Where To Turn For The Best Financial Advice
For most self-employed professionals, “do it yourself” is a way of life. After all, that’s probably why you went into business for yourself – to do things your way and shape your own career, business or financial path. But when it comes to finances, many self-employeds find that do it yourself is much easier said than done.
You probably went into business because you have a particular talent or skill, which may or may not be financial related. If managing the financial side of your business isn’t something that comes naturally for you, don’t be afraid to admit it. Instead, be proactive in locating the right kinds of financial professionals who can offer the critical guidance you need to make your business a success.
“Most self-employeds and small business owners have some kind of specialized expertise, but they soon realize it takes much more than technical expertise to run a business,” says Gene Siciliano, Your CFO For Rent®, the founder and president of Western Management Associates in Los Angeles. “And for most, their biggest weaknesses are in marketing and financial management.”
Building your team
Lisa Aldisert, a New York City-based management consultant who specializes in small business financial management, says that small business owners should have an outsourced team of financial professionals in place that ideally includes a banker, accountant, attorney, insurance broker and business consultant.
“They all bring a different dimension and perspective, but owners can interweave advice and feedback from them for particular issues,” says Aldisert. “For example, if a sole proprietor is considering incorporating, he or she needs to decide which type of corporate structure (S corp, LLC, etc.) is best. An attorney and accountant can both provide valuable input for this decision.”
Following is a look at several different types of financial professionals and how they may be able to help your business. It should help you determine what kind of financial professional to turn to for advice under which specific circumstances.
Your accountant: More than just taxes
When most people think about an accountant or CPA, they think “taxes.” But accountants can do many things other than just taxes, says Peter Soh, president of Adviseinc, a professional services firm in Agoura Hills, California.
“Most small business owners struggle to set up the proper financial and accounting systems,” says Soh. “For self-employed individuals, the biggest challenge is often just keeping their personal and business finances separate. An accountant can come in and help set up the right kind of system that will keep funds segregated and allow for consistent financial monitoring.”
An accountant can also play a key role in helping a business owner obtain financing. Most accountants have relationships with bankers and can refer you to the right banker for your particular financing need, and then help you prepare a loan package, including the compiled financial statements that banks usually require when considering loan requests.
“The accountant can play a key role in the financing process,” says Soh, “acting as kind of a middleman between the owner and banker. When an accountant has helped prepare a loan request, the owner may be seen as more financially sophisticated by the banker, which will only increase the chances of financing success.”
Of course, accountants can also provide invaluable help when it comes to taxes – not only preparing and filing tax returns, but also providing advice to help owners minimize taxes and operate more tax efficiently year-round.
Soh says that many owners need help with just the basics of tax planning, like payroll and sales taxes and workers compensation. More advanced tax situations accountants can help with include the tax implications of different forms of ownership and ownership of commercial property by the business entity. “A good accountant should have a good bedside manner to walk the owner through issues like these,” says Soh.
Your banker: Don’t miss the boat
Aldisert says small business owners often miss the boat when it comes to building and taking advantage of a strong relationship with their banker. She says that most bankers are willing to give owners financial help and advice, “but it’s really up to the owner to be proactive in establishing the relationship. Your banker will appreciate it, and by establishing the relationship before you need to borrow money, you’ll make it easier for your banker to maybe even stretch a little financially to help you if you need it later.”
Mike Price, a senior vice president with National City Bank, headquartered in Cleveland, concurs: “It’s always good for small business owners to have someone in their corner,” he says. “To the extent the owner and banker have familiarity and trust with each other, the banker can be in a unique position to give counsel and answer questions, especially those that relate to cash flow, liquidity, growth financing and the like.”
Price identifies five specific financial areas where bankers are best equipped to help small business owners: 1) Financing growth and acquisition; 2) managing cash flow; 3) reducing operating costs; 4) building wealth for owners and employees; and 5) managing risk. Even if they don’t have specific questions, owners should sit down with their banker once a year to discuss each of these areas.
Practically speaking, most small business owners and self-employeds can be best served by working with a competent branch manager. For these owners, personal and business finances are closely intertwined, “and the branch manager is in the best position to counsel on the personal side,” says Price. “Most bankers are well-networked, too, and can make referrals and open doors for owners with other financial professionals.”
