This is a story of a few friends that started a business.
Each friend brought something to the table.
Friend 1 was really great at sales and had a knack marketing. Friend 2 was the technical guy. And then there was Friend 3. He was the business / money guy- he basically managed the company. Sounds like a pretty good team, right?
Truth is, it was a great team. These guys built a great business and made a lot of money. And eventually, they decided to sell. But as they were preparing to sell, they uncovered a major problem…
When the business was formed, Friends 1 and 2, not really understanding the “accounting and legal stuff,” trusted Friend 3 to get everything set up. To save money, Friend 3 just kind of did everything by himself. He didn’t hire an accountant. He didn’t hire an attorney. He just set the business up on his own. And that is the way he ran the business- no help, no advisors, no guidance.. He even did the business’s taxes without help (gotta love Turbo Tax!)
So when these guys went to sell their business, Friends 1 and 2 were shocked to learn that they didn’t actually own any part of the company. You see, because Friend 3 never hired an accountant or attorney to assist in setting up the business, he put everything in his name only. He cut out Friends 1 & 2 without even realizing it.
Thus, as far as the state and the IRS were concerned, Friend 3 was the only owner of the business and Friends 1 and 2 were simply subcontractors. Why did this matter? Because it created substantial tax, accounting, and legal issues for these three partners when they went to sell the business.
We’re talking super bummer problems ($$$$$$)
Crazy thing is, a couple of hours with an accountant and attorney on the front end would have made this a non-issue at the time of sale.
So today, with the hope of helping you avoid making big mistakes like our Three Friends, I am going to show you exactly how to build a Dream Team of advisors that can guide you through starting, growing, and exiting your business. By the end of this post, you’ll know who you need on your Dream Team of advisors and how to find them!
I’ve compiled a list of the top six advisors you need helping you in your business and I’ve put together a detailed explanation of each advisor in an easy-to-reference training guide that you can follow when setting up your Dream Team.
For now, in this post, I’ll highlight the top three advisors that you definitely need to find right now!
Advisor #1 – Accountant (Your MOST Important Advisor)
Your accountant is the most important advisor for your business.
Why? Because accountants understand the numbers (and the numbers are the lifeblood of your business). From taxes to audits to financial statement analysis, a great accountant will help you understand the ins and outs of your business. Just by asking a few questions and reviewing a few reports, they’ll help you see what is working and what isn’t working.
So if you do not have an accountant for your business, take the time right now to find one that would be a good fit. And then, once you have identified who your accountant will be, take the time to meet with them on a regular basis. I suggest bi-annually at a minimum. They’ll be useless to you if you do not meet or otherwise communicate with them regarding your business.
Are accountants expensive? Sometimes they can be. But let me tell you, our Three Friends were kicking themselves for not paying the money upfront to hire an accountant to assist them with the financial aspects of the business. The few hundred bucks they might have paid upfront for the proper formation advise would have saved them thousands on the backend.
If you do not have an accountant right now, find one. And check out my Advisor Guide for strategies on how to identify one that is a great fit for you!
If you do have an accountant that you trust, make sure to touch base with them on a regular basis and keep them updated on what you are doing in your business- they are there to help!
Advisor #2 – Attorney (We Aren’t All That Bad)
So I’m an attorney and I know that the reputation of my profession isn’t super great. And I get why (but that’s a discussion for another day). But here’s the deal, like us or not, we can actually help you and your business in numerous ways.
Take the three stooges I mentioned early as an example. If Friend 3 had hired a competent business attorney to set up the company, they wouldn’t have had any issues at the time they decided to sell. The business would have been structured correctly and the state and IRS would have been happy campers. Would it have cost a few bucks up front? Of course! (Do you work for free?). But I would definitely rather lose a few hundred bucks on the frontend than thousands on the backend.
This is just one example of how an attorney can help you in your business- there are so many more! Did you get sued? We’ll defend you. Need a trademark or patent? We’ll help you apply. Want to make sure the state or some creditor doesn’t get all your money when you die? We’ll set up an estate plan to make sure that doesn’t happen. Not sure what the word “indemnification” means in that contract you have to sign? We do and we can help you understand what you’re getting yourself into before you sign.
For all the faults of the legal profession, we attorneys are here to help. And no, you don’t need to meet with us multiple times per year like you should your accountant. But keep us in the loop on what is going on in your life and business and be sure to call when you have questions or concerns- we’ll help you get through them!
Just don’t be afraid to call. If you’re proactive on the front end and get the help you need to do it right, you’ll likely save yourself a lot of time, money, and hassle on the backend.
If you don’t have an attorney, it’s time to find one. Check out my Advisor Guide for some help identifying one that would be a good fit for you and your business.
If you do have an attorney, make a point to reach out to them soon just to let them know what’s going on in your life and business.
Advisor #3 – Wealth Advisor (This One Is Vital)
Want to know something that is counterintuitive?
Many entrepreneurs are pretty good at making money, but pretty lousy at keeping it.
I’ll say it again.
Many entrepreneurs are pretty good at making money, but pretty lousy at keeping it.
So what does this mean? It means there are so many entrepreneurs that are great at building businesses that make a lot of money, but these same entrepreneurs are not so great at knowing what to do with that money once they have it. Because the entrepreneur understands their business, the tendency is to continue to reinvest company earnings into the business to fuel growth instead of pulling cash out to build personal wealth. The other tendency is to spend all the money they make because they think the business will continue killing it forever into the future.
I’m not at all against reinvesting company earnings back into the business and I’m certainly not against spending a bit of your hard-earned cash in the short term, but if you are an entrepreneur, you need to have a long term outlook as well.
If you are an entrepreneur, you need to be setting money aside every month for retirement just like everyone else working a 9 to 5 with an employer sponsored 401k.
And a wealth advisor can help you do this. These are the guys/girls that understand the investment options that are available to you. Your business might be killing it right now and your growth might be off the charts, but you should still be sockin’ at least a bit of money away each month into traditional investment vehicles for retirement purposes (ie IRA, 401k, etc.). When you retire, you will be glad you did.
So sit down with a solid wealth advisor and put together a plan for how you are going to take a portion of the earnings you are generating from your company and invest them for the long term. Check out my Advisor Guide for details on how to find a great advisor in your area.
Already have a wealth advisor? When’s the last time you sat down and talked about your investment strategy? You need to meet on an annual basis at a minimum. If it’s been awhile, set up a meeting and review your retirement plan again!
Go Build Your Dream Team!
So we’ve just covered the first three advisors you need to have on your Dream Team. They are:
- Wealth Manager
If you don’t have these advisors in your business, then you need to make finding them a top priority! They can help you and your business grow in numerous ways, so don’t delay assembling your Dream Team of advisors!
Now, check out my Advisor Guide to find out the other three advisors you need on your Dream Team and to learn a few strategies that will help you identify advisors that will be a good fit for you and your business.