2025: What to Expect and How to Plan
2025 is just around the corner, and for business owners, it's time to look back at 2024 and prepare for 2025. Here are a few things to keep in mind as you navigate the evolving economic landscape:
Economic Realities:
Inflation: While inflation is gradually easing, expect prices to remain higher than we're used to. Generally, inflation is expected to be between 2.2 and 2.5%, not bad.
Interest Rates: Interest rates may dip, but not significantly. Your lending rates may drop by 0.75% by the end of the year, but so will the interest rate you earn on your cash account.
Consider calling your bank and see where you can save on fees. Some of those small fees weren’t a big deal when interest rates were higher. Now, they make up a more significant chunk of your return on cash.
Tariffs: Depending on your suppliers, new tariffs may impact you significantly or not at all. If you are concerned about tariffs, consider doing the following:
Take a proactive approach by diversifying your supply chain to include domestic and nearshore suppliers, reducing reliance on single-source imports.
Analyze your product components and identify those most susceptible to tariffs, exploring alternative materials or production methods if feasible.
Model the financial impact of potential tariffs on your costs and profitability, adjusting your pricing strategy or seeking government assistance programs if necessary.
Stay informed about trade policy changes by getting more involved with your industry associations. They may hear about the intricacies of new policies early so you can plan accordingly.
The Talent Squeeze: Finding and keeping good employees will continue to be challenging. This is an ongoing process of building a culture that supports the talent you are trying to attract. In an earlier article, I summarized why investing in talent increases your company's value. It may be helpful. I’ve seen companies do this well, and it pays off, but it requires some planning and management to make it happen.
Planning & Forecasting for the Year Ahead:
Data is Your Friend: There are a lot of tools out there, such as PowerBI, to pull important information out of your other systems. You may focus only on your financials, but you should have a 360-degree view of your company.
"What If?" Scenarios: Don't just plan for one outcome. Create different financial forecasts based on different possibilities (good, okay, and not-so-good). This will help you prepare for whatever comes your way. Think of this like hurricane forecasting; you want to know what will happen if it's a direct hit or veers north or south. Forecasting allows you to plan for each scenario so that when it happens, you execute your plan quickly rather than delaying, which could be costly.
Cash is King: If you don’t have a cash flow forecast, you should prepare one. It’s easy, and it saves you from worrying about cash. If you have enough cash, a forecast will help you keep the ideal amount of funds in an investment or money market account rather than a low-interest checking account.
Focus on What Matters:
Keep Costs in Check: Look for ways to trim expenses without sacrificing quality. Can you renegotiate contracts, find better energy deals, or use technology to do things more efficiently?
Pricing Power: Review your prices regularly to ensure they're competitive and profitable. Consider offering different pricing options or bundling products and services to attract customers.
Happy Employees, Strong Business: Invest in training your employees and creating a positive work environment. This will help you keep your best people and attract new talent.
Financial Communication is Essential:
Keep Banks and Investors in the Loop: Maintain strong relationships with your bank and investors by providing them with regular updates on your financial performance, including key metrics and potential challenges. This transparency builds trust and strengthens these critical partnerships.
Conclusion
By planning ahead, being flexible, and focusing on these key areas, business owners can navigate 2025 with confidence and set their businesses up for continued growth.
ABOUT US
Highpoint CFO is a CFO consulting firm based in Tampa, Florida, that serves clients throughout the U.S.
Scott Young is the President and Principal Consultant at Highpoint CFO. He is a CPA, Certified Merger & Acquisition Advisor (CM&AA), and Certified Value Growth Advisor (CVGA) with over 25 years of experience in finance and accounting at industry-leading companies.
Like most small or mid-sized businesses, you don't need a full-time CFO. Our on-demand CFO service is the finance and accounting expertise you need to reach your business goals. We serve companies from early-stage to growing businesses through getting ready to sell. We are a fractional CFO consulting firm based in Tampa, Florida. We offer remote (virtual CFO) and in-person CFO and accounting consulting services to clients throughout the United States.
How We Can Help You
Highpoint CFO provides CFO consulting services. Contact us to learn how a fractional CFO can help you with financing, forecasting, cash flow, accounting infrastructure, working capital management, by-product profitability reporting, and data analysis using business intelligence tools such as Power B.I.
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