Building a Business Advisory Team

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Some entrepreneurs can successfully run their business for years on the strength of their own passion, intensity, business smarts, and a little bit of luck. They don’t believe they need advice, and don’t ask for it. They might have an attorney on call for business paperwork, and a CPA who does their tax returns every year, but they’re just “hired hands” like the rest of their employee team. Life is good “at the top.”

However, as a business succeeds and grows, sound management skills become as important as entrepreneurial brilliance. There are a lot more moving parts, and things aren’t as easy as they once were. The business owner finds it harder and harder to keep up with all the spinning plates. He is losing sleep and afraid he might lose his business if he makes a mistake. Suddenly, it’s “lonely at the top!” If you can relate to those feelings, the time has come to build a business advisory team.

That business transactional attorney and CPA are a good place to start, but you might also include an estate planning attorney, a financial planner, and an insurance professional. As the term “advisory team” implies, none of these professionals are as useful to you alone as they are working together as an integrated and collaborative team.

A good business attorney will be needed for buy-sell agreements, transfers of stock (or interests), and good solid advice about how to keep or get your business up to date with things such as annual minutes and a review of existing contracts. The attorney will also be able to tell you where you are vulnerable to future liabilities and how to minimize those liabilities.

An estate planning attorney will help monitor and ensure that your estate plan is in line with your exit plan. Part of that review will be your revocable living trust/will, durable power of attorney and health care directives. They will also discuss with you estate taxes and methods of transferring some of your estate to your beneficiaries early to reduce those taxes. If you are considering forming a family limited partnership or making use of irrevocable trusts, your estate planning attorney will be critical in the formation and maintenance of the entities.

Your CPA is crucial in the preparation of compiled, reviewed, or perhaps even audited financial statements. Generally speaking, a serious business has a history of regular (monthly or quarterly) CPA-prepared financial statements. These statements will eventually be reviewed by all potential buyers. You want to be sure you understand just what the financial statements say about you. They are called your accounting “books” because financial statements can be read just like a book that tells the story about the company from inception to today. They tell a lot about where your business has been and what has happened through the years. Simply having properly-prepared financial statements adds to your credibility and thus to the value of your business. The CPA is also important for the preparation of tax returns, and advice on how to reduce those taxes.

A financial planner is critical to helping you with current investment choices while the business is active, as well as helping you to understand what you will need from the sale of the business to live the lifestyle you want after the sale. They can offer guidance in different ways to receive the funds from a sale; for example, installment sale versus outright cash. A good financial planner is critical at the beginning and during the preparation of the exit plan. What you need from the business in the way of future funds will determine how much work is required to build the business value to meet your need.

Insurance agents are also a necessary part of the advisory team. Risk is a part of life but we all need to balance the cost to put that risk into reasonable perspective. You will certainly need to review business insurance liability policies, and be sure you are covered with the basic compliance polices required by government and lenders. Your personal insurance needs should also be reviewed for items such as long-term care, health, life, accidental death, etc. Insurance may also be a big part of employee benefits, buy-sell agreements, and estate planning.

A good business advisory team is critical to helping you step by step to increase the value of the business, and fully prepare for a successful future transition. They will work on coordinating and balancing each aspect of the business internally as well as preparing the management team for your ultimate departure, which they may or may not know about at the time. There are some basic things in a business that will help to drive value which include having a fully functional management team in place, having positive operating cash flow, having strong and proven processes and systems in place, having low owner dependency and well as low customer and vendor dependency, and having a clear vision for the future growth of the business. By working with a good business advisory team, the value of the business can be enhanced dramatically.

Depending on the nature of your business, other advisors you might include on the team include: an intellectual property or patent attorney, a real estate professional, or a qualified plan/pension specialist.

Admittedly, the proper involvement of a business advisory team is not inexpensive. But in most cases it will be less expensive than trying to do it all yourself. The costs will generally be offset by you concentrating on the things that are most profitable for the business, by paying fewer taxes, by a higher sales price when it comes time to sell, by less hassle, and by greater peace of mind.

Traits of a Strong Business Advisory Team

The team of professional advisors you select should work well together and collaborate annually on your behalf. Look for the following traits:

Connection: One of the primary attributes a team can have is the ability to connect with you and your objectives. Teams that immediately go into “problem solving” mode typically are not good listeners. In planning there is no such thing as “one size fits all.”

Experience: There are many professional generalists. The right team will have the experience to guide you in the area of expertise in which they are proficient, and rely on other team members in areas they are not.

Collaboration: An effective team is one that has a seamless collaborative process. All the experts know their roles, and provide accountability to the other advisors on the team. Like any team, there is typically one professional who serves as the team leader. You can choose that leader, and it is often the professional with whom you first begin the planning process. It’s important to remember that you don’t have to be the one who keeps the team coordinated and collaborative. You have enough to do just running your business!

If you have questions, click here to have our office call to set up a time to discuss this with you.

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