Financial consultants: Helping you help yourself
Depending on your particular financial challenges, it might be beneficial for you to work with a financial consultant.
“Most small businesses and self-employed individuals can’t just go out and hire a controller or CFO, but working with a consultant can be the next best thing,” says Siciliano. “The right financial consultant can come into a company and identify problems, suggest solutions and help implement them. It may be as simple as teaching the owner how to use a program like Quickbooks and what to do with the information.”
Ideally, consultants will help owners gain the knowledge and tools needed to solve problems themselves in the future. “If an owner isn’t real confident in the financial side of things, the best thing he or she can do is learn as much as possible,” says Aldisert. “The truth is, no matter how much they enjoy what they do, owners should be in business to make money.”
If you have a low budget for hiring an outside consultant, Aldisert says working with a more generalized business consultant with financial expertise may be more cost-effective. This type of consultant can help with more big-picture strategic things, like the self-employed person who is weighing the decision to expand from a one-person shop to hiring the first employees and building a more formal organization. “There are lots of financial considerations in making this step,” she says, “such as classifying workers as employees versus independent contractors, making payroll tax payments, etc.”
Siciliano offers the following suggestions for selecting and working with a financial consultant:
- Identify the specific financial problem or challenge. Write down what you believe the problem or challenge is, what you think the causes are, and what it would look like if solved to your satisfaction. This is known as a “statement of work.”
- Get referrals and interview prospective consultants. Talk to your other business advisors and other owners. Once you’ve gotten several referrals, ask each potential consultant how he or she would approach your statement of work. Can they clearly describe how they plan to achieve the results you’re looking for? Do their ideas and solutions make sense to you?
- Be upfront and clear about fees. Based on your statement of work and an initial consultation, the consultant should be able to get a good handle on the scope of your project and give you a fixed price and timeframe for completion. If the project is more open-ended, be sure to set milestones so you can track progress toward your defined goals.
“In working with a consultant, don’t make the mistake of thinking you can just turn a problem or project over and forget about it,” Siciliano stresses. “Make yourself accessible to answer questions, review progress, work through specific issues and challenges, and provide additional information as needed. And make sure you’re getting regular progress reports, even if it’s just a quick email message.”
Other professionals
As Aldisert noted, an attorney and insurance broker may be other valuable members of your outsourced professional team. It’s always a good idea to have a relationship with an attorney, who can provide many different services to your business, such as contract reviews, estate planning, incorporation and advice for specific legal situations. An insurance broker, meanwhile, can help you analyze specific risk management issues and ensure that you have all the right coverages and levels of protection in place.
And finally, don’t forget the value of the free advice you can receive from your peers. “Most business owners network extensively with other owners of similar size companies and in similar industries,” says Price. “In my experience, they’re most likely to go to their peers before contacting an outside professional. Peers have usually shared similar real-world experiences, and can often provide the most valuable advice and assistance of all.”
Sources of free assistance
Here are a few good sources for free financial help for your business:
• U.S. Small Business Administration (SBA) — The SBA’s home page (www.sba.gov) is an invaluable resource for all things business financial. In addition to information on all the various SBA loan programs, the site also includes detailed sections on starting and financing your business and links to many other useful sites.
• Small Business Development Centers (SBDCs) — SBDCs are administered by the SBA to provide management assistance to current and prospective small business owners. They offer one-stop assistance to small businesses by providing a wide variety of information and guidance in central and easily accessible branch locations. There are now 58 SBDCs with a network of nearly 1,000 branch locations — visit www.sba.gov/sbdc to find the location nearest you.
• Service Corps of Retired Executives (SCORE) — SCORE is dedicated to aiding in the formation, growth and success of small businesses nationwide. With more than 11,500 volunteer business counselors, SCORE provides small business mentoring and advice on the full range of business topics. You can receive counseling from an experienced former business owner or executive in person or via email. To learn more, visit www.score.org.
Don Sadler is an Atlanta-based writer and editor specializing in issues of interest and relevance to small business owners. Reach him at don@media3pub.com.
