the customer experience. After that, I took a more senior role with a credit union.
At the credit union, I was fortunate to be given the opportunity to learn about community banking. I worked on creating products, services, offers, and processes. Even in the five years between my previous position and now, the landscape has changed when serving small businesses. We talk a lot more about the digital aspect, but we probably have overstepped how far we also think that we are moving away from traditional customer journeys.
There’s that balance that we’re trying to find today, and my past experiences have certainly helped in my current role: both from dealing directly with customers, leading teams and now developing products and services. Those experiences have all lead up to this point, where I have spent some time working in a global organization and using this acquired knowledge to deliver a domestic strategy.
What are some of the programs and resources that HSBC provides to help SME owners grow their business?
About two years ago we increased our investment in small business banking. HSBC Bank Canada has been a solid player for global organizations. We looked at how we were serving the domestic market and we realized that we hadn’t been properly invested in it. So we began looking at the way the market serves small businesses in order to increase our investments.
We looked at some of the research that we did around traditional relationship models versus digital journeys, and we decided to strategically invest in what I’ll call “digital assistant journeys”. The concept was about maintaining a relationship level approach to serving small businesses, while providing them with digital capabilities to become a customer of the bank, and to borrow money from the bank.
Digital lending, for example, is now alive platform where a customer can apply and get a credit decision on a line of credit in as little as five minutes. It’s called HSBC eCredit. A big differentiator is that applicants don’t have to be HSBC customers. We have also partnered with a Fintech – Biz2Credit -on eCredit, and we are using some impressive new technology around transactional data scraping to create a risk scorecard.
Our approach around small business lending is to look at more cashflow-based current data to try to assess our customers’ risk. That is one example of how we are trying to move forward, but additionally, we still give every customer a relationship manager and we still have our branch model.
At HSBC, we firmly believe that the branches are an essential place for customers, and also for our small business customers. This process is a multi-year journey. We’ve got a new mobile app coming later this year that can be used alongside eCredit and our branch models. And we will be bringing some other neat things, including “Beyond Banking”, which is the integration of other services.
Many entrepreneurs often hesitate before going into business because of the economy and not having enough resources or capital to launch. In your expert opinion, is there a right or wrong time for business owners to embark on their journey of becoming entrepreneurs?
It’s a complicated question because it puts the issue into two separate components. On the economic side, there’s no question. You need to look at your business model and how that might relate to the current economic conditions.
On the other hand, recessions has traditionally been one of the most significant sources of self-employment whereby rightsizing, downsizing, people have decided to start a business. And there are some great successes that you may have heard about started by people who were transitioned into that role where they became self-employed.
So, I think it’s a matter of looking at what your business model is and saying “Is my model dependent on a strong economy?”
What is the number one financial challenge that SME owners face and how can HSBC help them?
In my experience, the number one challenge they face is wearing multiple hats.
Most small business owners are passionate about an idea, a product, a service, but they’re not excited about doing payroll, or managing HR, or managing supplier relationships. It is essential for an entrepreneur to receive advice in order to guide them on proper decision making in multiple areas. A bank traditionally really steps up to support you in the areas of understanding your cashflow, financing needs, and how to manage that whole payment world.
That’s where HSBC is looking at providing many new products and solutions. Business owners will want access to the products and services they need, and they will want them to be simple. That’s a real challenge because the Fintechs of the world are creating unique ideas and opportunities to help a specific facet of small business needs. But when it comes to bringing it all together, you’re at risk of dealing with ten different service providers and trying to manage your business. We’re trying to bring those types of services together and also keeping it very simple.
The key behind what HSBC can also do as a bank is through our own network and that is to introduce small business customers to what we often call “centres of influence”. I believe that every small business needs to create some level of a board of directors: which can be formal or informal but it’s important to have expertise that can be called upon for help.
Starting a business can be very challenging and overwhelming for entrepreneurs. What services does HSBC provide to help business owners in their start-up phase?
The challenge to dealing with startups is their limited financial history. Banks often spend a lot of time looking at the financial numbers of a startup, but often the most successful factor of a startup is actually the capability of the owner. We have devoted our efforts to helping professionals who come from other countries get established here. We see a lot of those customers come bank with HSBC because they are familiar with our bank from other countries.
There’s a lot of competition between banks when it comes to providing financial support to business owners. What should entrepreneurs look for when searching for a lender?
Entrepreneurs need to make sure that their lender can adequately explain and provide the services that they need. You should go in with a clear understanding of the terms and conditions and that the lender has sufficient capability to be able to serve you moving forward, and also has a lending facility product that can be integrated into your overall banking.
Banks have now realized that there are some Fintech startups in the lending space who are actually good business partners. What our partnership with Biz2Credit did was allow us to bring in someone with a better understanding of a style of lending that we didn’t have. And we worked together with them to build a platform that could serve small businesses in an area where we probably couldn’t have got there as quickly by ourselves.
At what phase should SME owners consider getting a business loan?
The textbook answer to that question is they should never really go and seek a loan until the business is financially feasible, because ultimately they’re going to have a higher chance for approval. At the same time, they also shouldn’t be taking on obligations for a business that they haven’t thoroughly tested. Ultimately, if you are going to have your business take on debt, you want to have your business at a stage where you’ve got future cashflows established to pay for it, because once a business owner takes on that financing, they are also taking on the obligation to repay it. You want to make sure that you’re at a stage where you feel confident. You won’t always be 100% convinced, but maybe it’s the stage where you’ve got that letter of interest in a contract or a supply chain agreement, and that’s when you approach your financial suppliers for capital.
What is the best advice that you can give to SME owners when it comes to managing their business finances?
