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Can a Financial Planner Help Your Small Business?

by Jonah Von Spreecken | Apr 5, 2022 5:00:00 PM

No one knows the future. And yet, we keep scooting our greatest aspirations into that great unknown, saying things like, “someday I’ll retire, someday I’ll follow my dreams, someday I’ll get to what’s next.” But here’s the big question: Are you really preparing for all those somedays?

Financial planners specialize in addressing those somedays for individuals, families, and companies big and small. If you’re a small business owner, you’ve probably put a lot of thought into what the future holds. What does retirement look like? How can you take care of your employees over the years? What is the lifespan of your business? Will you ever pass control of the business to someone else?

Those questions are all in the realm of a financial advisor. These pros create business financial plans, solve financial stress, and most importantly – work with you to create a customized blueprint that lets you get the most out of your money.

If you’re a small business, you may have questions about managing your financial goals. We explored some of those questions with Ginger Ottesen, from Sage Wealth Strategies in Eugene, Oregon. Her thoughtful insights are included in this post and might be just the financial planning tips to keep in your back pocket when hiring a financial advisor for your business.

What is a financial planner?

A financial planner is someone who works to create a financial plan for a business, one that aligns your financial goals with your dreams.

For small business owners, that last part is important: What are your dreams? Why did you start a business? What do you want to happen to the business over time?

These questions are the starting point for a financial planner, so dig deep to find the answers; they’ll help shape a plan that allows you to get the most out of your business today, tomorrow, and even after you retire.

What’s the difference between a financial advisor and an accountant?

As Ginger puts it: “Accountants get to deal with all the numbers, I get to do all the fun stuff.”

Accountants are the ones who keep track of your spending, your budgets, your bookkeeping. In other words, they’ve got their eyes on the numbers and they know how to make sense of them – that’s why they’re so handy come tax season.

A financial advisor looks at your whole financial world, how you deal with income, debt, and investments; how to get the money you need; and how to leave a legacy. A good bulk of this work is analyzing your liquidity (aka how easy it is to sell your products and services). Taking all this into account, a financial advisor then gets to dive into the “fun stuff” (aka how to get where you want).

What are the benefits of having a financial planner?

Why is financial planning important? There are numerous benefits, but it sure helps to have a checklist when you’re on the hunt for a financial advisor. You’re in good shape if they can help you with the following:

Saving Time and Money: This is the biggest benefit. After all, you want to make informed decisions that don’t involve you hunting for answers. You also want to preserve the financial health of your business by working with a pro. The sooner you have a financial expert on your team, the sooner you’re saving time and money.

Financial Education: From Ginger: “I believe that we can make the best decisions for ourselves when we are educated.” A financial planner is aware that everyone’s situation is different. They know what’s going on in the marketplace, its pitfalls, and how to avoid them. With the right financial training, your advisor’s expertise becomes your expertise.

Growth: If you’re setting growth targets for your business, a carefully crafted financial plan can map out quarter to quarter, year to year, how you’ll manage your cashflow to accomplish those goals.

Employee Happiness: Your employees are on the front lines of your business. As a business owner, it’s an amazing thing to be able to add to your employees’ well-being, to incentivize them by offering them retirement benefits and educating them in their financial needs as well.

Retirement: You may not be thinking about retirement just yet, but someday you will. How are you going to handle healthcare and retirement? How are you going to create income for yourself? How will your business contribute to your employees’ retirement? Does it make more sense to offer a traditional IRA or a Roth IRA; a 401(k) or a Roth 401(k)? A financial advisor can walk you through the after-tax contributions and tax-free withdrawal benefits of a Roth IRA or Roth 401(k) versus the pre-tax contributions and taxable withdrawal specifics of a traditional IRA or 401(k).

Succession: If the business will carry on after you retire, a financial planner will work with you to assess how the handoff of assets and responsibilities is handled. Along with this, financial advisors can look at how to have guaranteed income throughout your life through investing over time and planning to keep up with inflation.

Leaving a Legacy: What do you want to leave behind for your loved ones? Legacy planning involves creating a strategy that will plan for your estate, mitigate tax and legal issues, and anticipate financial obstacles for your beneficiaries after your death.

Scenario Planning: Do you have an emergency fund or savings account in place if you're hit with catastrophic expenses that require financial assistance or specific tax strategies? (The pandemic is a great example.) Proper planning will help your business respond quickly should any unforeseen events occur.

When is the best time to hire a financial planner?

To be clear: You may not need a financial planner right from the moment you cut the ribbon to your new business. This early stage is a great time to focus on attracting customers and learning how your business plan holds up. On the other hand, if you’re inexperienced and run into financial obstacles in those early days, a financial advisor could help you avoid common mistakes and get you back in the black.

In many cases, though, you might consider working with a financial planner further on down the road, when your business capital, growth, retirement, and succession planning could benefit from having a financial planner on board.

The common thread is that these big financial decisions need more than just a cash flow statement; they need a plan. It’s right there in the job title: financial planner. If you want to maximize your money in these moments, hire a financial planner.

This all goes back to the first sentence of this post: Your business’s future, your personal future, and the future of your employees are all front and center when working with a financial planner. And with retirement planning at the top of the list for most people, Ginger sums it up nicely: “Well, there's never a bad time, right? Because there's always something that you can do.”

How do I find the right financial advisor?

You want to be able to ask questions and not feel silly. That kind of trust is critical when finding the right person to handle your future. Avoid common mistakes when researching financial advisors with these questions:

  1. Are they a fiduciary? A fiduciary is somebody who is legally obligated to put your best interests in front of their own.
  2. How long have they been in business? The number of years they have under their belt could inform you of their experience with the various scenarios, pitfalls, and outcomes you might encounter.
  3. Do they have experience working with small businesses? Many financial advisors work with families and individuals but may not have as much experience with small business financials. Be sure to find someone you trust with your business needs.
  4. How do they get paid? Flat fees generally lean in your favor versus commissioned fees, but here are three options to be aware of:
    • You can work with a fee-based advisor, where you’ll be paying a fee for your managed assets - a percentage-based fee.
    • You can pay a flat fee where you’re paying for a financial plan or financial advice, or by the hour just like you pay any other professional that you’d expect in that capacity.
    • You could work with a commission-based advisor – someone who you might have been called a broker in the past – they broker financial investments and get a commission on them.
  1. What are people saying? Gather referrals from family and friends, but also – and this is a new option – read the reviews. Why is this a new option? Because registered investment advisers (RIAs) historically haven’t been allowed to use testimonials as part of their marketing efforts. However, this all changed when the SEC outlined new guidelines on December 22, 2020. This means BBB can now accept your reviews for financial advisors, so please chime in when you have a chance. (And if you’re a financial advisor, get Accredited.)

In the end, it’s all about finding an advisor who you trust, who puts you first. This last quote from Ginger is a great piece of wisdom to wrap things up:

“Most importantly, this is a personal relationship that you have with another human being that's handling everything that you’ve worked so hard for, which is your money, and most of us don't want to try retirement out and then go back to work later. We usually want to go into retirement and start living or relaxing – doing what we worked so hard to do.”

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