Some small business owners are minimizing expenses or making temporary standard-of-living changes to navigate economic hardship.andreswd/iStockPhoto / Getty Images
Advisors with new small-business-owner clients are helping them look past the headlines about tariffs and a sputtering economy to focus on what they can control, including building financial buffers that allow them to stay nimble.
Shiraz Ahmed, founder and chief executive officer of Sartorial Wealth in Mississauga, says he’s seen a significant uptick in people wanting to start a small business since 2020, as entrepreneurship has been romanticized as a way to escape the “rat race.”
But for some entrepreneurs, the realities have started to hit home.
“For a lot of years, it was not cool to be an entrepreneur. And all of a sudden, everybody is [one],” he says, noting there has been a particular focus on technology. But, he notes, “it isn’t always rosy. Things don’t always go up in a straight line and, unfortunately, geopolitical issues do affect us all.”
Mr. Ahmed and his team are seeing clients concerned about the impact of tariffs, and many are applying for government support programs available based on business size, type and sector.
His team often takes the position of an outsourced chief financial officer, he says, providing guidance tailored to specific industries and circumstances on topics such as budgeting and cash flow in the early stages, and determining when to expand.
Most people can’t afford to earn nothing for an extended period of time, he says, so having a war chest set aside and a fiscally conservative mindset is advisable.
“Sometimes, it does require delayed gratification,” he says. “It’s coaching people through that and what the ramifications [are] from a financial planning standpoint.”
For some business owners, that may mean minimizing expenses such as vacations or making temporary standard-of-living changes.
Sectoral considerations
While many small business owners are facing challenges, those selling to consumers in areas with industries affected by tariffs may have additional struggles, says Wendy Brookhouse, financial advisor and money coach with Black Star Wealth in Halifax.
As an advisor, she says, the first step is to make sure those starting a new business do a deep dive on their ideal market’s capacity to make purchases and prospective clients’ timelines for paying suppliers.
She describes one client with a strong business who just signed a massive purchase order.
“That purchase order will not pay for a period of time,” she says, but the client has to invest money in the meantime, “to float the activities he needs to do before he will get paid.”
The conversation, she says, should focus on options they can control: understanding how to access capital and build out buffers, whether using personal assets or a line of credit, for example.
“Having that buffer sometimes, even though it costs you in interest, might save you so much stress and anxiety that you actually are able to focus more on doing the things you need to do to get your cash flow up faster,” she says.
Room for optimism
While some entrepreneurs are concerned about the headlines, others are excited about interest rate cuts and stock market performance, says Julie Shipley-Strickland, principal, founder and senior wealth advisor with Julie Shipley-Strickland Wealth & Risk Management at Wellington-Altus Private Wealth Inc. in Calgary.
“Most of the entrepreneurs I work with are pretty positive, realistic and optimistic people,” she says. “They acknowledge the challenges, but they’re not letting that limit them from expanding their ideas and growing their businesses and taking chances.”
Now that interest rates are lower, more clients who have been in business for a couple of years are looking for strategies to pay down debt more aggressively. With newer entrepreneurs, she’s also working on ways to deal with uncertainty, including establishing steady, short-term savings.
“That can help if you get hit with tariffs for a little while, or it can help if you have dips in sales,” she says.
For clients who want to invest longer-term within their corporation, it’s important to establish a strategy suited to the client’s needs, she says. This could involve using the capital dividend account to pay out tax-free dividends to shareholders.
Ultimately, building out flexible options for new entrepreneurs that offer liquidity, if necessary, can help clients become less focused on day-to-day news, Ms. Brookhouse says.
“If we just go, ‘There’s always something,’ and we’re just going to prepare ourselves so that we’re ready to move if we need to, it’s a different mindset,” she adds.