Just for Entrepreneurs: How to Choose the Right Financial Adviser

StrategyDriven Managing Your Finances Article | Financial Adviser | Entrepreneurship | Just for Entrepreneurs: How to Choose the Right Financial AdviserWhile most entrepreneurs know their industries well, many are not experts when it comes to money. To help entrepreneurs succeed financially at work and in life, they need both a great CPA and a trustworthy financial adviser. Ideally, with the right people, one firm could serve both roles. It’s possible, in my opinion, to work with two different firms, but coordination is essential to keep critical information from falling through the cracks.

What are the characteristics of the “ideal” adviser? To me, it’s all about trustworthiness, the existence of a solid process, and a holistic approach that considers all aspects of an entrepreneur’s life and business.

Defining “Trustworthiness”

How do you know whether your financial adviser is trustworthy? The perception of trustworthiness is subjective, but to me, it’s more than just likeability. It’s also more than friendship, or a reputation based on a referral from a friend, boss, relative or coworker. By “trustworthy,” I mean an adviser who isn’t considering his or her wallet when offering guidance: a person who always puts the client’s agenda first.

It’s true that some financial advisers are required to place their clients’ interests before their own because of the fiduciary standard established under the Investment Advisers Act of 1940. However, that standard only applies to certain types of advisers in specific situations, all of which the layperson is usually unaware. Finding an adviser who is required to meet the standard is one thing; finding an adviser who embraces the standard as a mindset, and who structures fiduciary processes to support the standard, is ideal. Look for an advisory firm accredited by the Centre for Fiduciary Excellence, or CEFEX. CEFEX-certified firms voluntarily undergo annual audits to verify their adherence to best-interest standards. This is supplemental to regulatory or government oversight.

Why Process Is Important

Your financial well-being is a big-picture scenario. All of the moving parts need to work together, and your adviser needs to be confident that his or her process compensates for blind spots and avoids errors. In his book, The Checklist Manifesto, author Atul Gawande discusses the difference between someone with “aptitude,” (the natural ability of a person to be able to accomplish a certain skillset) vs. “eptitude” (the application of knowledge correctly and consistently). High-performing advisers demonstrate eptitude by having strong processes in place to identify and understand your needs, and monitoring those processes to make needed adjustments. Any adviser should provide a great deal of clarity about what you can expect from the relationship. In addition, he or she should be skilled and confident in connecting your business growth with integrated and holistic wealth management that includes tax, financial and investment strategies.

It’s important to understand that a good process informs strategies, which determine the tactics you and your adviser will take toward your financial well-being. Entrepreneurs know that complexity (and sometimes, chaos!) can be the rule in getting a business off the ground. Having a trustworthy adviser who can guide you through these types of situations will help you sleep better at night.

The Need for a Comprehensive Approach

Entrepreneurs have far different financial situations than those with regular, salaried jobs, yet most advisers provide only investment consulting. Entrepreneurs need more. A financial professional suitable for an entrepreneur should ask such questions as: What was your objective in setting up the company? Was it just to have an exit strategy sale? Was it to provide a service to your clients on an ongoing basis, and then to ensure that continued as your legacy? Do you want to help your employees save for retirement, and how? Who, if anyone, are you grooming to take over your business? How can you minimize the impact of taxes that diminishes your wealth over time?

An adviser who can go beyond investment consulting has to have a very different mindset than the average adviser. The shift is from that of a master-builder, as Gawande describes in The Checklist Manifesto, to a more collaborative mindset. In premodern times, as the great cathedrals of Europe were constructed, the master builder held all of the necessary knowledge in his head and directed huge teams, but the projects were not collaborative. Today, complex large structures involve a team of architects, engineers and others who work together in constant communication. The financial services industry is on the cusp of a similar shift. Instead of working with one “perfect” adviser, entrepreneurs should look for firms with diverse master-builder teams who collaborate with, and on behalf of, the client to find creative solutions that work well for the inherent complexity of entrepreneurs and their businesses.

Choosing the right adviser is well worth the time and effort, even for the busiest entrepreneur. With the right person to watch your financial back, you’ll have the freedom to focus on what really matters to you: your family, your goals, and your company.


