You’ve built a strong AEC firm, solving complex design and engineering challenges for your clients every day. But when it comes to managing your finances, do you have the same confidence? Do have clarity into your business and personal finances or does it feel like you’re flying blind?
Many firm owners unintentionally blur the lines between business and personal finances—paying personal bills from the business, pulling cash as needed, or skipping structured compensation. While this might seem harmless in the short term, it can lead to cash flow chaos, tax headaches, and an uncertain financial future.
Integrating and separating business and personal finances is key to long-term success. Without a clear system, you risk losing control over cash flow, overpaying in taxes, and failing to build personal wealth outside your firm.
This article will guide you through the four essential steps to structuring your finances the right way:
1. Assess your current financial setup:
Understand where your money is coming from and where it's going.
2. Establish a clear boundary between business and personal finances:
Set up the right accounts, compensation structures, and tax strategies.
3. Implement a tracking system:
Gain visibility into your firm’s cash flow and your personal financial health.
4. Create a financial plan that balances business growth & personal wealth:
Develop a strategy to ensure both your firm and your personal finances thrive.
By the end of this article, you will have a clear blueprint for managing finances confidently and securely. You can also dive deeper into this topic with a webinar lead by Ryan Sullivan where he will break down this topic into actionable insights. More info:
Most Engineering and Architecture firm owners don’t realize how entangled their business and personal finances have become until it’s too late. A cash crunch, tax bill, or retirement shortfall forces them to take a hard look. The first step to fixing this is to get a clear picture of where you stand today.
This means assessing both personal financial health and business financial performance separately. If these two areas are intertwined, it can be difficult to know if you’re truly building wealth or just surviving month to month.
Before making any changes, start by identifying your personal financial reality. You must ask yourself the following questions about your finances and document your answers:
What’s My Retirement Target?
How much do I need per month to retire comfortably?
Do I feel like I’m on track? (Yes/No)
What’s My Net Worth?
Total assets (savings, investments, real estate, business equity)
Total liabilities (debt, loans, credit cards)
Formula: Net Worth = Assets - Liabilities
What’s My Savings Rate?
Formula: Savings Rate (%) = Annual Savings / Annual Income
A high savings rate (15-30%) indicates strong financial discipline. If your savings rate is low, it could mean you're too reliant on business cash flow.
Am I Relying on My Business for Personal Expenses?
Do I pull money out of the business when I need it?
Do I pay personal bills directly from the business account?
Do I Pay Myself a Consistent Salary?
Many firm owners don’t pay themselves a consistent salary. Instead, they "take what they need" whenever they need it.
While this feels flexible at the moment, it leads to financial instability—both personally and within the business.
Without a structured compensation plan, long-term planning becomes nearly impossible.
With your personal financial situation analyzed, it is time to assess how financially stable your business is. A firm that struggles with cash flow, profitability, or efficiency is likely to cause problems for business and bleed over to impact your personal financial well-being. Use these questions to build a financial picture of your business:
Is the Business Profitable?
Net Revenue = Total Sales - Consultant/Subcontractor Fees + other pass-through expenses
Profit Percentage = (Net Revenue - Expenses) / Net Revenue
A strong profit margin (15%+) suggests a well-run firm. If margins are thin, you may be underpricing services, overspending, or have low efficiency in delivering services.
How Efficient is the Firm?
Utilization Rate = Billable Hours / Total Hours
Average Hourly Rate = Net Revenue / Billable Hours
Realization Rate = Net Revenue / Revenue Potential
(Revenue Potential can be calculated by taking the number of Billable hours X Billing Rates)
Low Realization Rates, Utilization, or underpriced services can drain business cash flow, putting your firm’s stability at risk
How Strong is the Firm’s Cash Flow?
Time to Payment = Average Days to Receive Payment
Backlog = Unbilled Revenue Under Contract
Backlog in Months = Unbilled Revenue / Monthly Expenses
AEC firms often struggle with slow payments and cash flow gaps. If clients take too long to pay, the firm’s cash reserves can become unreliable.
How many months of reserves do you have in your account?
Many firm owners assume their business will be their retirement plan, either by selling the firm or continuing to earn an income. But have you actually calculated its value? Many formulas can give you a rough idea of your firm's value. Below is one such example. These are great places to begin understanding your firm's value to help with retirement planning.
Seller's Discretionary Earnings (SDE) = Net Profit + Owners Salary + Perks
Business Valuation = 2-3x SDE (typical for AEC firms)
Without a buyer or transition plan, this is a risky bet. Your firm's value is only real if and when you can sell it. Unless you have an internal person willing to take over the practice and buy you out, or your firm is built in a way that it would be an attractive merger or acquisition target, you may be out of luck. It is important to plan for this early on in the tenure of running your business.
By answering the questions above, you’ll gain clarity on whether your business is actually supporting your personal financial success, or if it’s holding you back.
Once you’ve assessed your finances, the real challenge begins: How do you grow your firm without sacrificing your personal financial future? That’s where goal balancing comes in.
Financial decision-making is a constant tug-of-war between business growth and personal wealth building. This is true for any business owner, including A&E firms which too often have owners that only look at their annual compensation levels rather than long-term company value.
Do you reinvest in the firm to fuel expansion, or do you prioritize savings for your personal financial security?
Should you take a higher salary, or keep more cash in the business?
The reality is, that both are important, and neglecting either can create long-term issues. If you prioritize your firm at the expense of your personal finances, you risk being in a situation without enough personal wealth to step away. On the other hand, if you prioritize personal savings without properly funding the business, growth may stall, and your income potential could shrink.
If you find yourself:
❌ Mixing business and personal finances
❌ Uncertain about your savings and retirement progress
❌ Overly reliant on business cash flow
❌ Struggling with cash flow tracking
…then it’s time to implement financial separation and create a system that supports both personal and business wealth.
This is where my 6-step goal-balancing framework comes in. It's a structured approach to aligning business success with personal financial security. By systematically evaluating and prioritizing both business and personal goals, you can make strategic financial decisions without feeling like you’re sacrificing one for the other.
The first step is getting clear on why you started your business and what you want it to provide for you. For some, the business is a vehicle for financial freedom. For others, it’s about control over time and work-life balance.
Ask yourself:
What are my personal financial goals? (Retirement savings, college funds, travel, home purchases, reducing work hours, long-term financial security)
What are my business financial goals? (Growth targets, hiring, profitability, debt repayment, cash reserves)
Am I working toward these bigger goals, or just reacting to short-term needs?
Example: George, an architecture firm owner, wanted to retire at 60, save for his two children’s college education, and take a big family trip four times a year. But he also wanted to reduce his work hours while increasing his firm’s profitability. Without a system, he had no idea if he was on track or if his goals were even realistic.
Once you’ve listed your goals, put dollar amounts and timelines to each.
For personal goals:
Retirement → “I need $3 million by age 60”
College Savings → “I need $60,000 over 8 years”
Travel → “I want $18,000 per year for trips”
For business goals:
Revenue Growth → “I want to increase net revenue by 30% over the next 3 years”
Work-life Balance → “I want to reduce my work hours to 30 per week over 5 years”
Debt Reduction → “I want to pay off my $50,000 business loan within 3 years”
Example: George had been paying himself about $150,000 per year, but he realized he needed to increase his income by $50,000 annually to hit his targets. Instead of blindly pushing for more revenue, he mapped out exactly how much more he needed to charge per project to achieve this.
Now that your goals are defined, you need to prioritize them. You can’t focus on everything at once, so it’s about balancing short-term needs with long-term stability.
Priority Framework:
1. Immediate Financial Security (Emergency fund with three months of operating expenses, cover accounts payable, debt payments, and tax payments)
2. Business Stability & Growth (Profitability, cash reserves, operational efficiency)
3. Mid-Term Wealth Building (Retirement, personal investments, college savings)
4. Lifestyle Enhancements (Travel, home upgrades, philanthropy)
Example: Instead of focusing on all his goals equally, George prioritized paying off high-interest debt first, while simultaneously setting up automatic contributions to maximize his annual retirement contributions. He also set up an automatic contribution of $625/month to a 529 tax-advantaged college funds to be on track for his goal of $60,000 in college savings over 8 years. This allowed him to balance his personal financial goals while still growing the business.
Once priorities are clear, cash flow management is key. Many firm owners make the mistake of waiting until the end of the year to see what’s left over. Instead, you should systematically allocate funds throughout the year. Firm owners should pay themselves their personal compensation on a monthly basis, and take out quarterly profit distributions.
How to Balance Firm & Personal Finances:
Salary: Pay yourself consistently while keeping enough in the firm for operations.
Profit Distribution: review profit on a quarterly basis and execute profit distributions to the owners and bonuses to the team quarterly.
Reinvestment Strategy: Decide how much profit will be reinvested into the business to go into hiring, marketing, or expansion.
Personal Wealth Building: Automate transfers to retirement and savings accounts.
