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Do Small Business Owners Need a Financial Advisor?


Running a small business can take up a significant amount of time and energy. You may be wondering if you should hire a business financial advisor to help stay on top of your business and personal finances. A financial advisor can offer advice and guidance on things like succession planning for your business. And he or she can also help you create a financial plan that includes saving, paying down debt and investing for retirement.

A financial advisor may be able to help you with your personal and business financial plans. Speak with an advisor who serves your area today.

What Is a Business Financial Advisor and What Do They Do?

Financial advisors help people manage their money. A small business financial advisor does that as well but with a specific focus on the issues and challenges that small business owners are most likely to deal with. That includes things like maintaining positive cash flow, managing debt and tax obligations and improving the business’s overall profitability. So, for example, some of the things a business financial advisor might do include:

  • Creating financial statements, such as a cash flow statement or profit-and-loss statement
  • Analyzing those statements to identify cash flow leaks or areas where the business could reduce spending to improve profitability
  • Coming up with a strategy to create cash reserves for the business so you have savings to draw on in an emergency
  • Helping you to manage tax reporting and payment requirements for your business
  • Recommending specific financial products or services that might benefit your business
  • Charting a course for long-term growth in the business
  • Creating a succession plan to transfer ownership of the business when you’re ready to pass it on to someone else

Business financial advisors are well-versed in the kinds of questions business owners are most likely to ask and the type of obstacles they most often run into. In addition to helping manage your business finances, a business advisor could also help with personal financial planning.

For instance, your advisor might offer help with:

  • Creating a debt repayment strategy for credit cards, car loans, student loans or a mortgage
  • Offering advice on budgeting and saving
  • Shaping an investment strategy so you can meet your retirement goals
  • Planning for college expenses if you have kids

A business financial advisor can work with other financial professionals, such as insurance brokers, estate planning attorneys and your accountant to help create a comprehensive financial plan for both you personally and your business. That can make it easier to make decisions about your business finances that might affect your personal finances or vice versa.

Benefits of Working With a Business Financial Advisor

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Hiring a financial advisor for your business requires an investment of money. But there are several ways you could benefit from that investment, including:

  • Saving time and energy
  • Saving money
  • Improving your overall business strategy
  • Creating a long-term plan that includes succession planning and retirement

Financial advisors can help you save time and energy by finding ways to make your business more efficient. So, for instance, they might recommend a specific accounting software that makes managing cash flow easier. Or they might help you pinpoint areas where you can either outsource or eliminate certain tasks altogether.

The more time a business financial advisor is able to help you free up, the more you can focus on other aspects of your business such as developing new products or changing up your marketing. Those are things that could help your business to grow and that you might not have time for if you’re bogged down with managing the day-to-day minutiae.

A business financial advisor can also help you save money by eliminating wasteful expenditures and improving cash flow management. For example, if you struggle with getting your clients or customers to pay on time, your advisor could help you implement a new invoicing system or set your business up to accept more methods of payment. They could also help you find expenses you could trim from your business budget so you’re able to keep more of what the business earns.

In terms of long-term planning, a business financial advisor can help you decide what to do with the business once you’re ready to retire. Or you might need advice on something like key person insurance if you’re interested in creating a contingency plan for the business in case you pass away. And an advisor can also help with creating an investment plan for retirement so that you’re saving enough money during your working years to live comfortably later.

How to Choose a Business Financial Advisor

Choosing a business financial advisor to work with is similar to choosing a personal financial advisor. It starts with talking to multiple advisors and asking the right questions of each one.

For example, you might ask things like:

  • Are you a fiduciary?
  • How are you compensated?
  • Do you only work with business clients or do you also offer personal financial advisory services
  • What’s your typical business client like?
  • How many years of experience do you have?
  • What professional certifications do you hold?

You can also research an advisor’s background by checking their Form ADV. This form is required to be filed with the SEC by all registered investment advisors. It includes details about what services the advisor offers, how they set their fees and what type of clients they work with. Advisors are also required to disclose any past disciplinary actions on their Form ADV. FINRA Broker Check is another useful tool for looking into an advisor’s background.

In terms of fees, make sure you understand whether a business financial advisor is fee-only or fee-based. Fee-only financial advisors only charge fees for the services they offer. This can be an hourly fee or an annual fee. Fee-only financial advisors are fiduciaries, which means they’re leally required to act in your best interests at all times.

Fee-based advisors can charge hourly or annual fees. But they also get paid through commissions from products they recommend and sell. Fee-based advisors are not always fiduciaries, which means it’s possible they could recommend financial products that aren’t necessarily suited to your business or personal needs.

Bottom Line

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Owners of small businesses have unique challenges and opportunities. Among those are maintaining positive cash flow, managing debt and handling tax obligations. A business financial advisor could be worth hiring if you need advice on how to best tackle any of these challenges. Such an advisor could also helpful as you seek to pivot toward emerging opportunities more quickly than larger rivals. Finally, an advisor could save you time and money and help you avoid potentially costly mistakes when running your business. Comparing financial advisors online can help you determine which one is the best fit for your needs.

Tips on Getting Financial Guidance

  • If you’re looking for a financial advisor to work with, either because you need help with managing business or personal finances, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Don’t get financial advisors confused with financial planners. A financial advisor can help with managing your business and personal finances; a financial planner focuses more on creating a comprehensive long-term plan to reach your financial goals.

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