About the Author

StrategyDriven Expert Contributor | Wayne B. Titus III, CPA/PFS, AIFAWayne B. Titus III, CPA/PFS, AIFA founded AMDG Financial and AMDG Business Advisory Services in 2002 based on his 15 years’ experience at two large accounting firms working with Fortune 50 clients. He dove into entrepreneurship to make a bigger impact on people’s lives. As a fee-only fiduciary adviser, his loyalty is to his clients: he places their interests ahead of his own or his firm’s. With assets of more than $150 million, AMDG Financial integrates tax, financial and investment strategies to help clients make financial and life transitions successful on purpose. The company’s credo is, “From financial wisdom, better stewardship.” His latest book is The Entrepreneur’s Guide to Financial Well-Being (Lioncrest Publishing, March 2019). To learn more, visit amdgservices.com.

What is the importance of pre-money valuation For Your Business?

StrategyDriven Entrepreneurship Article | What is the importance of pre-money valuation For Your Business?Pre-money valuation is a company’s liquidity before it earns the cash from an investment round. With the contribution of cash to the balance sheet of a business through the shareholder value, the post-money value becomes stronger due to the additional cash earned.

Importance of Pre Money Valuation

A pre-money valuation calculator by calculators.tech helps finance professionals to precisely measure the profit that they will earn after specific investment. Although pre-money evaluation is essential, it is not the most important consideration when taking money, especially when taking it from venture capital. Most of the time, the deals offered by companies are pre-money valuation.

The value-added that an investor will bring to the table is especially important for venture companies for the first time. Startups should take the lower pre-money bid if this business has the potential for a much larger value-added than another, offering better pre-money funding, but the added value opportunity is not the same. The long-term effects of the added value are more than compensatory to the lower pre-money.

Example of Pre Money Valuation

The following is an example of a business undertaking a finance process and its pre-money valuation.

Let’s suppose there is a company with a pre-money valuation of $100 million. There are a total four million shares in the company. The price of a single share will $25. Now the company wants to increase $40 million to the existing equity. So, the company has to release 1.2 million extra shares. Company will add $40 million in its pre-money valuation of $100 million, the post-money valuation will become $140 million. Now, the company has 5.6 million shares, but the price of shares is the same, $25.

Share Price and Equity Value

The pre-money valuation is calculated for the equity of entire business. It does not apply to the share price of the company. Although the capital stock is influenced by the acquisition of extra cash, the share price is not affected.

Equity Value and Enterprise Value

The enterprise value of a company is the market value of a business. It does not include the capital structure. It should be noted that a round of financing does not influence an enterprise’s value. As the equity value of a business rises in the capital, the enterprise value tends to remain the same.

Effect on shareholders

It is important to emphasize that before the transaction, the current shareholders will be reduced in ownership percentage by issuing new shares. The founders had 1 million shares, or 25% of the total shares, before increasing the equity value in the above case. After the increase in equity, founders will have the same 1 million shares but 17.85% of total shares (5.6 million). On the other hand, value of the shares of the founders will remain same.

Valuation of Equity Shares

There are three methods for the valuation of equity shares based on the balance sheet.

Book Value

Book value is the total value of a company split into several remaining shares. You can calculate the net worth by adding equity and reserves of the company minus expenses.

Liquidation Value

Liquidation value is calculated differently from the above-stated book value. It uses the valuation of the liquidation funds, which are often less than the books and market. For the calculation of the liquidation value of the company, liabilities are excluded from the liquidation value of the assets.

Replacement Cost

Replacement costs offer another method to evaluate the valuation of a business. The substitution or current cost of an asset is the amount of money to substitute the asset by purchasing a similar asset with the same future capabilities. Assets and liabilities in replacement costs are measured at their replacement value.

Venture Capital Pre-money Valuation

The valuation of the cash obtained from a funding round significantly affect the equity value of the new companies. That is why the statement is used so often because a business could see a dramatic change in its valuation.

Methods of Valuation

If a company undergoes a funding process, it will have to address the value of the company with investors. Investors can make strong arguments if they don’t find the value of company according to their expectations.

There are several methods for the valuation of a business or a company.

  • Precedent Transactions
  • Comparable Companies
  • Discounted Cash Flow

Formulas for Pre and Post Money Valuation

There is no standard method for estimating pre-money valuations of a company because they completely depend on the worth of the business.

Post Money Valuation

Post Money Value = Pre Money Value + Value of Cash Added

Pre Money Share Price

Pre Money Share Price = Post Money Value / (Previous Shares + New Shares)

Filling Gaps of Valuation

Since a company’s worth can be debated extensively, and investors usually expect a highly optimistic market, Venture Capital companies typically utilize preferred shares to address the valuation discrepancies.

