Thinking long-term: Choosing the right financial advisor for your startup

homework for founders: quick tips before getting started

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1. If your startup can afford it, set out to hire a financial advisor from day one. This ensures a solid financial history from the start, allowing you to focus on the business while offloading financial responsibilities. Regulatory misses are hard and expensive to rectify later, so a full-time financial advisor can track compliance and financial processes from day one without stretching your bandwidth.

2. Before getting started on your hunt for a financial advisor, speak to fellow founders and business builders who operate in the same space/sector as you, so that you partner with someone reliable. Don’t forget to check if the advisor has adequate bandwidth to spend on your startup, especially if they are working with more than one startup. 
3. Get a clear understanding of your company’s structure and operational needs. This knowledge would help answer potential questions from financial advisors on regulatory compliance (including taxes), accounting policies, GAAP requirements, and other legal requirements. Financial advisors require this information to understand the organizational structure (e.g., SaaS startup based in India vs. US-domiciled company with an Indian subsidiary) and offer the right advice. 
4. A lot of founders don’t realize how much time it can actually take to incorporate your startup and set up a bank account for it. The end-to-end process can typically take 2-4 weeks, although it may sometimes take longer depending on how things are running with the MCA website. A lot of this depends on registered office location (state/jurisdiction) and – interestingly – name availability.

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5. Finally, if you’re renting property, dealing with address issues can become a real hassle. You’ll need to provide proof of address during incorporation, so it’s smart to have a stable address ready before you begin. As a tenant, you might run into issues with receiving and managing important documents from the property owner, which can slow things down. Plus, all the paperwork from the registration body will go to this address, and managing it from a rented place can be tricky.

what to prioritize in a candidate while shortlisting your financial advisor

1. Service Expertise: It’s recommended to onboard a financial advisor who offers services directly relevant to your startup needs, like accounting, legal, tax and regulatory advisory, valuation, and company secretarial services. These services are crucial for maintaining compliance, optimizing tax strategies, accurately valuing your business, and ensuring proper legal documentation. 
2. Fees: Ensure the financial advisor’s fee structure aligns with your budget and requirements. Fees can range from ₹10L to ₹30L annually, depending on the complexity and time commitment involved. 

3. Resourcefulness and accessibility: Assess the financial advisor’s turnaround time and availability. In the early stages, you’ll have many questions and require timely support, especially when interacting with investors or figuring out compliance. To break this down further:
   a. Resource access: Ensure the financial advisor can easily connect you to the appropriate team members with relevant expertise (e.g., tax specialists, regulatory experts) when needed.
   b. Stakeholder Queries: The financial advisor should be responsive to queries from various stakeholders, including investors, customers and regulators, and provide clear, concise answers quickly.

But before you shake hands on it, perform reference checks and evaluate their track record, especially with early-stage companies. A financial advisor with experience in handling the unique challenges of startups will be more effective in helping you grow your business. The early days come with increased complexity, and your financial advisor’s ability to address issues with minimal resources will help keep things running smoothly. 

questions to anticipate from a potential financial advisor

1. Business and organizational structure: What is your startup’s business and organizational structure, including domicile? 
2. HoldCo/Sub model: Will your organizational chart include a holding company or subsidiary structure?
3. Revenue and billing model: How does your startup generate revenue and handle billing (cashflows)?
4. Nature of services: What specific services are you seeking from the financial advisor?
5. Office location: Will your registered office be a shared space or a private office? This may affect state-specific compliance requirements.
6. Key personnel: Who are the main individuals in your startup, and what are their roles?
7. Resource deployment: Where will your resources be primarily deployed – within India or internationally?
8. Client base: What is your target client base – domestic or international? Businesses or consumers?
9. Investor location: Where will your investors (VCs) be based?
10. Treasury management: What is your structure for managing financial resources?

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