If you don't have a 401k/ IRA, or other retirement plan for your business set one up today! You and your team should be taking advantage of the tax benefits of retirement savings.
Example: George decided to increase his salary incrementally as revenue grew, rather than keeping all profits in the business. Along with increasing his salary, he began doing quarterly profit distributions. This gave him a clear personal savings plan without stalling the firm’s growth.
Many firm owners get discouraged because they set financial goals without crunching the numbers. If you’re aiming for $3 million in retirement savings, how much do you need to invest monthly? If you want to reduce work hours, what does that mean for your pricing structure?
Financial Breakdown Example:
If you already have $500k and want $3 million in 15 years, you need to invest $5,000 per month at a 7% return
If you want to travel 4 times per year for $18,000, you need to set aside $1,500 per month
If the math doesn’t work? Revisit your assumptions.
Can you increase business profitability to fund personal savings?
Should you push back a goal’s timeline to make it more achievable?
Iterate & Adjust as Your Business Grows
No financial plan is set in stone. Markets change, goals shift, and your business evolves. Your wealth-building strategy should evolve too. At the end of each year, revisit your goals. Look at your actual contributions towards their goals and assess if you are still on track. Make any adjustments you deem necessary to stay on track or consider if your existing goals are still applicable or need to be tweaked. Consider the following questions during each annual review:
Is your firm generating enough income to support your personal goals?
Are you ahead, behind, or on track with savings?
Do you need to adjust revenue targets or pricing?
Balancing your firm’s financial needs with your personal financial security isn’t about choosing one over the other. It’s about creating a structured approach where both thrive together. By following this framework, you can avoid the stress of feast-or-famine income cycles and build a business that supports your long-term financial freedom.
Define and prioritize both business and personal goals
Attach real numbers and timelines to each goal
Implement a structured cash flow system to balance business reinvestment and personal savings
Review and adjust your plan annually to stay on track
Example: After implementing his new financial structure, George increased his firm’s revenue by 15% and realized he could reduce work hours faster than planned while maintaining income.
Now that we’ve mapped out how to balance your business and personal financial goals, in Step 3, we’ll go deeper into setting up the right financial systems—ensuring you’re separating funds properly and tracking cash flow effectively.
Now that you’ve balanced your business and personal financial goals, the next step is to create a system that ensures those goals are met consistently. Without a structured approach, even the best financial plan can fall apart. Many firm owners struggle because their business and personal finances are too intertwined, making it impossible to track progress, manage cash flow, or make informed financial decisions.
At this point, you know how much you need to allocate toward each of your goals, but where should that money actually go? How should you create a system so the cash is in the right place at the right time? The answer lies in separating and tracking your finances correctly.
Too many firm owners run everything through a single business bank account. client payments come in, expenses go out, and whatever is left over gets used for personal spending. You don’t know how much of that money is truly available, how much should be saved for taxes, or whether you can afford to take more home.
This leads to some big challenges, including:
Erratic Paychecks: Taking money when it’s available instead of structuring a consistent income
Tax Surprises: Scrambling to come up with money for taxes at the last minute
Unclear Business Health: No clear picture of actual profitability
Implementing a structured cash flow system that automatically separates funds for different purposes can help bring clarity to the chaos. The best approach to accomplish this is to have dedicated bank accounts as outlined in our financial flow system.
To ensure that you’re paying yourself properly, saving for the future, and keeping your business financially stable, you need a simple, repeatable system that automatically moves money to where it belongs. Each goal should have its own separate account so it is clear what each bucket of funds is dedicated to and to prevent cheating.
Our recommended account structure for both business accounts and personal accounts includes the following:
Revenue Account: All client payments flow into this account
Operating Expenses: For rent, payroll, marketing, and other business costs
Tax Savings: A portion of all revenue gets set aside for taxes
Profit Account: Earnings reserved for long-term business growth or personal use
Owner’s Compensation: The paycheck you pay yourself monthly
Fixed Expenses: Mortgage, insurance, utilities—non-negotiable costs
Variable Expenses: Discretionary spending like dining, entertainment, travel
Savings & Investments: Contributions to personal savings and retirement accounts
Goals: Add other accounts as needed to work towards specific goals (like buying a house or savings for college)
Example: Jason, an engineering firm owner, used to pay himself sporadically, depending on what was left over in his business account. By separating his business cash flow into these structured accounts, he gained clarity and consistency, ensuring his firm was financially stable while also meeting his personal financial goals.
