Financial Planning for Small Business Owners in Phoenix


By Ascendant Financial Solutions, Inc.

business planning in a large meeting

Small businesses are the heart of the Phoenix economy, with more than 95% of companies in the valley having fewer than 50 employees. No matter the size of your business, as a high-performing business owner, your complex financial situation is unique. It should be prioritized as such – with a solid map that actually forecasts economic instability.

Even if your business isn’t your sole source of income, it represents a significant amount of risk that must be comprehensively understood and planned. Beyond the risk you face, you are vulnerable to a heightened value of systematic risk because of the value of your assets with your global portfolio.

As an entrepreneur and business leader, you need a customized financial plan that emphasizes the risks and opportunities inherent in owning a business. Without the right plan in place, you are taking the chance that innumerable variables will be in your favor consistently over a long period.

While we hope this happens, in my experience, this is far from the norm.

You’ve done a fantastic job thus far. It’s nearly impossible to start a business and make it sustainably profitable. It takes incredible skill, solid ethics, and hard work – we hope you take pride in that.

Now it’s time to protect it and make sure it serves you (not the other way around). Your business may be both your greatest asset and most significant liability. As a financial advisor in Phoenix, Arizona, also catering to Mesa and Flagstaff, here’s what business owners want to know about financial planning.

Chapter 1

What is Financial Planning?

Financial planning  is the process of accounting for your current financial situation, noting short and long-term goals, and implementing strategies to achieve those goals. The document will include your existing assets, liabilities, income, expenses, and goals, as well as your future dreams and expectations.

Each plan should be comprehensive but highly individualized. Every person is different, from their personal and family situations to risk tolerance and beliefs about the future. Your plan should reflect this. 

The bulk of the financial planning work may be done one time (possibly being updated with the occurrence of major life events), but it truly is an ongoing, holistic process.

The Distinction

We need to make a critical distinction between your business’ financial plan and your personal financial plan. You will want to have a financial plan for your business and a financial plan for yourself (which includes your business). 

Let’s say Harry owns a barbershop. Here are what his two different financial plans would look like:

Harry’s Barbershop’s Financial Plan

Harry’s business financial plan contains a profit and loss statement (income and expenses), a cash flow statement, a balance sheet (assets and liabilities), a sales forecast, growth expectations, a personnel report, and maybe a few financial ratios.

It’s created at a snapshot but includes projections about his short and long-term goals. Once his current financial state and expectations are established, he can develop strategies for growing his business well into the future.

*Note: His business financial plan is isolated and does not reference his personal financial plan.

Harry’s Financial Plan

Harry’s personal financial plan incorporates his income, expenses, assets, liabilities, and short and long-term goals. He also has a safety net and retirement plan.

Since he takes a $4,000 monthly distribution from his barbershop, this is listed as income on his personal financial plan. Similarly, he is the sole owner of the barbershop, which makes $60,000 profit per year and was recently valued at $200,000. That $200,000 business is included in his personal asset column.

*Note: If the barbershop were to be making up a large portion of his income and net worth, his personal financial plan’s construction might entirely revolve around protecting the business. On the other hand, if they were only a fraction of his income and net worth, his plan’s construction may not be quite as risk-averse.

Do you see the difference? His business is intertwined with his personal financial plan, but his business’ financial plan does not mention Harry.

Chapter 2

Why Have a Financial Plan?

With more than 100,000 companies in Phoenix with fewer than 100 employees, small business is big business in Phoenix. You need a financial plan to compare and keep your doors open and lights on. Better yet – make it to the top AZ Fortune 500 list, yes?

Let’s craft this another way: If I told you to get in your car and drive to meet up with me, your first question would be, “where are you?” or “where should we meet?” How would you get there if you didn’t know where you were going?

A financial plan’s job is to take you where you want to go. To succeed in the business world, you must establish and aim for goals and business objectives. After identifying your clear target(s), you will know which specific strategies to implement.

Chapter 3

How a Financial Advisor Can Help

If the endless numbers on your financial documents, spreadsheets, and statements seem overwhelming, you’re not alone. However, as a small business owner, you can’t afford not to have a proper financial plan. There’s simply too much at stake. 

That doesn’t mean you have to forge ahead without help. Every successful entrepreneur knows they need the best of the best on their team!

Financial advisors work with people in your situation every day. We have more than 30 years’ worth of experience in Arizona small business planning. We know the questions to ask to uncover what’s most important to you. We know tax efficiencies, when to get an accountant or estate attorney involved, and how to prepare you for a bright future.

You want someone who can integrate your small business and personal planning to find synergies in tax and retirement opportunities. You need someone who can see you holistically and create a plan that considers your global portfolio.

We sit down with you, talk about your current situation, figure out where you want to go, understand your risk tolerances, needs, and desires, then create a plan to meld them with confidence.

We take care of the financial planning so you can run your business and – more importantly – live your life.

Chapter 4

5 Financial Planning Tips for Small Business Owners

Business financial planning is an ongoing process.

Tracking assets and liabilities, handling cash flow, managing employees, maintaining inventory, servicing debt, projecting growth – anything with money involved should be on your business’s financial plan.

There are many similarities between personal finances and business finances. Budgeting, risk management, tax strategies, investment strategies, retirement, and succession planning are all overlapping aspects seen in both. 

However, there are some essential differences, which leads us to #1:

1. Separate business and personal 

Have a set salary or distribution for yourself, don’t use the business’ credit card for personal expenses, and make sure to have specific business and personal goals. The company should be serving you, not the other way around. Don’t let the lines get blurred.

