With the perception of a tight credit market already causing damage to banking relationships, most banks have avoided conversations with their business customers on the recession’s impact. With approximately 790,000 small businesses and 5,000 middle market companies changing banks in the last 12 months, avoiding these difficult conversations with customers may have cost banks potential revenue today and the valuable opportunities ahead once the recovery takes hold.

The Barlow Research 2nd Quarter 2010 Economic Pulse shows 10% of small businesses ($100K-<$10MM) or approximately 790,000 businesses reported switching banks in the last 12 months. Barlow Research’s most recent Value of the Customer model shows that an average small business customer is worth $5,438 in net potential revenue. If the entire relationship of each of these businesses were in play, over $4 billion dollars in net potential revenue would have switched hands over the last 12 months.

The middle market ($10MM-$500MM) also saw 6% of businesses change banks over the last 12 months, which represents approximately 5,000 companies. Although a smaller number of middle market companies are switching than small businesses, Barlow’s Value of the Customer model shows that the average middle market company is worth $95,745 in net potential revenue. If the entire relationship was in play, almost $500 million dollars in net potential revenue would have switched hands over the last 12 months.

Many small businesses and middle market companies are making changes in their banking relationships right now in preparation for the oncoming recovery. Avoiding the tough discussions now may leave a bank missing the opportunities that will come once the recession ends and the recovery takes hold.