How Small Businesses Can Clear the Economic Hurdles Ahead
Shifting rules on taxes, trade and regulation are creating uncertainty for SMBs. Owners can overcome that by focusing on efficiency, flexibility and investment.
When Coldplay’s Chris Martin sang, “Nobody said it was easy,” he could well have been referring to owning a small-to-midsize business (SMB).
According to the U.S. Chamber of Commerce, SMBs account for an estimated 99.9% of all firms in the United States, and it often seems like the owners are managing this vital sector of the economy single-handedly.
They need to get up every day, ready to out-compete and out-hustle larger competitors that have greater scale and resources.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Furthermore, owners must satisfy customer expectations, meet payrolls and manage cash flow — and do all of that while trying to figure out how to grow their business (and closely tied personal finances) to the next level.
In 2025, business owners face yet another challenge. The new administration’s tax, trade, regulatory and other policies are still evolving, and it may be some time before their full impact is known.
Many of the new initiatives will likely be positive for SMBs in the long term, but the short-term path is paved with uncertainty.
For example, SMBs are waiting for news about tax-relief measures, including whether the 20% income tax deduction for qualifying businesses will be extended. It is too soon to tell how proposed tariffs will affect the cost of goods for businesses and their customers, as well as the availability of products and materials that are currently sourced from global supply chains.
Many owners are hoping for an easing of some burdens given the administration’s deregulatory agenda, but the future is uncertain.
Inflation, interest rates and the overall health of the economy also rank high on the list of uncertainties for SMB owners.
For SMB owners seeking to chart a course through this uncertain landscape, a few key principles are important to keep in mind:
- Focus on those factors that are under your control. Keep a close watch on your workforce, employee sentiment and customer sentiment to ensure the company is as efficient and productive as possible during times of uncertainty.
- Maximize your financial and operational flexibility, so you are less vulnerable to shifting rules and regulations and their consequences.
- Don’t put off strategic investments that are needed to grow the business. Rather, base decisions on a solid ROI analysis. Leverage technology to offset potential labor or supply chain deficiencies.
Control supply sources, costs and cash flow
Many owners are responding to uncertainty by taking more control of their supply sources.
For example, they are stockpiling inventories of products and materials to lock in availability and costs ahead of any disruption in global trade.
Some are thinking about diversifying their supply chains, while others may want to consider developing their own manufacturing capacity to replace or augment current providers.
You can also invest your time in further developing meaningful relationships with vendors, from accountants to landlords to suppliers.
Getting a handle on cash flow is one of the most important steps an owner can take. Now is the time to really analyze cash flow, simplify the payment cycle, accelerate payments and forecast upcoming cash flow needs.
But not all businesses have access to that depth of information and analysis. Work with your bank or other financial institutions to find platforms that can support the analysis of real-time information.
From internal reporting to payment functionalities, maintaining a comprehensive understanding of your cash flow requirements is essential for making informed business decisions.
Maintain financial flexibility
Reliable access to financing at a reasonable cost is a critical piece of navigating uncharted territory. SMB owners should look carefully at their current credit facilities and whether their lines are adequate for a range of possible eventualities.
They also may want to reach out to their lenders for better credit terms or more flexible loan covenants.
One approach could be to consolidate more of the company’s financial relationships with its primary bank, to provide leverage to negotiate more favorable pricing and/or better terms and conditions. Spending time talking through strategy and plans for the year ahead with your banker or financial adviser provides a clear starting point.
An external resource can help to reveal blind spots to improve both your business strategy and operations.
Invest in growth
It may be tempting to put off investing in the business during a period of uncertainty. However, select investments can help an SMB become more efficient, resilient and productive. Owners should consider certain investments, as long as they are backed up by a solid cost/benefit analysis. Knowing how the investment will pay off over several years is key.
One investment to consider is the use of technology to offset anticipated labor shortages. While demand for workers remains high due to the underlying strength of the U.S. economy, an aging population will continue to limit the growth of the working-age population.
Changes in immigration policies can also potentially impact the availability of labor for some businesses. Owners may want to assess technology investments, with an eye toward automating functions to improve employee productivity.
SMB owners don’t have the luxury of waiting for a clearer picture to emerge about possible changes in official policies and priorities. Focus on the factors you can control, maintain financial and operational flexibility, and invest prudently to optimize efficiency, productivity and growth.
Related Content
- Tariffs: What They Are and How They Impact Your Wallet
- Kiplinger Trade Outlook: New Tariffs Threaten to Widen US Trade Deficit
- When Is the Next Jobs Report?
- Why Small Business in 2025 Should Have You Excited
- Three Key Questions for Small-Business Owners in 2025
-
Trump Reshapes Foreign PolicyThe Kiplinger Letter The President starts the new year by putting allies and adversaries on notice.
-
How to Plan a (Successful) Family ReunionFrom shaping the guest list to building the budget, here's how to design a successful and memorable family reunion.
-
These Unloved Energy Stocks Are a BargainCleaned-up balance sheets and generous dividends make these dirt-cheap energy shares worth a look.
-
These Unloved Energy Stocks Are a Bargain
Cleaned-up balance sheets and generous dividends make these dirt-cheap energy shares worth a look.
-
You've Heard It Before, But This Investment Advice Still Pays Off"Time in the market beats timing the market" ¬— been there, done that, right? But don't write off the underlying advice. There's a reason it's a popular saying.
-
Are Clients Asking About Adding Crypto to Their Retirement Plans? This Is How Advisers Can Approach This New 401(k) FrontierAdvisers need to establish clear frameworks to address client interest, navigate risks like volatility, and ensure they meet their fiduciary responsibilities.
-
3 Niche Oil and Gas Investments for Next-Gen Wealth BuildersLesser-known segments of the oil and gas sector present unique opportunities for next-gen investors and family offices, as long as they're vetted thoroughly.
-
A Portfolio Checklist If You're Planning to Retire in 2027Are you planning to retire in 2027? This portfolio checklist will help put you on the right path.
-
How to Avoid Being Buried by the Tax Avalanche in Retirement: Tips From a Wealth AdviserAll that cash you have in tax-deferred accounts could launch you into a higher tax bracket when you start withdrawals. It's time to protect your income.
-
I'm a Financial Adviser: This Is the Real Secret to Retirement SuccessFor real retirement security, forget about chasing returns and focus instead on the things you can control: income, taxes, risk-taking and decision-making.
-
Is Your Retirement Plan Based on Social Security Fact or Fiction?One in two Americans don't know much about Social Security — and some are basing their retirement on mistaken beliefs. It's time to separate fact from fiction.
