Financial Planning Advice Every Small Business Owner Should Know [Q&A]

by Kristin Hoppe

If you're a business owner or entrepreneur looking for some help with your finances, Grant Bledsoe may be right up your alley.

Grant got his start in the financial industry nearly 13 years ago at Charles Schwab, working on an international securities lending desk. He spent time as a trader and working his way up the corporate ladder, then eventually went his own way to launch a registered investment advisory firm. His firm is fee-only and doesn't work off commission.

Like many advisors who saw the institutional side of financial advising, Grant felt compelled to help people plan their financial future without being influenced by product sales or compensation. He channeled that passion into specifically advising business owners, entrepreneurs, and independent contractors.

He's also stacked with qualifications: certified financial planner (CFP®), chartered financial analyst (CFA), and accredited investment fiduciary (AIF®). That last qualification allows him to focus on fiduciary plans like 401(k)s, defined benefit plans, and retirement plans for businesses. In other words? Very helpful for small business owners.

Below, we go over why he's so passionate about fiduciary advising, the biggest qualities you should look for in a financial advisor, and what every business owner should consider before launch.

Q&A with Grant Bledsoe

What got you interested in fee-only advising?

My observation after spending some time [at large brokerage firms] was that there's 300,000 more or less financial advisors around the country, but less than 5% of those check a couple of really basic boxes. You want somebody who's going to be legally obligated to act in your best interest as a fiduciary. You want somebody who's fee-only and is not going to be influenced by compensation from product sales or other things like that. You want somebody with a fair amount of experience and competence.

"I believe in entrepreneurship. If I can be a small cog in the wheel that helps people take risks and go create products and services that help people, then I'll die a happy man."

My decision to launch and get into it was because there's 300,000 of these people out there. Very few of them just check those basic things. It seemed like a really good business opportunity, alongside the fact that I just really get a kick out of helping people and helping business owners in particular because I believe in entrepreneurship. If I can be a small cog in the wheel that helps people take risks and go create products and services that help people, then I'll die a happy man.

It's amazing how many financial planners aren't actually out to genuinely help. That's why it's really great working with MFC because at least because they're helping connect people with advisors like you. If  you work mostly with people who have small businesses, what kind of things are you looking at when they're asking you for help?

A lot of times, what will happen is the small business owner recognizes that they need some help with their personal finances. They have, let's say, an S corporation where they feel like they're paying out the ears in taxes. They go into a financial planner who says, "Okay. We can help you set up a 401k plan or a SEP IRA, and we've got this great menu of mutual funds that we can help you invest in." The business owner is often thinking, "Well, that doesn't really help me. I need help with my cash management and tax planning, and I can’t find anyone who can help."

That's basically what I do. I help people shore up their personal financial situation. In the small business community, a lot of that is, "Let's just go over what a typical spending month looks like in your household. Then let's make sure that we have an appropriate amount of cash set aside for a rainy day." We come up with a system that makes sense to you based on what you're trying to do, both personally and in the business, take distributions back into your personal account on a semi-frequent interval so that everybody's comfortable in your household with how much you're making, and how much is coming in and what the trajectory is going forward.

Could you speak to the the different needs between people who have blue-collar or white collar type businesses?

Yes. Most of my clients are more white collar professional services type people. I think that the financial decisions you need to make are quite a bit different industry to industry. Your blue collar type businesses are manufacturing, auto shops, kind of capital intensive businesses, whereas the white collar side are more professional-based to where the product and service that's coming out of the business are based on the skills, experience, training of the professionals and staff. The margins are different. The path to growth is a lot different. Most of my clients sit on the professional services side, but I do have a couple retail and manufacturing business owners as well. A lot of their needs are really pretty similar. The mindset is often pretty similar, but the psychology of a blue collar person versus a white collar person is totally different too.

"When I work with people, we spend a lot of time at the beginning on, 'Where are you from originally? What was money like growing up? What's the business look like?'"

Can you speak to how someone's psychology affects their relationship with finances?

I think that everybody has a slightly different mindset on how they view their personal finances and how they view what's going on in their business. That's not really an industry to industry thing.

