The Importance of Good Advisors to Business Owners

Posted on January 31, 2013. Filed under: Mark Hoefs |

Whether you are starting a business, purchasing a business, or already own a business, the importance of having good advisors should not be underestimated.

Who is an advisor to your business? In the broadest sense, it is any third party vendor. However, for the purposes of this discussion, I want to focus on accountants, attorneys, and bankers.

You should never pick your advisors purely based on cost. Good advisors are worth their expense in terms of the money they save you and the protection they provide you. The cost factor is a secondary consideration.

Accountants are crucial to the management of your business. They provide services to help you structure your business, make it profitable, and run efficiently. What business structure is ideal for your situation? Should you be a C-Corporation, S-Corporation, LLC, Partnership, or sole proprietor? They have the expertise to show you the tax advantages or disadvantages of each. A good accountant can also advise you on tax advantaged transactions like depreciation on equipment purchases or funding a SEP. Should you pay yourself a salary or should you take an owner draw? But don’t let tax preparation be the only factor in hiring an accountant. A good accountant goes well above and beyond that. Your accountant should be able to assist you in pricing your products or services. They can also be a resource in determining how many employees you should have to run efficiently and what types of employee benefits you should offer. If you are buying or selling a business, they can provide you a valuation estimate. A good accountant can assist in succession planning. The list of services is nearly endless. Often times business owners are afraid to ask their accountant for advice because they are afraid of being billed for the accountant’s time. Yes, you most likely will be billed. However, not asking those important questions will in the end cost you much more than what the accountant’s bill will be.

Attorneys will be an ally for you through all stages of your business. Their job is to protect your business interests. They aren’t insurance agents but through proper legal documents and interpretation of the law they provide a level of comfort so that you can focus on your business. In conjunction with your accountant, your attorney will provide you advice as to what structure you should use in setting up your business so as to minimize your personal risk. They will provide the necessary legal documents such as articles of incorporation, by-laws, and operating agreements. If there is more than one owner in your business, they can provide the critical buy/sell agreement between the owners. If you are purchasing a business, they can prepare the documents necessary to transfer the assets to your business entity as well as the non-compete agreement with the seller. Be open with your attorney so that they can be an effective ally to your business.

A good business banker will get to know every facet of your company. They will know how to properly structure any debt transaction. They will also have a thorough understanding of your business cash flow so as to keep debt at a manageable level and provide adequate working capital for day to day operations. A good banker will show you how to use debt as a tool and not a way of life. He or she will be knowledgeable in government guaranteed business loans. Lastly, a good banker will be able to deliver cash management tools that will make your life easier.

So, how do you find a good accountant, attorney, and banker? I propose you choose the right advisor based on years of experience, expertise in your industry, and recommendations of others. Ask people you already know for recommendations. Talk to other business owners about who they use. Ask other professionals. What attorney does the banker recommend? What accountant does the attorney recommend? What banker does the accountant recommend? Pick an accountant that understands your industry and type of accounting you need. Does your accountant have experience in contractor accounting if you are a builder? If you are an auto dealer, find the accountant that understands the complexity of dealer accounting and has the right software to produce the reports you need. Is your banker fresh out of college or does he or she have 20 years of experience? Does your banker make loan decisions locally or out of the area? Are they knowledgeable in government guaranteed financing? Research your attorney to see how much of their practice is business law versus some other specialty like divorce, bankruptcy, or injury. Is your attorney familiar with the challenges that face your particular industry?

Do not underestimate the importance of good advisors. Selecting the appropriate advisors now will provide you peace of mind and lifelong advocates for you and your business.