Meeting with a financial advisor can be an uplifting experience.
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There are plenty of reasons why you may have started your business, whether it was because you had a new and innovative idea, or because you needed to get out of the corporate world for your own mental health and well-being, or because you wanted to do work that is both filling your soul and your bank account at the same time. Or maybe it was a combination of all three! Whatever the reason was, you have a certain set of skills and talents that are unique to you, and goals, dreams, and a financial situation that are all unique to you as well.
For the vast majority of business owners, knowing the finances of their business and how their business and personal finances inform and affect each other is not one of those skills or talents. And that is okay!
As your business grows, it is essential to have a financial team in place that can help you understand your numbers so you can make sound financial decisions around hiring, investing in new technologies, paying yourself a reasonable wage, optimizing your tax situation, and everything else that comes with a dollar sign or interest rate! That’s where having a fiduciary financial advisor focused on comprehensive financial planning comes into play.
Most entrepreneurs know that they need help with taxes, and hire a Certified Public Accountant (CPA) or tax preparer early on in their business. One question I get frequently, however, is “how do I know if I need a financial advisor?” It’s not as obvious as needing someone to prepare your taxes every year, but it can be one of the most important hires you make to help you plan for your financial future and then execute on that plan.
So, let’s get into it! What are some of the big signs that you might be ready to talk to a financial advisor? You might resonate with one or more of these, but any one by itself is a good reason to have a conversation:
1. Your revenue is growing and you want to learn how to save and make smart tax decisions.
With this one, you’ve likely been in business for a few years and things are starting to pick up momentum! Your revenue is higher than it’s ever been, you’ve got contracts coming in with ease, and you’re excited about the growth…and a little anxious about the money that’s piling up in the business and personal checking accounts. You feel like you “should” know what to do with it all, but you’re also worried about making a mistake. Talking with a financial advisor and fleshing out your goals and dreams for your business and your life will help you make sure you’re making smart financial decisions for your specific needs.
2. You have a financial advisor, but they just sold you life insurance and put your investments in mutual funds…and have never asked you about your business.
This one can be tricky. Life insurance is important for a lot of people, and mutual funds might be the right investment option for you. But I’m going to be super honest here: if you meet with a financial advisor who’s only forms of compensation come from selling insurance and mutual funds, they are going to try to sell you insurance and mutual funds. When all you have is a hammer to work with, everything gets treated like a nail. Since they are not able to charge separately for financial advice, they don’t do true, comprehensive financial planning. And they likely don’t know enough about business finance to effectively guide an entrepreneur through the financial ups an downs of business ownership. Working with a fee-only, independent financial advisor that specializes in working with business owners is a different experience from working with an insurance agent that can do some retirement planning on the side. **Full disclosure – I am a fee-only fiduciary financial advisor, and Certified Financial Planner (CFP), so I do have skin in this game. That said, I intentionally chose to be an independent and fee-only fiduciary financial advisor because I believe strongly in the importance of unbiased, non-captive financial advice. You can find a CFP professional here if you don’t know where to start.
3. You’re constantly surprised by your taxes, and always reacting to your tax situation rather than proactively planning for taxes each year.
Entrepreneurs can be confused by this one, especially if they have a CPA or accountant doing their taxes every year. “Shouldn’t my CPA be helping me plan for taxes?” you might ask. And the answer is no, not usually. Some CPAs do proactive tax planning with their clients, and if you have one, hang onto them! But the majority of clients that I work with come to me asking for new CPA referrals, because they only hear from their CPA at tax time and never really know what their tax situation is going to look like year to year. It’s like a looming storm cloud hanging over their head all year long. If you’re experiencing significant growth in your business, it’s an even bigger storm cloud! It’s exciting to be growing, but you have no idea what the tax implications of making more money will be early next year, and that is a constant source of low level background anxiety. A planning focused financial advisor can help you look at your business revenue, all your other income streams if you have multiple business ventures or W2 jobs, and form estimates so you can be prepared at tax time. And an even bigger up-level is having a financial advisor and CPA that will work together to do proactive and strategic tax planning!
4. You’re doing all the financials yourself and it is not your zone of joy and genius, and you’re ready to delegate.
Most entrepreneurs are smart people. And when you started your business, you probably did all of the tasks that needed doing. All the marketing, selling, service or product delivery, social media management, and finances. And there’s a part of you that feels like you “should” keep doing the finances because you know how to Google things, you can figure out what types of retirement accounts exist, and you can read up on investments…but it always feels heavy. It always feels like there’s so much information to sift through, it takes more time than you really want to give, and you still aren’t quite sure you’re doing the right things. Here’s the not-so-hidden secret: you don’t have to do it all yourself. Can you do it? Probably. Basic financial planning and investment management is not rocket science. But the more your business grows, and the more complex your financial situation becomes, the harder it is to learn everything you need to know in order to optimize your savings, taxes, financing strategies, and investment options. If you’re excited about doing it all, then keep doing it all! But if you are serious about growing your business and staying in your zone of genius, and finances are not squarely within your zone of genius, it’s time to start delegating.
5. You’ve talked with a financial advisor before and felt shamed, defeated, or misunderstood about your finances.
Entrepreneurs are a creative bunch. And that doesn’t mean you’re a photographer or artist or musician necessarily, it means you are out there creating your own way in the world. You created your business. You create your own opportunities. You create. Every day. You may have created your business by investing a lot of your retirement money from a previous job into your venture. And when you’ve talked with financial advisors before, they said you didn’t have enough investment assets to work with them, or they looked at your after tax income and said you’ll never be able to retire unless you save multiple thousands per month starting 5 years ago…and you left feeling shamed about your current financial situation and misunderstood about your optimism for the future of your business. You see the potential of your business, you know you’re about to hit your prime earning years, and you have a deep knowing that it’ll all be okay! But you haven’t met a financial advisor that has that same abundance mindset and creative spirit to support you.
The right financial advisor for you does exist! You just have to be willing to reach out and meet a few of them to find a good fit. Having financial professionals around you that support your goals and dreams while providing practical and actionable advice will help you create the business, the life, and the impact that you want to create faster and more effectively.
Hannah Chapman helps entrepreneurs bring order to the confusion and chaos of business and personal finances as a Certified Financial Planner (CFP) and Money Mindset Coach with over 17 years of experience in the financial sector. As the founder of both X 2 Wealth Planning and Expansive CEO , s he empowers visionary entrepreneurs to save wisely, spend joyfully, and support generously through tailor-made financial planning, bespoke investment management, and transformational money mindset coaching. Connect with Hannah online to learn more!