Do you need a financial advisor as a small business?

1 min readLast updated May 30, 2024by Unbiased team

Find out why hiring a financial advisor is a worthwhile investment for small businesses.

Summary 

  • A small business financial advisor can handle all of a company's financial responsibilities, freeing the business owner to focus on running the company. 

  • According to Investopedia, money management issues cause 33% of new businesses to fail within two years of existence. 

  • Finding an experienced financial advisor can mean the difference between your business flourishing and going under.  

What is a business financial advisor? 

A business financial advisor is a qualified professional specializing in money management.  

Their role encompasses a vast spectrum of responsibilities aimed at optimizing a business's financial health and longevity. However, the types of services a business financial advisor provides depend on the size and type of the company seeking advice.  

Some essential services financial advisors can provide may include the following: 

  • Financial analysis and planning 

  • Tax planning and compliance 

  • Risk management and insurance planning 

  • Investment and retirement planning 

  • Market analysis and trend monitoring 

  • Budgeting 

  • Financing and loan advice 

What are some benefits of a financial advisor for small businesses? 

Not all business owners have the time, knowledge, and experience to run a tight financial ship and manage all the monetary challenges. Hiring a small business financial manager can benefit the company in multiple ways. 

  • Improve efficiency 

By delegating financial tasks to a qualified small business financial advisor, small business owners can free up valuable time and resources to focus on more pressing tasks like sales, production, and marketing. This enhanced efficiency allows businesses to use their resources more effectively. 

Since entrepreneurs may need a firm grasp of tax law, business financial advisors can provide invaluable assistance in optimizing tax strategies, ensuring compliance with tax regulations, and minimizing tax liabilities

  • Create a business plan 

A financial advisor for small business owners is invaluable as they can provide realistic guidance regarding how to achieve your business’s financial goals. While you may have grand ideas about the company’s future reach, advisors will typically see the pitfalls and can help you create a realistic business plan to help you achieve your objectives.  

  • Monitor market trends 

Small business financial advisors have the expertise to monitor market trends and fluctuations. They can identify emerging opportunities and advise on timely adjustments to business strategies to stay ahead of the curve. 

  • Assistance with insurance planning 

From property insurance to liability coverage, insurance planning is critical for mitigating risks and protecting the company’s assets. A business financial advisor can assess the needs, recommend the appropriate coverage, and negotiate competitive premiums to ensure maximum protection against potential losses.

  • Managing investment and retirement plans 

Planning for the future is crucial for both business owners and employees. A financial advisor can craft tailored investment portfolios that meet the business’s objectives and risk tolerance. They can also help structure retirement plans such as 401(k) or IRA accounts, enabling business owners and employees to build wealth and financial security for their futures. 

What mistakes can a financial advisor help your small business avoid? 

Unnecessary mistakes can cost a business a fortune, but a financial advisor for small businesses can help owners avoid certain pitfalls with their skills and expertise. 

  • Inaccurate cash flow management 

Financial advisors can analyze a business’s cash flow patterns and identify areas for improvement. Other strategies include forecasting, budgeting, and optimizing working capital. By gaining a clear understanding of the company's cash flow, they can help ensure sufficient liquidity to sustain operations and pursue growth opportunities. 

  • Ineffective risk management 

Many entrepreneurs focus on sales, marketing, and growing profits and forget about risk management. A financial expert can conduct a comprehensive risk assessment and help find the most appropriate and affordable insurance to mitigate the risks facing the company. 

  • Insufficient debt management 

A small business financial advisor will analyze the company’s debt structure, assess the financing options, and develop a prudent debt management plan. This may involve refinancing existing debt at more favorable terms, restructuring repayment schedules, or exploring alternative sources of funding to optimize the company’s capital structure. 

  • Overlooking tax planning 

Business owners unschooled in tax regulations could cause missed opportunities for tax savings and expose the business to penalties for non-compliance.  

A small business financial advisor with tax planning experience can create tailor-made strategies to minimize tax liabilities while ensuring compliance with tax regulations. They can identify available deductions, credits, and incentives, optimize the timing of income and expenses, and navigate complex tax laws to maximize the company's tax efficiency.  

How to choose the right financial advisor for your small business 

Selecting the right financial advisor for small business owners is crucial for ensuring a productive and mutually beneficial partnership. Here are some considerations to keep in mind: 

  • Look for a financial advisor with experience in working with small businesses in a similar niche. 

  • Consider the advisor's fee structure and ensure it aligns with the company's budget and expectations. 

  • Verify the advisor’s credentials, qualifications, and whether they are a fiduciary. These criteria demonstrate their expertise and commitment to ethical standards and professional conduct. 

  • Ask for recommendations from other business owners, industry associations, or professional networks. Research their reputation, review testimonials, and request references. 

  • A good advisor should take the time to understand your goals, risk tolerance, and preferences, tailoring their recommendations accordingly. 

  • Consider leveraging resources offered by Small Business Development Centers (SBDCs), which provide free or low-cost assistance to small businesses, including financial counseling. 

Need more information? 

Small business financial advisors are qualified professionals who focus on taking the pressure of money management off a business owner’s shoulders. The benefits of a financial advisor are clear as they handle everything from cash flow analysis to investments and employee benefits, leaving business owners free to deal with the nitty-gritty of running the company.  

For expert financial advice, let Unbiased match you with the right advisor for your needs.  

 

Writers

Unbiased team

Our team of writers, who have decades of experience writing about personal finance, including investing and retirement, are here to help you find out what you must know about life’s biggest financial decisions.