A Financial Planning Business Plan - More Than Experience Required

If you will need to raise outside money to fund your financial planning practice, writing a business plan is a must. In that business plan, you certainly must show that you have the financial experience to be able to advise clients to make wise decisions or to make sound investments on their behalf. However, showing your personal experience is not enough. The plan has to show the groundwork for a business that can achieve economies of scale - that is, the ability to grow 100% in revenue, for example, while growing less than 100% in cost.

Business vs. Freelance Work

Proving to investors that your firm is a fundable business and not just a way to reduce your personal tax liability, requires you to think like a business owner. Although, as you are starting out, the business may rely on your direct work with clients to bring in any revenue, you should have a plan to build on that foundation over time. That could be with products that you sell (i.e. reports, guides, spreadsheets), by pushing down lower skill work to employees, or by hiring additional advisors to work within the company. The plan could also be a system which will allow you to serve more clients per day and manage more assets than another solo financial advisor could, if you can devise such a system.

Economies of Scale

These types of plans show an investor that there is a chance for a much higher return on their investment than if the company's revenues are always a function of your billable hours. They show that the company's products or services are scalable beyond what independent financial advisors can do on their own.

If you want to simply be a busy, freelance financial advisor, you can certainly do so, but your options to bring in outside funding are more limited. The company has little value in a sale and therefore raising capital through equity will be difficult. For a lender, there are no physical assets in the company to act as collateral, so it is less likely to receive a loan. In this case, you are more likely to find success funding the company through a home equity loan or credit cards to get off the ground. In these cases, you don't need a business plan for anything beyond your personal planning and organization.

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