When I work with people, we spend a lot of time at the beginning on, "Where are you from originally? What was money like growing up? What's the business look like? What are you really trying to do? What's the vision? What's going on in 12 months, five years, 10 years? What do you want and need out of your career to be happy and content?" It's those fundamentals that we use as context for a lot of these decisions and figuring out where to go first and what stuff to tackle first.

What are some of the most common financial mistakes that you see people make when they first come in?

I see people who don't view their personal finances completely separately than their business finances. A lot of people overestimate what the value of their businesses. That's a pretty big problem because for a lot of these people, they don't have a whole lot of savings outside the business, which is totally okay. A lot of times, the business is very valuable, but it's like 50%, 60%, 70% or more of their net worth. If you think you're going to get $8 million for it and it's really only worth $4, that's a pretty sizable difference.

When people get to the point where they want to think about transitioning into retirement, there are steps you could take to boost the value of what that equity is worth and get more for the business when you step away, but most people don't have any idea what that is, what those steps are, or time to tackle them. I think overestimating what they have and overestimating what they'll get for it without making substantial changes is pretty typical and a huge mistake.

What would you say to a person who is reluctant or skeptical about getting a financial advisor?

A couple things. One is that you have to view the relationship like any other professional engagement. Accountants, doctors, attorneys, anybody that you hire for help with whatever it is you need help with, you have to think that you're getting more in value out of the engagement than what you're paying for out of pocket. For  someone who's reluctant to pay the cost, I would say just try it out and fire me or fire whoever you're working with if you don't feel like you're getting more in return than what you're paying for.

"I would like people to know that there are good people out there. If you use the publicly available information to sort through them, look for a fiduciary, look for a fee-only person, look for someone who has competence and experience in the stuff that you need help with, that's a pretty good start."

The other thing I'd say is, a lot of planners will have a minimum time period with which they'll require you to work together. I don't have anything like that because I want to make it low risk for people to sign up and I'm confident in the value that we can deliver in my firm. You can cancel whenever you want and it's not like you shell out a check for like $8,000 or $10,000 and then just hope it works out. You just pay month by month, and if you're not happy with it, then you cancel. You take it step by step.

What would you say are some of the biggest misconceptions you see that people have about financial advisors?

People are really kind of jaded on the industry, for good reason, because there's a lot of nefarious activities from advisors who are just in it for themselves and to make money. Movies have been made about them and many of them have been imprisoned and banned from the industry. I think the regulation has not come nearly far enough. There's still just this huge reluctance to work with people because they're scared that I'm going to try to sell them something.

That's completely understandable. But I would like people to know that there are good people out there. If you use the publicly available information to sort through them, look for a fiduciary, look for a fee-only person, look for someone who has competence and experience in the stuff that you need help with, that's a pretty good start. People are reluctant for good reason. Your personal finances are some of the most personal things that you would share with someone, but I think if you just check those boxes initially, it will help to take the edge off.

You said you work with small business owners. Do you also work with independent contractors or mostly people who have employees?

Most of them do have employees, but I do work with independent contractors as well. A lot of the same issues apply. You have 1099 income, so you can establish a SEP IRA or a solo 401k, which is very convenient. Some of the tax planning opportunities are still present when you're a 1099. Some of the group benefits and other issues aren't present, but often times it just makes it a less complex case for me. A good example of that is a lot of ER docs work as 1099s and find themselves in a high tax bracket. They need to defer and minimize the amount of tax that they're paying. There are mechanisms to do that, so that's a pretty good fit for me too.

What advice would you give to someone who is just starting out their business and not sure how to balance that with their personal finance?

I would say that you want to have a pretty concrete personal financial plan in place prior to launching the business. You want to know what your startup costs are going to be and you want to have a loose idea of projected ongoing P&L over the first couple of years to make sure you have enough runway personally to succeed.

The best advice I have for somebody who's starting is do the leg work prior to launching, prior to leaving a stable job or taking that risk. If you know that, "I've got three years worth of expenses saved up. I know that I'm going to need to spend however many thousands of dollars to get this thing off the ground. I need to hit these milestones along the way to stay afloat", that just makes it a heck of a lot easier to make decisions in the moment. If you don't know those things, it just adds to stress and pain.

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