In the ever-evolving world of entrepreneurship, where challenges and opportunities co-exist, financial advisers have long been regarded as a compass, guiding business owners through the labyrinth of finance.
But let's not take this status quo at face value; let's scrutinise it. My research suggests the relationship between entrepreneurs and financial advisers is more complex than meets the eye.
As a participant in the pioneering cohort of the UK's first MBA programme in Financial Planning, I embarked on a quest to unravel the intricate bond between entrepreneurs and financial advisers, especially concerning business exits.
What I uncovered challenges conventional wisdom and underscores the pivotal role financial advisers can play.
Financial advisers have traditionally been seen as indispensable partners in steering business owners toward success and securing business exits. But recent data suggests this symbiotic relationship may not be as effective as once believed. In this article, I will delve into the intriguing findings of my study that challenges the assumption that financial advisers significantly contribute to entrepreneurs' journey to the business exit, as well as their personal financial planning and lifestyle goals.
The Entrepreneurial Mindset: A Paradox of Wealth
Entrepreneurs are often seen as wealth-driven individuals, chasing financial success at any cost. However, my research paints a different picture. Entrepreneurs primarily embark on their journey driven by intrinsic rewards, such as autonomy, recognition, and the satisfaction of meeting challenges.
An entrepreneur participant in my research summarised this well when they stated, “It’s never been about the money. It’s totally about freedom and thinking there’s another way this could be done.”
While wealth creation is a by-product, it isn't their primary motivation. This finding contradicts the conventional belief.
This paradox becomes even more intriguing when we consider that many entrepreneurs plan for a business exit selling at the highest possible value, known as financial harvesting. While they aim for maximum value, the personal financial gain from this transaction is often perceived as an inconsequential by-product. This discrepancy raises a crucial question: Do financial advisers truly understand entrepreneurs' financial ambitions and goals? The answer, it seems, is not as clear-cut as it should be.
Entrepreneurs often express a commitment to entrepreneurship by nurturing a lifestyle business or establishing new ventures after a successful exit. But few have considered the possibility of unforeseen events, such as health issues, that could impact their ability to work and achieve their future objectives.
The Strategy Gap: Planning for Business Exit and Financial Well-being
Entrepreneurs typically start their businesses with a causal strategy, often relying on intuition rather than formal business plans. While those planning to exit their businesses in the short term tend to create formal exit plans, there's a disconnect between their business and personal finances.
Two participants in the study confirmed they deferred the running of their personal finances to their spouse and showed limited interest in this. This discrepancy is evident even among entrepreneurs who work with financial advisers.
Half of the participants in the study confirmed they had a working relationship with a financial adviser; none confirmed that their adviser assessed their business and related goals, highlighting a lack of synergy.