There are a lot of advantages for venture capital companies to receive preferred shares.

  • Participation rights can be further enhanced
  • Anti-dilution privileges may secure the share from further dilution
  • Preference for liquidity is the first paying out when the company is sold
  • Preferred returns have a preferred investment return rate

Since all of the characteristics above have an added value, the preferred shares of the venture capital business are worth more than the rest. This ensures that they are willing only to buy preferred shares that are more expensive at a less desirable common share level, rendering their return on investment more appealing.

Wrapping-up

Financial planning doesn’t leave an investor comfortable until his/her business performs as per expectations. It is something that follows and sticks with you throughout your career, even if you are planning for a startup or a company with thousands of employees. You should probably hand it over at one stage to a professional who doesn’t just learn but love to do that. You must get to know the mechanism until then.

Seven marketing and business strategies for real estate agents

StrategyDriven Online Marketing and Website Development Article, Seven marketing and business strategies for real estate agents

Being a real estate agent is no different to working within any other industry: you’ll need to market yourself and your brand so you can be successful. There are a number of different ways that you can do this – however, what will work for a person in one industry won’t necessarily be the best for someone else in another role.

So what should you add to your marketing and business strategies to be a good real estate agent? Your aim is to make sure you can sell properties for the best price you can on behalf of the seller, and to attract buyers to gain interest in your portfolio. There are different methods and materials you could use to your advantage, so think about what could be the best strategy to use for your real estate brand.

These are only some of the items you could include in your plans.Try implementing some of them, and see what could be excellent additions to your business.

Use video

Using technology as a device for your real estate business will show your clients that you have a fresh perspective on selling homes. You could use video streaming for live auctions, for example, or use social media tools for quick home walk-throughs. Buyers want to have their agent to liven up what’s added to social media.

Try out VR

Tech-savvy real estate agents are looking to include virtual reality, or VR, for walkthroughs. Many people will want to view a property in the comfort of their current home and, by using VR, you can offer a comprehensive preview of that place. If you want to be competitive in real estate, then technology is one area that can give you an edge.

Put some effort into your online profile

You need to have an effective online profile so you can attract future business and get previous client referrals – so is an important part of your marketing by using websites for real estate brokers. Your profile should be compatible for all mobile devices as well as different computer screens; people are more mobile-centric, so you need to meet the demands of the smartphone market to make sure they will check you out.

Learn about your local property market

The valuation of a potential property is most likely to be based on other properties within the local area. So if the prices of property within one town are in the $220,000 range, for example, there might be an area where there are places that won’t sell for more than $178,000.

So do a bit of research into what properties sell for, so you can have information that you can present to a potential client. There are portals available that can give you details of recent sale agreed prices.

The area that you look at should be based on the number of properties that are in it. So if there aren’t that many homes in that place, then you will need to widen your search.

Develop your skills

Once you’ve learnt the basics, you should put them into practice. What would you do if a seller asks you to reduce your commission, or how would you explain what happens with inspection contingency?

The more people you engage with, the more practice you will have when it comes to tackling important topics. So have as many real estate conversations that you can, and practice any scripts.

It’s also crucial that you run your real estate career as a business, and develop your entrepreneurial skills. Make sure you carry out some research using a range of sources that will give you inspiration and ideas that you could put into action, as well as give you valuable insights. There’s a lot of real estate information online, including on YouTube, and there are numerous books you can also read.

Engage with your audience on social media

One of the most efficient ways of engaging with your audience on social media is to optimize your content, so it is easy to find and is something other than just promotional. You can also post direct questions to your followers – such as on polls and on Instagram stories, for example.

Use testimonials and quotes

Real estate isn’t the best material for you to create interesting and engaging content. So if you’re struggling with this, you can try using customer testimonials and interesting quotes. You will then have a steady amount of quality content if you turn these blocks of text into beautiful pictures.

IT Expenditure: What Should a Realistic IT Budget Look Like in 2020?

StrategyDriven Managing Your Finances Article | IT Budget | Entrepreneurship | IT Expenditure: What Should a Realistic IT Budget Look Like in 2020?Every business needs to have an IT department of some sort, whether on-site or remotely, in order to keep their company afloat. So much relies on computers that if they suddenly stop working, your business stops moving.

That being the case, it’s not uncommon to see much of a business’s finances go directly into making sure their IT services continue to run smoothly. But how much do you really need to be spending on an IT budget – and how much are you already spending?

There are limits to how much you should be putting out for the services you receive. This article goes in-depth with how your 2020 budget should look like for your IT software and troubleshooting needs, so you won’t spend any more than necessary. Read on to find out more!

Your IT Budget Will Increase Most at the Beginning of the Year

New year, new you – and new business. Your company is bound to shape up and adopt the “out with the old, in with the new” rhetoric. That most likely also means you’ll be getting rid of old hardware and software and investing in new tech.

Of course, this is bound to bring up the IT bill initially, as the purchasing and the installation of new equipment will be added to the tab. In most cases, however, it will pay for itself in the long run, so the initial purchase shouldn’t be seen as something scary.

Streamlined Operations Will Save You Money

As technology gets better, it becomes easier to use the software to our advantage. These streamline operations will allow you to not only better serve your customers, but will save you money as well.

There will be minimal confusion on what you need to conduct B2B and B2C interactions as well as in-house operations, and the lack of complexity will free up the IT department from working on the small stuff and allow them to focus on what really matters.

Internet Is Faster at Relatively the Same Price

Businesses need internet, and it’s good to know that each year companies are able to make their services faster. It’s even better to know that, due to competition, the internet is still being sold at the same price – or in some cases, even less.

This is good news for you as that means you get better services without the higher price, allowing you to place the money you’ve saved onto other important aspects of your business.

To make sure you stay up to date on how much you’re spending on IT needs, you’ll want to use an organizational tool such as a NetSuite price cheatsheet to make sure you know where every penny goes!

Stay Driven. Be Successful

You know what you should be spending on your IT budget for your computer needs, so now you’ll be able to watch your money flow and still get things done. But that’s only the beginning of what you need to know to help your business succeed.

At StrategyDriven, we help focused and goal-oriented business owners like yourself take on the competition and succeed in their field. We offer help from all angles, including formatting and executing business strategies, management and organizational programs, and more.

Ready to get started? Click on any of the tabs on our site to learn more about what we have to offer you. We’re sure that we can help your company to win!

Ways To make Your Business More Efficient

A business needs to work and keep working for both the owners and the consumers. Inefficiency can be a real problem for businesses, which can end up costing your business a lot of revenue. There are some tricks you can use to make your business more efficient and improve your earning power and productivity.

StrategyDriven Managing Your Business Article | Ways To make Your Business More Efficient | Entrepreneurship | Business Efficiency

What Isn’t Working?

Before you make any changes, you need to identify the areas of your process that are currently inefficient. When you know where the problem areas are, you can start working out what is causing it. From here, you can create a solution. For example, if your IT team is overworked and stressed, you’ll get more IT downtime, slowing down work. You can fix this by using IT services to tackle business inefficiency caused by technology. Inefficiency can occur in lots of different places. It might be redundant processes, important information that is hard to find and procedures that have been allowed to get out of date. Overcomplicated procedures are also a common problem.

Democratize The Market

Find a way to make the market you work in more democratic, which makes processes faster for staff and consumers, and frees up your team to deal with other parts of their job. Making the process of working with you much smoother and simpler, you can serve more customers and retain them afterward. The easier it is for customers and staff to access technology and information, the smoother and faster your business can operate.

Explore Digital Integration

Digital integration that is inefficient can be a big problem, causing you to be less competitive in your industry. Instead, use digital integration that can streamline your work, cutting down on the time that is wasted. Digital solutions that are properly integrated can improve efficiency in lots of ways. Technology can be used to automate tasks that are time-consuming, which then allows your employees to focus on tasks that need attention from a human being. Communication is made faster and easier. Reports can be generated and shared with key stakeholders much more quickly. Problems can be found and handled sooner, and employees can communicate with each other much more easily. Proper, thorough digital integration is a must-do solution to inefficiency in a business.

Build An End-To-End Solution

You need to think about the entire system, and consider how your business and product fits into the larger picture. Full integration can help you find more ways to improve your efficiency. If all the parts of your machine work together, things will operate in a more efficient way, allowing you to work on the things that matter.

Build Communities And Resources

A great way to be more efficient in your business is to create communities. The people you meet will help you to open up more opportunities in a natural way. Foster community development with tings like public forums for discussion, networking options and sharing resources. This can generate new ideas, invaluable feedback, and new concepts for you and the other businesses involved.