Are You a Likely Candidate to be a Breakaway Advisor?

August 28, 2023 Oak Street Funding

Breakaway Advisor

If you've considered becoming a breakaway advisor, walking away from your current employer to establish a business where you call the shots, good for you! Professionals who are currently employees often see starting their own businesses to gain more control over their workdays and enhance their ability to serve their clients.


Becoming a breakaway advisor has its risks

Hanging out your own shingle may be appealing, but that doesn't mean it's easy or risk-free. As part of a larger organization, you've been freed from making many of the most demanding business decisions. You've had minimal exposure to issues such as human resources, compliance, and technology integration, and you've been able to tap into a deep, ready-made pool of resources. You may welcome the opportunity to make your own decisions and handle those issues, but you also need to prepare yourself to assume more work and responsibility than you may realize.


Creating a plan

Starting the process by developing a business plan may seem old-fashioned and cumbersome. Still, it involves a formal process that forces you to think through every aspect of your business. It's the opportunity to spell out precisely what will differentiate you from others in your market, the types of clients you'll pursue, how you'll price the services you'll offer, and what you may need in terms of staff and service partners.

→ Watch Now: Strategic Planning and Implementation


About your services

As you develop a vision for your business, you'll start to make a long list of choices. One of the most critical concerns is the services you'll offer. Do you anticipate limiting your services to what you’ve been doing, or do you also expect to provide additional services that may require further education or licenses?


Pay attention to requirements

You’ll need to choose your type of business entity and register with your state’s secretary of state, any other states in which you plan to conduct business, and (in some cases) local authorities. You’ll need to obtain a federal tax ID and may need to take additional licensing exams. Consult with a tax advisor or attorney on entity type, and the impact of the type of entity.

Going through the entire process may take between six and ten weeks, depending upon state requirements. You may also engage the services of a third party to assist with the registration process.

Get Industry Insights to Your Inbox


Think twice before recruiting clients

Familiarize yourself with any existing agreements and policies in place with your existing employer, regulatory rules, and other agreements you’ve signed to make sure you don’t get yourself in trouble. Many large companies perform surveillance on public filings to see if their representatives are obtaining licenses and permits. If you are found to be breaching agreements, you may face immediate termination, and lose the clients you worked to gather. Consult with an attorney to guide you through this transition to become a breakaway advisor.

However, studies suggest there's no reason to actively solicit clients because the vast majority are likely to follow you anyway. If they've been pleased with the service you've provided, and trust your integrity and expertise, they'd prefer to continue to work with you instead of someone they don’t know.


What about money?

One of the essential needs for any new business is start-up capital, and the company you're considering is no exception. While it's possible to keep start-up costs lower by initially, for example, operating out of a home office, some costs are inescapable. Licensing and registration fees can be hefty, and costs can be even higher if you draw upon a consultant's resources to help you through the process. You'll likely want the assistance of an attorney as you draft documents and a CPA to advise you on business structure and tax issues.

As your company starts to do business, you'll have additional costs related to operations and marketing. While revenues will begin to flow in, it may take a while for your income to match what it was when you worked for another business, so you’ll want to provide for household expenses and other family needs during that time.


You’ll need capital

Professionals who have broken away to become a breakaway advisor will caution that you need to be prepared to go without meaningful profits for as long as three to four years as you rebuild your client roster and absorb the costs of starting a business. You'll need adequate capital for the start-up. Trying to cut corners when it comes to capital is one of the most common mistakes breakaway advisors make.


Financing your breakaway

If you're not comfortable with the level of capital available to you, it may be wise to investigate outside financing. New business owners often assume their best approach is to turn to local banks and loan officers they’ve come to know. However, most traditional banks aren’t comfortable with the structure of businesses like yours. Most are geared to making loans to companies with tangible assets such as inventory, equipment, and real estate.

That’s why a growing number of companies turn to specialty lenders that are accustomed to working with your industry. Such lenders understand how a business like yours operates and are familiar with the nature of your income streams so that they can approach the underwriting with realistic expectations and an appreciation for inherent risks. A growing number of business owners in your industry are turning to specialty lenders like Oak Street Funding, who are accustomed to working with businesses like yours.

Contact Us

Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.

Share This: