Marcus Richards
The financial services industry has grown tremendously recently, with millions turning to financial experts for support during their startup journey. However, risks should not be underestimated and must be accounted for when starting out. To thrive in today’s economy, a business needs to have a strong foundation that includes sound finances from the get-go. An all-encompassing relationship with a financial expert can give your business valuable insights on marketing your product or service, giving you peace of mind that you have everything covered before jumping headfirst into the market. Here are seven reasons why financial advisors can help your startup:
Protect your startup’s bottom line.
The worst thing that could happen to a startup is having its stock market value tank and losing its assets overnight. Your financial expert can help you see the risks associated with going public and private so that you can make the best decision for your company at this stage in its life. Also, a good advisor will tell you if there is another way to accomplish your goals without taking on these risks.
You can minimize your startup’s risk by hiring an expert. They can help you calculate your required cash reserves and make sure you are in full compliance with any laws and regulations involving capital raising. In the event of an audit, a financial expert can explain how to properly document all activity and help with the process of how to file things like financial statements, income tax returns and employee benefit plans. At the same time, your financial expert can prepare a business plan that will allow you to secure funding even if you are not as profitable as other companies in the same market.
Ensure compliance with all financial laws
Your startup is required to follow certain laws and regulations. For instance, if you live in the US there is the U.S. Foreign Account Tax Compliance Act (FATCA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act. If your startup does not comply with these laws, it can face huge fines or other penalties down the road—in addition to the reputation damage that comes from being called out for not following the rules.
A financial expert can ensure your startup complies with all necessary financial laws by establishing a system to properly document all activity, including loans, revenue and expenses. They should also help you develop procedures that will allow you to respond to an IRS audit as well as review your employment practices including compensation, benefits and retirement plans. Your financial expert can also provide you with an escape hatch if things get out of hand—an exit strategy.
Make sure workers are paid properly
A financial expert can help you make sure all of your employees are paid properly. They can help you establish wages, pay rates and benefits that are based on the Fair Labor Standards Act (FLSA). This includes how to handle overtime and penalties. Your financial expert can also explain how to make sure you are in full compliance with any laws, regulations or industry standards regarding employee benefits and compensation.
Help you create a business plan that will help attract investors
Your financial expert can make sure your startup has a solid business plan that’s ready to go when it comes time to approach investors. They can help you find the right advisors who will probably be able to help you fill out the rest of the paperwork too. That is important because it’s much easier for investors to understand and invest in your plans once they see them in writing and know what’s going on behind-the-scenes as well as how they will benefit from investing in your company. Your financial expert will also help you prepare materials for investors.
Prepare the startup to sell
A financial expert can help you prepare your startup to be sold or even converted into a corporation if that is what the plan will be. They can provide you with all the documentation you will need and answer any questions investors may have about selling your company’s equity. They may also provide examples of how other companies have prepared their businesses before selling shares to investors and discuss how they could get at least 50 percent of the value they sought in their sale.
Determine if there is a market for your product or service before attempting a launch.
A financial expert can help you determine if there is a market for your product or service before attempting a launch. That is important because if you launch without testing the market first, you could be wasting valuable time and money that could otherwise be used to build more features into your product. Your financial expert can make sure you set realistic goals so that when you launch your product, you are ready to go.
A mentor can help you navigate the different types of investments you might decide to pursue
As a startup, it is essential that you understand all of your investment options – from public stocks to private placements and everything in between. A financial expert can guide you through the process of doing research on these different investment choices, helping you understand them and decide which ones are right for your company’s future. They can also advise you about how much you should invest for each option, helping to keep your assets safe.
Determine how much cash reserves are required by law
Your financial expert will help determine how much cash reserves are required by law and prepare a business plan to raise capital. Many laws and regulations require startups to have cash reserves measured by net worth. These start at $50,000 for businesses with up to 25 employees. This number increases to $100,000 for businesses with up to 50 employees and keeps going up from there. Therefore, your financial expert can help you determine how much cash reserves are necessary for your startup. They can also help you figure out how you will get this money because new businesses often face challenges in attracting investors. Your financial expert can also help you prepare a business plan that will allow you to secure funding even if your startup isn’t as profitable as other companies in the same market.
There are many different benefits that a financial expert can bring to your startup, including helping you prepare for an audit. Your financial expert can also help you protect the bottom line, ensure compliance with all laws and regulations, and ensure you are getting paid properly. These are just a few of the benefits your financial expert can provide.
Takeaway
There’s no denying the fact that startup founders need to know finance. But you don’t need to be an expert in the subject to make smart decisions. By working with a financial advisor, you can focus on what you do best, and your startup will have a better chance of succeeding.
When looking for the best financial advisor, it’s always important to research and learn as much as possible about the person or company offering their services to you. For example, look closely at financial advisors marketing strategies to try and find a highly qualified and experienced candidate.
