By: Wendy Nguyen

Here’s a sobering statistic: About 20% of small businesses will fail within their first year. Worse, nearly 50% of businesses will fail by the end of their fifth year, according to data from the U.S. Bureau of Labor Statistics.

The most common culprit? How a small business handles its financial resources, whether it’s a lack of capital, inadequate business planning, or mismanaging their cash flow and marketing budgets.

For small-business owners, this underscores the importance of finding and working with the right financial professional. If you want your business to not only survive but thrive, the following guidelines can help you select the best potential financial partner (or assess your current one):

1. Brush up on your financial vocabulary terms.

A lot of confusion exists around the difference between finance and accounting. A simple way to distinguish the two is this: Finance is where everything starts; accounting is where everything ends. Every business should have a finance mindset so it can plan, budget, and forecast, and then use accounting to capture spendings and earnings.

Even armed with this knowledge, many business owners mistakenly use financial professionals’ titles interchangeably. Still, it’s essential to learn the differences between them so you can make the best choice for your business and its needs.

• Bookkeeper: This professional accounts for your financial records after funds have been collected or used.

• Certified Public Accountant: A CPA dabbles in all financial areas, sometimes handling bookkeeping and financial advisory tasks as well as consulting on many issues, including taxes, accounting and business planning.

• Chartered Financial Advisor: A CFA is a finance expert widely recognized as the gold standard in the field of investment analysis and helps create a plan and devise business strategies to keep and build finances. They can serve as a CFO, yet often rely on an accounting manager or controller to do the accounting.

• Business coach: A coach can advise you on your goals and focuses on decisions that impact your business’s bottom line. Keep in mind that coaches have vastly different backgrounds. Some may have years of experience running successful companies, and some have always been self-employed consultants.

• Management consultant: This professional consults with the leadership team to improve managing the business overall through its human resources, marketing, IT and operational functions. A consultant can interpret the numbers on your financial statement but does not necessarily have the knowledge to create a budget, prepare a forecast, or account for what has been spent and earned.

2. Create a list of what you want.

Before you begin conversations with potential financial partners, it’s essential to take the time to assess your needs and those of your business. Here are a few questions to ask yourself:

• What is my vision for my business? Consider how you see your business long term. If you own a local restaurant and plan to open a second location in a neighboring city, your business goals will be different than a professional services organization looking to take its business nationwide.

• What are my non-negotiable values? How you conduct yourself and how your business operates should be aligned with whomever you choose to partner.

• What are my expectations of a financial partner? If you expect someone to act as your outsourced CFO to help you with managing cash, increasing net profits, and acquiring additional funding from banks or private equity, but they are only focused on your bookkeeping, you’ll be unhappy. Determine what you need and expect from your financial professional so you can communicate and find the best fit.

• What are my business strengths and weaknesses? Hiring someone with a skill set identical to yours won’t serve you as well as finding someone with complementary experience and abilities. For instance, if you’re a process-driven person, you may want to find someone who can provide more creative solutions.

• What is my budget? Decide in advance how much you’re willing to allocate to bring on a financial partner. This part is important because you need to calculate the rate of return. You may be willing to pay a lower amount and see no rate of return, or you may want to pay double the amount because doing so helps you triple your business growth.

• What is my preferred working arrangement? Some people prefer only in-person meetings, and others are fine working with a remote professional via phone or video chats. Consider, too, your desired frequency and method of communication. Are you someone who likes weekly updates or a monthly recap?

• What deliverables do I need? To measure results, you’ll need some form of deliverables. Ask yourself if you want impact reports, specific documents, processes, systems or software to help manage progress.

3. Investigate and interview potential partners.

Now that you’re armed with your completed list, you’re ready to begin your search for the right financial professional. The best place to start is with referrals from trusted resources.

Reach out and share your list with family, friends, and former colleagues, customers, vendors, other business owners like you, and your local chamber of commerce, and ask if they know anyone who aligns with your criteria.

Once you have a few referrals, set up meetings with each professional to discuss your list of wants, and determine how they can address your needs.

4. Do a reference check for alignment.

At this point, you’ve narrowed your list of contenders down to a select few. Request references from each, and then ask those businesses questions about their experience working with their financial partner. Dig deeper to inquire about their perspective on the partner’s values and workstyle to gauge the level of alignment and fit with your own. You’re looking for a financial professional who understands your vision, shares your values, and becomes a raving fan who cares about and is invested in your success.

Remember, your choice in financial partners can make or break your business; choose wisely.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

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