How to Find a Financial Advisor for Entrepreneurs

Looking for a financial advisor? Harness can connect you with hand-picked tax, financial, and estate experts from around the United States.

Table of Contents:

1. Financial Planning for You and Your Business
2. Can a Financial Advisor Help With Starting a Business?
3. 10 Ways a Financial Advisor Can Help an Entrepreneur
4. What to Look for In a Small Business Financial Advisor
5. How to Find a Small Business Financial Advisor
6. Financial Advisor for Entrepreneurs FAQs

Financial Planning for You and Your Business

A financial planner’s role goes far beyond managing investments for entrepreneurs. As an entrepreneur, small business owner, or self-employed individual, you have to balance short-term and long-term goals for your personal life and business. From starting your business to selling it, a financial advisor can help you target increased profitability and risk management, all while guiding you towards a balanced personal plan like saving for retirement.  

If you’re investing your personal assets in the business, a financial advisor, like a Certified Financial Planner (CFP), can strive to ensure that both your personal and business finances are protected. As your life unfolds—from buying a house to starting a family to growing your business—an advisor can help you adjust your financial plan. A business consultant, on the other hand, will focus on maximizing your business goals, but certain financial advisors will work with you toward the goal of balancing all aspects of your financial life. 

Can a Financial Advisor Help With Starting a Business?

Having a small business financial advisor doesn’t replace the need for an industry-specific business consultant who can provide strategic advice on market analysis, operational issues, or industry-specific strategies. However, a financial advisor can provide guidance in many areas over the course of creating a new business, including:

• Setting up Insurance: Your new business will likely need insurance, and a financial advisor can help put the right policies in place.
• Setting up Employee Benefits: If you want to offer your employees a 401(k) or other retirement plan, an advisor can set it up and manage the plan for you.
• Securing Funding Strategies: Advisors can help you choose and guide you through potential funding strategies such as loans, investments, or other financing options.
• Cash Flow and Liquidity Modeling: An advisor can help you set up systems for modeling cash flow and liquidity before you launch your business, which is critical for the growth of a new business.

10 Ways a Financial Advisor Can Help an Entrepreneur

All businesses are different, but as an entrepreneur, it’s good to know your options. Here are 10 of the main ways a small business financial advisor can help guide an entrepreneur’s business. Use this as a guide to assess potential financial advisory service needs as your business evolves. 

1. Cash Flow and Liquidity Management 

Cash flow is what it sounds like. It’s the cash that flows into and out of a company. Specifically, it’s the difference between the amount of cash a company has at the beginning and at the end of an accounting period. Liquidity, on the other hand, is the amount of cash a business has to cover its immediate and short-term obligations.

A financial advisor can help estimate incoming cash and outgoing expenses over a set period. This forecasting enables entrepreneurs to anticipate periods of tight liquidity and plan accordingly. In addition to forecasting, advisors can also help implement financial processes to control cash flow and cash management solutions to maintain liquidity while maximizing the business’s profitability.

2. Budgeting, Forecasting, and Business Valuation

A financial advisor can help create comprehensive budgets that detail revenues, costs, and expenses used to track financial performance against your business objectives. You can use your budget as a cost-control tool and hold regular reviews with your financial advisor to adjust as needed.

Your financial advisor can use historical data to forecast revenue and expenses to help with scenario planning as you grow your business. This can involve estimating your future cash flows, which is crucial for operational planning, investment planning, and managing your debt.

When the time comes to value your business—whether it’s for fundraising, selling the business, or merging with another company—an advisor with valuation expertise may provide financial statements that help to justify your business’s intrinsic value.

3. Insurance Planning for Entrepreneurs 

Insurance planning is a critical element of a business’s overall risk management, and a financial advisor can aim to ensure you are adequately covered. A financial advisor can conduct a risk assessment, including your operational risks, legal risks, property risks, and financial risks. Once risks are identified, your advisor can help determine the appropriate types and levels of insurance you need to protect the business. This could include property insurance, liability insurance, worker’s compensation, professional liability, product liability, key person insurance, business interruption insurance, and more.

When it’s not clear if you need insurance, your financial advisor can perform cost-benefit analyses to weigh the costs of insurance premiums against the potential benefits of coverage. This helps ensure that your insurance coverage provides value without unnecessarily straining the business’s finances.

