Nothing irritates me more than people who overpromise and underdeliver.

…Okay, maybe people who don’t put their shopping carts back, but that is a rant for another day. ​

The financial services industry is full of people following the same well-intentioned but ill-conceived advice: “find a niche” then “move up market."

This sounds great in theory, but it fails to consider whether an advisor is even capable of serving a more complex client. While it’s not intended to be taken this way, many financial planners go out into the world and embrace a “fake it ‘til you make it” mentality with a blatant disregard for the impact on their clients.​
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​In the wise words of the great (albeit fictional) hedge fund manager Axe:

There is just too much at stake for you to be working with an advisor who does not have experience in helping business owners like you. Whether you are modifying your corporate structure, implementing a retirement plan to encourage employee retention, or planning how to do a tax-efficient exit, you need someone who has done more than just Googled some ideas before you walked in the door.

As an entrepreneur seeking an advisor, we suggest you consider the following:

1. Work with a fellow business owner.

There are plenty of good financial advisors who work for big companies, but their business knowledge is almost entirely theoretical.

They’ve never felt the pain of skipping a draw to ensure their employees get paid. They don’t understand the stress that “just borrow more money” can have on your business, let alone on your quality of sleep.

They just don’t get it.

Can they help that 62-year-old couple approaching retirement with their 65/35 ETF portfolio and social security analysis? Sure, we all can run them through the software, customize a plan, and manage their portfolio.

    But if that’s not you, get advice from someone who has been in the trenches.

2. Your advisor is not going to beat the return you could get reinvesting cash into your business.

But that’s not the point!

The goal of funding accounts outside of your business is to diversify your holdings.

Building a business is one of the riskiest endeavors you can undertake—data from the BLS suggests about 20% of small businesses fail in the first year, and 50% fail in the first five. (https://www.bls.gov/bdm/us_age_naics_00_table7.txt)

As a business owner, you are effectively taking a 50/50 shot that your business will survive with the hope that the payout is 100-to-1 or greater.

As a prudent investor, we aren’t going to take the same risk in your portfolio. You’ll be invested across hundreds of the world’s best companies armed with the knowledge that the failure of any one company would not have a detrimental impact on your wealth.

With that said, on multiple occasions I’ve recommended clients keep investing in their businesses rather than giving us the funds to manage.

Is that the most profitable decision for our firm? Nope.
If it’s in the best interest of the client, is that what we recommend? You bet.

3. Secure a relationship before you think you need one.

Here is a dirty little secret about our industry: We are all taught to pursue “money in motion.”

When you have a liquidity event—i.e. sell your business, it’s likely your inbox will blow up with every Tom, Dick, and Harriett looking to be your new advisor.

Choose the right advisor ahead of time so you can ignore these charlatans.

It’s no different than Timmy, your second cousin twice removed, coming out of the woodwork after you’ve won the lottery.

A real advisor will help you throughout the course of your business journey: providing cash flow and tax strategies during the building phase, facilitating introductions, maximizing your valuation, working with your team of professionals during the sale, and helping you transition into the next stage of your life in your post-work years.

4. Find a firm with a breadth of services.

Your business is your greatest asset.

As an entrepreneur, you don’t simply need a professional who will advise you on your investment portfolio, but someone who understands the intricacies of how your business fits into your estate plan, the tax implications of various exit strategies, the insurance you need in your buy-sell agreement, how to ensure your family has liquidity in the event of an untimely passing, the capability to create and advise on a retirement plan, and a whole host of other things.

A basic “financial plan” just won’t cut it. You have too much to lose for this to fail. This may be the only company you ever own, grow, and exit, so find a firm like Welon Partners & Welon Consulting that helps business owners like you every day.

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