Once your accounts are set up with the structure outlined above, it’s time to get serious about your paycheck. Many firm owners treat their income as an afterthought, pulling money out of the business when it’s available instead of paying themselves a predictable salary. This is not recommended. If you work in the business, you should be paying yourself a salary.
How to Structure Your Compensation:
Set a base monthly salary based on firm profits and industry standards. (You should be earning at least what you could get if you worked for another firm.)
Adjust your salary gradually over time, not based on month-to-month revenue fluctuations.
Take profit distributions quarterly instead of random withdrawals.
Example: Jason used to pay himself whatever was left at the end of the month. After implementing this system, he set up a consistent monthly salary and scheduled quarterly distributions from his profit account, allowing him to budget more effectively and reduce stress. By allocating the business revenue into the structured accounts he always knows he has enough to cover his salary and other firm expenses.
To keep things running smoothly, set up automatic transfers that move money to the right accounts on a recurring basis. This simplifies cash flow and saves time having to manually remember to do this. Here is a guide to setting these up:
Set aside a percentage for taxes (15% of net revenue should be a good start)
Transfer your monthly salary to your personal account
Move 15% of net revenue into the profit account for reinvestment or future growth
Allocate the remaining funds to your operating expenses account
Contribute to personal savings and retirement accounts based on your goals
Reevaluate cash reserves to ensure at least 3-6 months of firm operating expenses are covered
Review profits and distribute owner draws and team bonuses, and/or reinvest in the firm
By implementing structured accounts, a predictable salary, and automated financial transfers, you create a system that:
Provides Clarity: You always know how much is available for personal use, taxes, and business growth
Reduces Stress: No more guessing if you can afford to take money from the business
Prepares You for Taxes: Never get caught off guard by tax bills
Helps You Build Wealth Consistently: Your salary and investments stay on track, regardless of business ups and downs
Example: After struggling with unpredictable cash flow, Jason automated transfers to his tax and salary accounts once a month, ensuring he was always ahead instead of playing catch-up. By taking these funds out of his operating expenses account, he found that he made better financial decisions for the business, reduced overall expenses, and saw profits rise.
Now that your finances are structured properly, in Step 4, we’ll focus on how to align your financial tracking and forecasting—giving you a clear roadmap to grow your firm while securing your financial future.
Now that your finances are structured, and your accounts are set up, it’s time to gain visibility into your firm’s financial health and your personal wealth trajectory. Many AEC firm owners make the mistake of assuming that if they have money in the bank, things are fine. But without ongoing tracking and forecasting, you could be missing critical financial warning signs.
The goal of this step is to take control of your financial future by implementing systems that help you:
Monitor cash flow trends and profitability
Forecast future financial needs and identify risks
Ensure your firm supports your long-term wealth-building goals
Operating on gut feeling instead of financial data is a big mistake that too many firm owners make. Even with years of experience, you should be using data and forecasts rather than your intuition. Some signs that you may need to adjust your financial review processes:
You check your bank balance to see if you can afford something instead of knowing in advance
Cash flow fluctuates unpredictably, making it hard to plan ahead
You’re unsure if your firm is growing in a way that builds long-term personal wealth
This is reactive financial management, and it’s a recipe for stress and instability. To truly gain financial clarity, you need a system for tracking the present and forecasting the future. A system based on data and not guesses.
Even with separate accounts, you need to track where the money is going to ensure you’re meeting your financial goals. We recommend implementing financial software tools to better manage your business and personal revenue and expenses.
Use Accounting Software – QuickBooks, Xero, or BQE CORE
Track Key Business Metrics – Revenue, expenses, gross profit, net profit, and cash reserves
Create a Monthly Cash Flow Statement – Know exactly how much is coming in and going out
Monitor Your Tax Liability – Ensure you’re saving the right amount for quarterly and year-end taxes
Use a Budgeting Tool – Monarch Money or a simple spreadsheet to track household expenses
Track Your Net Worth Growth – Monitor savings, investments, and debts over time
Review Investment Contributions – Ensure you’re funding retirement accounts consistently and maximizing your allowed annual contributions.
Example: Sarah, a small architecture firm owner, always felt “cash-strapped” despite earning solid revenue. After tracking both her firm and personal cash flow separately, she realized she was overspending in the business on unnecessary subscriptions and reinvesting too aggressively. A few strategic adjustments created an immediate cash flow buffer.