As your business grows, your insurance needs can change. A financial advisor can help review insurance policies regularly for proper alignment with the business’s current situation and future goals. In the event that something happens, they can provide guidance on the claims process, helping to advocate that your business receives the compensation it’s entitled to under the policy terms.

4. Exit and Succession Planning for Business Owners

After years of work, when you’re ready to hand over the reins of your business, a financial advisor can help guide you through exit planning, including a succession plan. Succession planning isn’t a “nice to have.” It’s a value creator. In fact, HBR estimates that better succession planning could increase company valuations by 20% to 25%.

To start, your financial advisor can help determine potential exit strategies, whether it’s selling to a third party, passing it to family members, selling shares to employees, or liquidating. Each strategy requires different planning and preparation. Leading up to the exit event, your advisor can help implement strategies to maximize your business’s value in preparation for a sale. These strategies may include improving profitability, streamlining operations, or strengthening customer relationships, where possible.

If you need succession planning, a financial advisor can help identify potential successors, whether they’re family members, employees, or external buyers. They can also assist in assessing the suitability of these candidates based on the business’s long-term goals and provide financial training on your business to the candidate. When it comes to actually transferring ownership, your advisor can work with legal counsel to put into place financial structures such as trusts, buy-sell agreements, or gifting shares to ensure that these transactions are tax-efficient and align with your personal and business goals.

5. Business Tax Strategies

Certain financial advisors will integrate tax planning into your business’s financial plan and, if needed, work with your tax advisor. Your tax advisors will help you understand your tax obligations, including federal, state, and local taxes, as well as specific tax rules that apply to your industry. 

An advisor will be able to guide you through potential ways to structure your business, save for retirement, offer employee benefits, or sell your company with tax efficiency as part of the objective. A financial advisor, working with your accountant, can identify applicable deductions and credits to minimize tax liabilities, such as equipment depreciation, home office expenses, and tax credits for certain activities like research and development.

When it comes to your personal or business investments, your advisor can help with asset allocation decisions that provide tax benefits and implement strategies like tax loss harvesting to reduce your tax bill.

6. Investment and retirement planning

As an entrepreneur, you have to decide between reinvesting profits into your business or putting them aside for personal savings, such as an emergency fund or retirement. A financial advisor can help assess your personal and business goals, evaluate your risk tolerance, and then create an investment plan that targets financial success for you and your business. Depending on your preferences, you can manage your own investments with an advisor’s guidance, or you can work with an advisor who provides comprehensive wealth management services so you can focus on managing your business.

A financial advisor can set up retirement savings plans suitable for you as an entrepreneur. These include SEP IRAs, Solo 401(k)s, or Simple IRAs, which allow for higher contribution limits and potential tax benefits. Once your investment vehicles are set up, your advisor can manage investment diversification and monitor your portfolio over time so that it aligns with any evolving personal and business goals. And when it comes time to retire, your advisor can help create tax-efficient withdrawal strategies to make the most of your retirement income.

7. Estate Planning

Estate planning can fall on a spectrum ranging from simple to complex, depending on your situation. On a basic level, as an entrepreneur, a financial advisor, along with an estate attorney, can ensure you have a medical and financial power of attorney and a will. Without a proper estate plan, your assets may be distributed according to federal and state law.

Areas of estate planning that financial and legal advisors can assist with are the distribution of assets to your beneficiaries, the succession of your business, tax planning, and charitable contributions. Your will is a document that outlines what happens to your assets after you die, but if you have complex assets or more wealth from your business, a legal advisor can guide you through the process of setting up a trust. Trusts are legal entities that can be used to manage and distribute assets to the beneficiaries of your estate. There are various types of trusts that legal advisors can create for you to ensure your personal and business assets survive after you are gone.

8. Risk Management

A financial advisor can help you conduct a risk assessment for your business. Understanding your risks will help you make decisions about purchasing insurance, allocating investments, and holding enough cash reserves.  A financial advisor, who is also a licensed insurance agent, may also coordinate with your business consultant or cybersecurity consultant to understand risks across your business, and make sure adequate insurance is in place.

An advisor can also merge their understanding of your business’s risks with your personal financial needs. They can help you strive to balance the growth of your business with a plan targeted for sufficient personal retirement savings and an emergency fund to fall back on in case your business fails. 

9. Loan and Financing Guidance

If you need capital to fund your business, a financial advisor can guide you through what may be the best option for your situation. Many entrepreneurs fall back on personal savings to bootstrap their companies, but an advisor can assist with evaluating if a loan or another type of financing makes sense.

