Afsha Butt, founder of Wealthverse, says entrepreneurs need multiple financial plans.Supplied
Many entrepreneurs wonder how to keep investing in a growing company without jeopardizing their personal savings. That can be a tough balancing act, notes Afsha Butt, an Edmonton-based financial educator and founder of Wealthverse, a financial management technology platform.
“You can build a multi-million-dollar company, and still be financially dependent,” she says. “Your company is only as good as what someone’s willing to buy it for.”
As a business owner herself, Ms. Butt understands the need to operate with two financial plans: one for her company and one that’s personal.
She began working as a bank teller at 18 and opened her own financial advisory practice through a franchise at 23. She’d go on to manage $40-million in assets, but says she felt constrained by the franchise model, which limited what she could offer clients. So in 2022, she launched Wealthverse as an independent platform, giving clients access to a broader range of investment options.
At first, Ms. Butt ensured she had buffers in place, such as having six months of savings tucked away to cover essential expenses, and a secure line of credit to help manage the revolving doors of cash flow.
Lianne Hannaway, a Toronto-based CPA, says some entrepreneurs may need to save enough to cover 12 months of expenses, particularly if they’re the sole financial support for a household.
She encourages having low-cost debt to tap into “if things get a little rough.” A line of credit that’s secured against a business or home typically carries a lower interest rate than a credit card.
Ms. Butt’s personal financial plan captures her lifestyle and long-term goals and doesn’t assume Wealthverse will automatically generate a major windfall. “$100,000 a month for your business is not $100,000 a month for yourself,” she says.
Having dual financial plans enables owners to stress-test whether their company is profitable enough to support their personal goals, like buying a house, funding education for children or saving for retirement. “Those are numbers that you want to make sure you’ve fleshed out,” says Ms. Hannaway.
Ms. Butt reinvests corporate earnings through a holding company and has also focused on “quiet money” that can grow independently over time – registered retirement savings plans, a tax-free savings account and her principal residence.
In 2024, Ms. Butt transitioned into a chief executive officer role for the eight-person team. Taking a step back from daily operations gave her more space to think about Wealthverse’s future, and how she can use her experience in finance to educate others, particularly women.
Ms. Hannaway recommends that entrepreneurs diversify their income streams as well as spread their investments across industries. Someone whose business is in technology, for example, might consider investing in sectors such as finance or health. “If something were to happen to that industry [you work in], you could end up with a double whammy: both your savings and the business itself,” she says.
She also urges entrepreneurs to invest in life, critical illness and disability insurance as part of their safety net. “It’s them – their health – that’s really the lifeblood of that business,” says Ms. Hannaway.