Tracking shows where you are today. Forecasting ensures you're prepared for tomorrow. Your firm’s income isn’t always predictable, but that doesn’t mean you should fly blind. Here are some recommendations to improve your future financial planning:
Project Future Revenue Based on Past Data – Look at seasonal trends, client pipelines, and past invoices to anticipate fluctuations
Forecast Business Expenses – Identify fixed costs (rent, payroll) and variable costs (materials, subcontractors)
Plan for Tax Payments and Large Expenses – No more surprises at year-end
Once your business forecast is in place, align it with your personal financial future:
Project Personal Savings Growth – How much will you have in 5, 10, or 20 years based on current savings?
Model Different Retirement Scenarios – What happens if you sell your firm? Scale back to part-time work?
Assess Investment Growth & Income Streams – Ensure your portfolio is diversified beyond your business.
Example: John, an engineer running his own firm, was hesitant to contribute more to retirement because he “wasn’t sure he could afford it.” After running a forecast, he saw that even small increases in contributions today could significantly impact his financial future, leading him to prioritize wealth-building earlier.
The final step is making financial review a habit so you stay ahead of challenges and adjust your strategy as needed. Set a monthly finance meeting with yourself (or a CFO/Advisor) and your partners (both business and life). Here are ideas on what to cover in these meetings:
Review the previous month’s business & personal financials
Compare actual vs. projected cash flow
Identify upcoming major expenses or revenue changes
Adjust savings, spending, and investment strategies if needed
Along with the monthly check-in meetings, schedule out Quarterly Deep Dives, where you spend more time looking into the specifics of all areas of your business and personal financial health. This is where you want to look at in-depth reporting from your firm management software and personal accounting. Make sure to look at the following:
Assess firm profitability and tax obligations
Check in on personal investment performance
Make adjustments based on upcoming life/business changes
With these shorter-term views underway, you will be well prepared for the next step, an Annual Strategy Session. Here you will:
Set new financial targets for the business
Review long-term personal wealth goals
Adjust investment and tax strategies for the next year
Example: After implementing a regular review habit, Emma, an architecture firm owner, realized her business had grown enough that she could start taking quarterly profit distributions without hurting cash flow. This provided a major boost to her personal savings and investments.
Financial systems aren't only for large corporations. Where most A&E firm owners operate on gut instinct, real financial success requires data-driven decision-making. Regardless of firm size, building a predictable system will lead to better performance. By tracking your cash flow, forecasting the future, and reviewing your finances regularly, you take control of your firm’s profitability and your personal financial freedom.
Benefits of a well-designed financial system for your architecture or engineering firm include:
No More Surprises: You always know where your money is and where it’s going
Informed Decisions: Stop guessing and start acting on real financial data
Aligned Business & Personal Wealth: Your firm supports your future instead of keeping you trapped in a cycle of uncertainty
Your firm exists to serve your financial goals, not the other way around. When you track and forecast properly, you gain the clarity, control, and confidence to build both a thriving business and a secure financial future. You will also find that when you pay more attention to your finances and set up structured systems like our bank account setup we recommended above, your performance will improve, often resulting in higher profits.
Running an AEC firm is demanding, but it shouldn’t come at the expense of your financial stability or future wealth. Don't get caught in the cycle of managing project deadlines, keeping clients happy, and reinvesting in your business while neglecting your personal financial well-being.
The truth is, that your firm should be a tool for financial success, not a financial trap. Without a clear separation between business and personal finances, a structured cash flow system, and a financial plan that balances both business growth and personal wealth, you risk instability, unnecessary tax burdens, and an uncertain future.
1. Assess Your Financial Setup: Identify where your money is coming from and where it's going
2. Balance Business & Personal Goals: Align firm growth with personal wealth-building
3. Separate & Track Finances: Set up structured accounts, compensation, and a cash flow system
4. Implement Tracking & Forecasting: Use data to make informed financial decisions
By following this framework, you’ll gain clarity, control, and confidence over your money—ensuring that your hard work today leads to financial security and freedom tomorrow.
You’ll always feel financially reactive instead of proactive
Your firm’s revenue will feel unpredictable, making it harder to plan
You’ll struggle to build personal wealth and security outside your business
When the time comes to step back, you may realize you haven’t built the financial foundation needed to do so
Your firm should create wealth, not uncertainty. If you’re still mixing business and personal finances, feeling uncertain about your financial future, or lacking a clear exit plan, you’re not alone. The good news is these challenges can be overcome.
I specialize in helping AEC firm owners create financial strategies that balance business growth with personal wealth, ensuring that your firm supports your life, and not the other way around.
Let’s build your Blueprint.
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