2. Risk management 

Nobody wants to think about their business failing, but identifying the largest and most likely risks is the surest way of preventing those risks from affecting your business. A cash buffer can go a long way in protecting you against risk. Additionally, having the proper insurance and corporate structure can mitigate the damage of many unforeseen perils.

3. Create a succession plan 

You may not be ready to retire or sell right now, but things change. At the very least, outline a few exit scenarios. What do you like about each one? What do you dislike?

If you do ever decide it’s time to exit, a game plan helps. It may be beneficial to discuss your eventual succession with a professional before you’re ready to retire, as they can provide invaluable insights. Your financial planner can prepare and adjust your personal financial plan accordingly.

4. Manage taxes 

The simple truth is, if you’re doing your own taxes, you may be paying more than you need to. The only thing worse than paying taxes is overpaying taxes. Especially for business owners, paying for professional tax planning and preparation may be the highest ROI available to you. 

CPAs know the tax law better than anyone and can advise you on a litany of strategies that can reduce your tax liability. The best methods can be deployed before you even incur the taxes! Given your unique situation (business and personal taxes), a tax professional may be a total game-changer.

5. Prioritize cash flow 

As you know better than anyone, cash flow is your lifeblood for a business owner. Healthy cash flow does everything: It allows you to grow, pay employees, purchase raw materials, and save for investments and emergencies. 

Without cash flow, your business stalls (and your blood pressure spikes!). If you can only focus on one thing financially in your business, make it your cash flow.

Chapter 5

10 Common Financial Mistakes Business Owners Make

Creating and managing a profitable business is complex, stressful, and time-consuming. On top of that, many small business owners make fear-based or poor financial decisions that hurt their companies and, indirectly, themselves. Don’t be one of them.

Here are 10 of the most common mistakes I see small business owners make:

  1. Paying themselves too much
  2. Using the business to cover personal expenses
  3. Not having appropriate insurance
  4. Not having a succession plan
  5. Spending money on things the company doesn’t need
  6. Not hiring a bookkeeper
  7. Not hiring a financial advisor
  8. Not having retirement plans established
  9. Failing to perform tax planning
  10. Taking on too much personal liability

If you can avoid these, you’re way ahead of the game. Great work, and keep it up!

Chapter 6

Looking Ahead: The Stock Market in March 2022 and Beyond

In January, the S&P 500 had an intra-month drawdown of more than 10%, briefly entering ‘correction’ territory. After an incredible run throughout 2021, headwinds have created some concern. Tensions on the Russia/Ukraine border and inflation have received the most attention. 

Read: 2022 Stock Market Outlook 

Russian President Vladmir Putin has ordered a massive number of troops, tanks, artillery, and other supplies to the border of Ukraine in the last few weeks, and his endgame is unclear. And what does this kind of climate do?

Any time geopolitical activity of this magnitude, investors will turn towards safe-haven assets (gold, bonds, and cash) and pull their money out of equities. We saw this play out in the stock market in January. Since then, the market has bounced off its lows and held steady through February’s first couple of weeks.

The other major news is inflation – it’s not as transitory as the Fed initially projected. In response, the central bank has stated its plan to begin raising interest rates at their March meeting in hopes of cooling inflation while keeping the broader economy humming. It will be months before we know if their strategy simultaneously meets both of those objectives.

Beyond those uncertainties, strong corporate earnings and a business-friendly environment are the primary tailwinds which could push equities higher. However, valuations are already stretched, indicating much of this positivity may already be priced.

Read: Choosing The Best Investments For Inflation 

So, What Can You Do?

As I’ve just touched on, various factors could demonstrably affect the equity markets. How can you prepare for any potential outcome as an affluent decision maker? 

Have a financial plan in play for your business!

The right financial plan is built to handle the uncertainties of the stock market, political climate, economic cycles, and more. Based on your current situation and future goals, your financial plan will be tailored to fit your personality, lifestyle preferences, and risk tolerances. 

All of that includes a versatile mix of asset allocation that suits you, which comprises your personalized portfolio. You don’t need to worry anymore about where you’re headed – your financial business plan has it mapped out for you, including all possible road bumps and detours.

If you don’t have a financial plan or don’t feel confident in the one you have currently, schedule an appointment with us today. There’s no need to concern yourself with revolving financial stresses. You can have total faith in your plan and your financial advisor’s ability to weather any storm. 

That’s why, in my opinion, the best financial plan is the one you don’t have to manage daily. You’re too busy living your life and orchestrating your company. Financial planning Phoenix, Mesa, and Flagstaff offices are open! Partner with us today for a brighter tomorrow. 

Ascendant Financial Solutions, Inc. is an independent SEC Registered Investment Advisory firm serving clients in the Flagstaff and Phoenix, Arizona areas. With more than thirty years of experience in the financial industry, we partner with families, business owners, and retirees to ascend to greater financial heights on their journey to financial freedom. No matter how complex your financial goals are, our team will rise to the challenge to help you meet your goal. 

Ascendant Financial Solutions, Inc. is an independent SEC Registered Investment Advisory firm serving clients in the Flagstaff and Phoenix, Arizona areas. With more than thirty years of experience in the financial industry, we partner with families, business owners, and retirees to ascend to greater financial heights on their journey to financial freedom. No matter how complex your financial goals are, our team will rise to the challenge to help you meet your goal.