Question: “I’m turning 50 and don’t have as much money as I’d like but I am working. I get sick a lot and need some guidance because I don’t want to work for a corporation anymore where people treat you unbearably. I want to invest in my own business. Is hiring a financial adviser the first step in figuring out if this is even possible? What kind of financial pro should I look for to help me determine whether this is feasible?”
Answer: As much fun and fresh as it may sound to own your own business, it’s also a tremendous amount of work, not to mention, rather risky. “It can take years for privately owned businesses to turn profitable [if they ever do]. You need to have enough cash to live on during the time period that you’re building the business,” says Mary Clements Evans, certified financial planner, behavioral finance expert and author of Emotionally Invested: Unlocking the Hidden Drivers of Your Financial Decisions. (You can use this free tool from our partner SmartAsset that can match you to a fiduciary adviser, as well as resources like NAPFA and the CFP Board.)
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Advice for starting your own business
The most important thing Evans says you need to do up front is prepare a comprehensive business plan. “There are some CPAs and financial advisers that can help you. There might also be a local college that will offer those services,” says Evans.
Aside from the financial intel you might benefit from, there’s also something to be said for learning skills to help you navigate starting your own company. For his part, serial entrepreneur Sam Miller, CEO and co-founder of digital payment platform Kasheesh, says the best advice he ever got was, “If you want an MBA, start a business. You’re going to learn the most from the school of hard knocks more than anything else. There is no crash course in entrepreneurship. The best way to learn is to commit to doing something and in that process, build with purpose and surround yourself with people who share in your vision,” says Miller.
While some people in your position might opt for creating a business plan, Miller says having a good deck is better. “Your business shouldn’t need 10 pages of explanation. You will eventually create a roadmap but for any entrepreneur who is pre-seed or just starting out, spend time in creating the idea instead of creating a business plan,” says Miller.
Karla Dennis, CEO and founder of the tax strategy firm KDA, Inc., says it’s key to learn both formally and informally. “There’s no shortage of classes and educational platforms that can teach you how to start and run a business. You can choose a formal route like a community college or online university class, visit a small business development center or a more informal one like self-help courses or series on YouTube or Udemy,” says Dennis.
Still, some pros believe the old school path to branching out on your own requires certain educational courses and a strong business plan. Evans says most universities have classes on becoming an entrepreneur. “I recommend you make sure that you have marketing and accounting classes. These are two skills vital to the success of any business and most startups don’t have the cash to hire these. You’ll also need a strong business plan. You can purchase workbooks online, fill them out and see if you can find an experienced financial person to review it with you,” says Evans.
Note that online platforms like YouTube often feature real business owners who have actually started companies and can give you practical, step-by-step advice based on experience, says Dennis. “A big bonus is the free advice you can receive as a lot of these content creators will answer your questions when you post it under their comments,” says Dennis.
Do you need a financial planner to help?
It could help, pros say. “Previously, it was nearly impossible to find a financial planner willing to work with a client who didn’t have a substantial investment portfolio. Today, some excellent professionals offer financial planning services on an hourly or project-based basis,” says certified financial planner Alonso Rodriguez Segarra at Advise Financial. (You can use this free tool from our partner SmartAsset that can match you to a fiduciary adviser, as well as resources like NAPFA and the CFP Board.)
For reference, hourly advisers generally cost between $200 and $500 per hour while project-based advisers can charge between $1,500 and $7,500 depending on the scope of work.
Segarra says many of the professionals operating under hourly and project-based relationships are also entrepreneurs who may be well aware of how difficult it is to start a new business. “They understand the general precautions they would have liked to have taken before embarking on the great adventure of being an entrepreneur and they can help guide you along the way,” says Segarra.
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Other things to consider
“You need to be clear about what your business will offer clients, how you plan to finance a start-up, what the costs will be and how you will pay your business expenses and personal expenses while establishing yourself as a business,” says certified financial planner Deborah Ellis at Ellis Wealth Planning.
You’ll also need to consider how much time you’ll have available to work on this project if you’re often ill and can’t work. “Consider what your business would be, what knowledge, equipment, education and background you would need to proceed and what the initial start-up costs would be. Take a hard look at how long you would need to support yourself and your business until it becomes cash positive and include a buffer,” says Ellis.
Once you’ve taken more initial steps and you have a clear goal, a financial adviser can help you work out the details. “Financial advisers generally specialize in specific areas, so you need to have a good understanding of what you require from an adviser [before you start working with one],” says Ellis. (You can use this free tool from our partner SmartAsset that can match you to a fiduciary adviser, as well as resources like NAPFA and the CFP Board.)
Have an issue with your financial planner or looking for a new one? Email questions or concerns to picks@marketwatch.com.
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