Going back to my experience as a relationship manager, I was amazed at how many truly successful entrepreneurs did not know their numbers. I would ask them what their margin was. I asked them what their operating costs were, and they would say things like, “That’s my accountant’s job,” or, “Here are my financial statements.” If you don’t know your numbers, you need to work with someone who can tell you your numbers, because you have avested interest in knowing that. Don’t rely on others to tell you. But if you have to, rely on someone you trust. Ultimately, you will need to know your numbers. And by the way, any financial lending institution that you’re going to work with, will want to make sure you know that as well.
Having investors can benefit SME owners in several areas, especially when it comes to growing their business. When do you believe is the right time for SME owners to start looking for investment opportunities?
I don’t think there’s a single answer to this because no two business models are the same. It’s often the case that some will look for investors in the early days to help develop whatever that next great thing is, and often, that can be friends and family. If you watch shows like Dragon’s Den and Shark Tank, you often see people come in who don’t actually need that much money, but they’re really looking for a strategic partner with expertise. You need to be careful to understand the terms of every investment and the obligations once you’ve taken the money.
Managing an investor relationship is something that an SME owner doesn’t often think about, but if I give you my money, then you’re going to need to update me on how things are going.
What’s a common mistake that entrepreneurs make that can hurt their business financially?
Ignoring warning signs! Small business owners are perpetual optimists: they love what they do; everything is great even though they know they’re buried in challenges every day. Its better that they identify the triggers rather than the bank identifying it.
Entrepreneurs often think that everything’s going to be great. Unfortunately, not having a concrete plan or concrete understanding of how you’re going to handle a downturn, or a lost contract, or key loss of an employee are mistakes that many small business owners make because they’re so busy running their business.
Often, when starting, small business owners don’t tend to separate their personal and business expenses. Do you believe that’s wise or should personal and business expenses be kept separate from the very beginning?
Without question, they should be separated from the beginning. There are many who believe that in the early days when your business is just getting started that there aren’t any tax advantages in separating your business and personal expenses. It costs a lot and it’s more work than it’s worth. You need to register a separate entity and file a separate tax return. These will bring about additional costs, but the benefits of being able to track your expenses are beyond just potential tax consequences.
A lot of small business owners believe that their business and personal accounts are the same. But from a record keeping perspective, you need to have a good understanding of how you are separating your expenses. It is way easier to carry both business and personal credit cards than it is to decipher your statements. It’s never too soon to separate personal and business expenses. It’s simply good practice as well.
What are your thoughts on entrepreneurs investing in an accountant as opposed to getting a financial software/app to manage their finances?
It sometimes comes down to time and costs, but I think an accountant can play a critical role for a business owner from the very beginning. When you look at the traditional sources of advice that a small business owner gets, it is their accountant, their lawyer, and their banker, and it’s often in that order.
We as bankers like to think that we could be at the top, but accountants often play an essential role in helping a business owner become that initial CFO. Accounting software can be the basis for how you know your profit margins and it’s a 365-day experience.
As well, when you look at where technology is taking accounting software, it’s starting to see the integration of payroll, invoicing, billing and banking, and we have a concept that we are developing here at HSBC called Beyond Banking, which is all about bringing those services together. It’s not an easy thing to solve because of privacy, data, storage, customer information, etc. But from a small business perspective, going back to their ability to understand their business, it’s a critical area that we can bring those services together. It doesn’t replace an accountant. It will enhance the relationship, and I think you need both.
On a more personal note, did you always know that you would go into this line of business?
No. I started in the food industry, and I worked my way up in a large grocery chain and ultimately went into their management. I left because I felt that they are very aligned with entrepreneurship, and I was very numbers driven, and I felt that something was missing in my life. So I joined a bank without any banking experience and became a small business account manager. And as I said, I started going around and helping entrepreneurs in opening accounts. My experience in those early days helped me move into more senior roles, and then ultimately building on my leadership experience in my previous positions helped me develop teams to serve small business customers.
I wanted to manage large teams and drive great results, but as I got more into the customer data and the analysis of how we serve customers, I became very intrigued regarding ways of serving businesses. More recently (and particularly in the digital era that we are in) I’ve learned to embrace how we can use technology to serve customers better without abandoning the traditional channels.
I certainly didn’t see myself moving to a global bank. It was a difficult enough decision to leave one of the domestic banks to go to a credit union, to then come to a global bank, but when I looked at the opportunity to have global capabilities to develop the domestic-based strategy, I felt that based on my experience it was a good fit. And Canada is such a great international trading country. HSBC is a great place to be! It wasn’t where I expected to be, but I love it.
What’s the future of banking?
I can’t see banking itself going away because the movement of currency, trading, and payments, for the foreseeable future at least, are going to exist in some format – whether it is paper currency or digital currency. There will always be the need for a bank to support the small business owner. That won’t change. There will always be a reliance on financial institution. But I think that the one thing that Canadians may underappreciated, and I can speak from an HSBC perspective, is the level of security and controls. The protection that we provide customers is tremendous, and not just from an HSBC Bank Canada perspective, but from an overall banking sector. We have a lot of strong controls in place to protect our customers as well as their customers’ data.
However, the one risk that I could see is the industry becoming too fragmented. I would say also that we have seen pushback from customers going all digital. I think five years ago, everybody thought, “let everyone do their own banking themselves whenever and wherever they want and everyone will be happy”. But we are opening new branches at HSBC Bank Canada, and we continue to hear from the small business community that they want to go to a branch in their neighborhood. They may not go in that often, but when they do, it’s to talk with someone. Our bank branches are becoming more like centers of advice and are no longer just the traditional transactional style bank.
We will still want that personal relationship, and small business owners specifically are looking for someone to help when they need it. Small business banking: it’s a “people” business.