Starting and growing a business can be very challenging. While it’s possible to achieve some of your financial goals without consulting a financial planner, working with one can have more advantages to both your business and personal financial health. We spoke with experts who shared a few signs you need a financial planner.
Here are the top 21 telltale signs you may need a financial planner:
1. You Need a Succession Plan
James Pollard, Owner, The Advisor Coach
One of the best indicators as to whether or not you should hire a financial planner is if you have gone through, or planning to go through, any major changes in your business, such as creating a succession plan. A financial planner is necessary to analyze the situation and see how potential decisions will affect your money.
2. You’re Selling a Business
Paul Taghibagi, Founding Partner, Signature Estate & Investment Advisors
An important time to consult a financial planner is when you are planning on selling your business. The sudden influx of money, especially for those not used to it, can be daunting and can result in making poor investment choices or overspending. Working with a team of professionals, including financial planners, estate planners, and accountants to create a plan for the income not only helps preserve it for the remainder of the individual’s life and future generations, but also helps alleviate a large tax bill.
3. Your Business Is a Partnership
Dan Johnson, Financial Services Professional, New York Life
If your business has two or more owners, you may want to call in a financial professional to help you mitigate some of your risks, like having to work with a partner’s spouse in the event of that partner’s passing. In these instances, small-business owners often implement a buy-sell agreement. This document, which is a legally-binding document, provides a company valuation and an agreement between parties to purchase the deceased’s share of the company at an agreed-upon price. Often, these buy-sell agreements are funded by life insurance.
4. If You Need Help Diversifying Business Profits
Windus Fernandez Brinkkord, AIF, Managing Vice President, Trilogy Financial
Ultimately, a business owner should seek advice from a financial planner as the business is starting to turn a profit. One key mistake business owners make is not paying themselves and reinvesting all profits into the business. This can create issues for them personally, however, the bigger issue is that not all businesses can be sold. You should not have the belief that you will put everything back into the business and one day sell in order to retire. The better path is to create an understanding of what percentage should be reinvested versus paid to you versus saved for the future. That way you are diversifying the profit and staying on track.
5. You Need Help in Understanding Your Finances
Matthew Gillman, CEO, SMB Compass
Many small-business owners are masters of their trade, but that doesn’t mean they’re financial experts. Using a financial planner is something that should be proactive, instead of reactive. Rather than waiting till you need help, it’s important to actively assess your strengths and weaknesses to make sure that all aspects of your business are fine-tuned. If managing your financials isn’t your strength, you need to bring in a financial planner early. Having a financial planner will help you understand your finances, budget and plan for the future, and ultimately, help you avoid potential financial hardship.
6. If You Own a Business & Have Young Children
Christopher Carosa, Author, From Cradle to Retirement: The Child IRA
Many parents who own their own business and have minor children may be missing out on long-term family wealth tax savings. In most cases, minor children who work for parent-owned businesses do not need to pay payroll taxes. In fact, if those children earn $12,000 or less, they won’t have to pay any federal taxes (but each state has its own rules on this). Many people who take advantage of this were in the financial services industry ―
they know the rules and the rest of us don’t. Compounding this, once minor children earn all that tax-free money, financial professionals know to have their children establish Child IRAs – the after tax Roth version, not the pretax traditional version. Depending on the age when the Child IRA is established (there is no lower age limit on starting an IRA) and how much money is contributed (the cap is $6,000 for 2019 earnings) that child could retire a multimillionaire based on their pre-adult Child IRA savings alone. So, if you own your own business and you have young children, find a financial professional who can help you establish a Child IRA.
7. You Have Financial Resources to Manage
Rob Drury, Executive Director, Association of Christian Financial Advisors
Waiting to find a financial adviser until one has major financial problems or a monumental financial decision is like waiting until one gets gravely ill or is contemplating a major medical procedure before obtaining a primary care physician. If one has financial resources, those resources need to be managed. Many advisers will perform most planning functions at little or no cost, so there’s no such thing as a person who does not need or cannot afford a financial adviser.
8. If You Are Scared to Invest
Nathan Wade, Managing Editor, WealthFit Money
Many people understand that investing is important. However, some are too afraid to make a bad investment and lose money mostly because they’re unsure of what they’re doing. If you find that you’re afraid of making investments then you might want an adviser to help you out. Financial planners can lead you in the right direction to what investments are best for you. While financial advisers will help you invest, it’s not the only thing they can offer. They can help you with taxes, rebalancing investments, spending strategies, and more.
9. You Have More Obligations to Handle
Riley Adams, CPA, Owner, Young & the Invested
It’s common to need financial planning assistance as the scope of your business increases and you have more obligations to handle. In fact, it is a strength to hire someone who specializes in financial planning exclusively when your company reaches sufficient scale to justify hiring someone who focuses solely on this aspect of the business. Doing so allows you to focus more on growing your business through executive decisions, business strategies, and improving your competitiveness. When you are considering a financial planning expert, it’s important that this person is familiar with your industry and the available financing options, tax consequences of certain decisions, and the overall business environment. If this person is coming in fresh and is not familiar with the landscape your business faces, it might be a steep learning curve he or she faces and could result in missed opportunities for your business to grow efficiently and effectively.
10. You Don’t Have Backup Plans
Nate Wenner, CPA, PFS, CFP, CIMA, Principal & Regional Director, Wipfli Financial Advisors, LLC
You need a financial planner if you don’t have a backup plan for your business. If you don’t have a plan set for how to keep your business running if something happens to you, such as premature death, then it’s a sign that you should talk to a financial planner as soon as possible.