Advisors start by determining how much capital your business may need, considering both current operational requirements and future expansion plans. An advisor can help determine the purpose of the funding, whether it’s for starting operations, expanding growth, purchasing equipment, or bridging a cash flow gap. This clarity is essential when communicating with potential lenders, investors, or purchasers of your business. An advisor can also conduct a debt analysis and create a debt management plan to help mitigate mounting interest and expanding debt that may hamper your business’s growth.

10. Implementing a Retirement Plan

A financial advisor can be a valuable resource to implement and manage a 401(k) plan or other retirement benefit plan. You can manage a 401(k) by yourself, but an advisor might save you time and money, allowing you to focus on your core business.

A tax advisor can also make sure you get eligible tax deductions and credits for starting a 401(k) plan. For example, the recent SECURE 2.0 legislation gave small businesses with up to 50 employees a startup credit to cover 100% of administrative costs up to $5,000 for the first three years of a plan.

What to Look for In a Small Business Financial Advisor

Selecting the right small business financial advisor to help manage your personal money and business’s financial plan is crucial. The term “Financial Advisor” can be used broadly, and different services may require different qualifications, licenses, or registrations. Additionally, a financial adviser can wear different hats and be compensated in different ways depending on the capacity the adviser is working in at the time. For example, a financial adviser can be an investment adviser representative and hold an insurance license.  Here are some points to consider when evaluating a financial advisor:

1. Credentials: Look for a Certified Financial Planner (CFP) and other designations or registrations. Small business financial advisor firms may have staff with other credentials, including the ChFC and CFA designations. An adviser who holds a designation, licenses, or other credentials does not guarantee a certain outcome or success.
2. Experience: Check to make sure the firm has experience working with small business owners or startups, depending on your situation. Additionally, ask about their estate planning resources, experience with succession planning, and other areas of need.
3. Fees: Check that the advisor’s fee structure aligns with your budget and preferences. 
4. Fiduciary: Working with an advisor who is a fiduciary, meaning they are obligated to act in the client’s best interests, aligns interests as you manage your business’s growth and personal wealth.
5. References: Check online reviews and ask for in-person references to gauge the advisor’s reputation. Try to talk to other small business owners to get a sense of the value the advisor creates for their clients.

How to Find a Small Business Financial Advisor

At Harness, we simplify the process of finding a financial advisor into 3 steps: 

1. Tell us about you: Fill out a 5-minute questionnaire that’s designed to capture your holistic financial picture so we can tailor your experience.
2. Select your advisor: Based on your questionnaire, our technology will recommend tax, financial, or estate services and advisors who have experience with clients like you. Plus, if you need to talk to someone for assistance, we have (human) Concierge standing by to answer general questions and schedule introductions as soon as you are ready.
3. Build your plan: With an advisor, you’ll build a personalized plan based on your goals, milestones, and career path.

Common Financial Advisor for Entrepreneurs FAQs

Hiring a financial advisor isn’t the first thought that comes to mind for most entrepreneurs. Below are common frequently asked questions that small business owners and startup entrepreneurs have about the need for a financial advisor.

Do entrepreneurs use financial advisors?

Many entrepreneurs use small business financial advisors to help navigate the complexities of their businesses and personal financial lives. Financial advisors assist in various aspects, including budgeting, cash flow management, tax planning, investment strategies, and assisting with financing options. They use their expertise and partner with tax, legal, and accounting advisors to help entrepreneurs make informed decisions in the best interest of the business.

Why should small business owners consider engaging a financial advisor?

By leveraging a small business financial advisor’s expertise in areas of cash flow analysis, tax planning, risk management, budgeting, and investments, small business owners can focus more on their core business activities, knowing that their financial strategies are in place and proactive.

Can a financial advisor help with a business plan?

A financial advisor can play a central role in developing a business plan along with other advisors like business consultants and attorneys. Certain financial advisors are particularly adept at forecasting financial outcomes and planning for financial stability. They can help support that a business plan is realistic and well-documented, which is important for securing investments or loans from banks and investors.

Disclosures:

Tax related services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness”. Harness Wealth Advisers LLC is a paid promoter, internet registered investment adviser. This article should not be considered financial, tax or legal advice and is provided for informational purposes only. Please consult a financial, tax and/or legal professional for advice specific to your individual circumstances.

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