Business owners have long been a popular target clientele for financial advisors; successful firms with strong profitability created an advisor opportunity to help business owners diversify their wealth (into the advisor’s managed accounts), to propose tax shelters (to offset business income), and to secure the value of the business with life insurance (to fund buy-sell agreements or estate liquidity). However, while the reality is that these have been lucrative ways for financial advisors to engage with business owners, it understates the full breadth of the unique financial advice needs of many business owners. After all, successful businesses are often the largest asset by far on the business owner’s balance sheet, which means advice to help them better grow and manage the business as an asset, can far exceed the economic impact of any of the advisor’s ‘traditional’ offerings. With the caveat that means advisors may need to develop new advice skills and new domains of advice expertise to serve the full breadth of business owners most effectively!
In this ‘hybrid’ video-based article, Michael Kitces and John Bowen, CEO and founder of CEG Worldwide and CEG Insights (formerly Spectrem Group), map out the four stages that entrepreneurs pass through as they grow and scale their business – and the new kinds of knowledge expertise that advisors need to develop to best help their business owner clients overcome obstacles along the way.
The first stage (Foundation for Freedom), centers on moving from scarcity to structure. At this point, owners are building stability, generating income, and coordinating basic financial infrastructure. This is where most traditional advisory services fit comfortably, including investment management, retirement plans, tax coordination, and basic succession discussions.
The second stage (Energy for Expansion), begins when entrepreneurs start converting their expertise into scalable intellectual property. Instead of relying entirely on personal effort, they begin building systems, processes, training, and thought leadership that can grow independently of the founder’s direct involvement. However, many businesses become trapped by “founder dependency,” where the owner remains indispensable to operations and growth, which creates both valuation limitations and operational bottlenecks. In these stages, advisors are largely focused on collaborative and coordinating services – such as ensuring CPAs, attorneys, and other specialist all work together to help the business owner achieve their goals, connecting the business owner to IP attorneys to understand how to turn their experiential knowledge into valuable intellectual property, and perhaps even some coaching nudges to the business owner themselves about how to evolve the business to be less dependent on them as a path to expanding enterprise value.
If entrepreneurs can mold a business to run independently of themselves, then they enter the scaling-focused stages. The third stage (Collaboration and Multiplication), is where business evolve into self-managing teams that can make complex decisions independent of the owner. From the advisor perspective, expertise needs shift significantly at this stage, as the business owner focuses more on how to ensure good governance of a business they may be less involved with day-to-day, the implications of sharing equity across key leaders in the business (as it dilutes the business owner’s own stake), and beginning to position the business for an eventual exit and liquidity event.
Finally, at the most mature fourth stage (Exponential Impact), entrepreneurs move beyond wealth accumulation toward significance and long-term influence. With their financial security firmly established and financial goals broadly achieved, the focus shifts toward family governance, strategic philanthropy, next-generation development, and perhaps how to create meaningful impact during their lifetime (rather than simply leaving a legacy after death). Many ultra-high-net-worth entrepreneurs are less concerned with maximizing investment returns (growth for what purpose at that point?) and more focused on defining purpose, stewarding family relationships, and aligning capital with personal values. This is where advisors increasingly function as strategic coordinators and personal CFOs, helping clients integrate financial, family, business, and philanthropic decisions into a coherent vision for the future.
The broader implication for advisors is that serving affluent entrepreneurs effectively requires a shift away from traditional expertise of investments, insurance, and retirement planning, into a more integrated advisory role that delves into valuable “non-traditional” advice domains from how to really boost enterprise value, to governance of their wealth and managing their equity cap table, and ultimately how to better align their wealth with their values and legacy (when all their other goals have been satisfied), while increasingly serving as orchestrators of expertise amongst increasingly specialized legal and tax experts.
Ultimately, there is a wealth of opportunities for advisors who work with business owners, particularly those who can emphasize their role as a thought partner, coach, and coordinator, by developing the unique expertise capabilities that successful entrepreneurs need. Especially for financial advisors who want to work with business owners of larger enterprises, where “traditional” financial planning expertise becomes less relevant, and the truly unique planning needs of business owners arise!
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