11. If You Want to Determine Your Business Goals
Dewayne Hamilton, Director, Web Cosmo Forums
Using the services of a financial planner can be a great help in determining short-term and long-term goals and track their performance by allocating savings. Also, it’s possible to set the limits to specific categories and control total spending in that way, too. Through daily reviews and set goals, customers and business can achieve planned goals during a certain period of time. Business can regularly track the difference between total income and spending allowing the client a better understanding of where their money goes. The goal should be the familiarization with their own spending habits so that they can more effectively manage their money.
12. Your Business Is Worth a Lot
Natalie Briaud Pine, CFP & Managing Partner, Briaud Financial Advisors
You need a financial planner if your business is worth over the estate tax exemption limit or that represents substantial economic value to the family. At this point, a financial planner could help figure out how to transition the business should something happen to the owner, could evaluate estate tax issues, and help prepare the family for what needs to happen during the worst case scenario.
13. When Your Business Is in Growth Phase
Swadhin Agrawal, Founder & Managing Director, DigitalGYD
If you’re doing good at business and you see managing finances is taking away a major chunk of your time, you need a financial planner or adviser as soon as possible. Some businesses see that even when they are profiting, they are actually not scaling ― it’s because many business owners spend a lot of time managing their finances. The best time to hire a finance planner is when you’re in your growth phase. You would not want your creative energies to be invested in something that you can easily outsource or hire.
14. Your Business Relies on Employees
Jeremy Straub, Founder & CEO, Coastal Wealth
You need a financial planner if you have employees who are so critical to your business that without them your business would suffer. The financial planner will help you brainstorm strategies and make plans to keep your business running in case those employees decide to leave the company on short notice.
15. If You Need Help Achieving Your Goals
Spencer McGowan, President, McGowan Group Asset Management, Inc.
Begin with the end in mind. It’s better to start with a plan then end in a panic. This is the reason why a financial planner is essential to your business ―
if you want to achieve your goals, you need a plan, and a financial planner is the best professional help you can get. Your financial planner can give professional advice on your cash flow and profit. He/she can also help you structure where you want to be with your portfolio, which will allow you to groom your business appropriately and retire comfortably.
16. If You Have Unusual Payment Terms
Matthew Ross, Co-Owner & COO, The Slumber Yard
If a business operates with unusual accounts receivables and accounts payable terms, it’s a clear sign they might want to hire a financial planner. Improper management of AR and AP can lead to serious cash flow issues. If you’re not organized and on top of collecting payments from customers, it can lead to bounced checks, missed payroll, and so much more. If you have customers that have payment terms as far as 120 days, this puts a serious strain on your bank account month after month. Instead of dealing with this issue yourself, you can hire a financial planner to help you schedule your monthly bills, payroll, and other expenses. This is helpful especially if you deal with customers with unusual payment terms. The extra money for a professional is worth avoiding the headaches and stress related to cash flow management.
17. If You Lack Skills to Manage Business Finances
Raymer Malone, CFP, Owner, High Income Protection Insurance Agency
It really depends on the skillset and available time of the business owners. Someone needs to be focused on the financial needs of the business, and if the owner is incapable, ineffective, or just has no desire to do so, then bringing in a pro can be advantageous. Outsourcing the financial aspects of the business has several advantages. For one thing, it can free up the owner to grow the business. Also, hiring a third party with a vested interest in increasing revenues is a good reason to hire a financial planner for your business.
18. If You Want to Eliminate Unnecessary Losses
Kelly Crane, President & Chief Investment Officer, Napa Valley Wealth Management
If you need help in eliminating needless losses, accumulate with less investment risk, and keep more of what you’ve built, then you need a financial planner. You need a financial planner because accumulating wealth is just as vital to your financial future as preserving it, whether you’re facing retirement or opening up that long-awaited business.
19. You Want to Do Retirement Planning
John Cooney, EA, Owner, Green and Gold Financial Planning, LLC
Anyone looking to start their own business should be working with a financial planner. They should not wait until a certain earnings/savings point, because without a financial planner, they may not make it to that point. One good reason for working with a planner is if you want to plan your retirement early. As an entrepreneur, gone are the days of the 401(k) being someone else’s job. It’s important to have a financial planner walk you through the different retirement plans available for self-employed owners, for both yourself and your employees.
20. You Need Help With Retirement Plans
Brandon Renfro, Professor & Finance Planner, BrandonRenfro.com
It’s best to work with a financial planner when you start thinking about saving for retirement. As a small-business owner, you have several options, each with unique benefits. IRA’s, SEP, SIMPLE, and Solo 401(k)s are all possibilities. The contribution limits, rules, and taxation differ on each. A financial planner can help you figure out the plan type that gives you the most benefit depending on your goals and your business.
21. You Want to Focus on Running Your Business
Dock David Treece, Finance Editor, Fit Small Business
Managing retirement plans and financial resources takes time and energy. Time that business owners spend on their own financial plans is time they can’t spend working on their business. If your business would benefit from increased focus, working with a financial planner can free up a lot of your time to focus on the things that will expand your bottom line and increase your net worth.
Working with a financial planner can have a positive impact on your business and overall financial health. This allows you to focus on your business instead of spending too much time trying to figure out your finances. If you are not sure whether or not you need a financial planner for your company, check the above signs and make sure you are not missing on opportunities for growth.