For small-business owners, change is a constant, and even minor changes in consumer spending, government spending, and interest rates can have an outsized impact. While the changes themselves may be out of our control, we can control how we prepare for them. In this article, we’ll look at some of the trends that could impact small businesses and what business owners can do to ensure they are positioned to thrive.

An unpredictable economy

How is the economy doing? Will it get better or worse as the year unfolds? It depends on who you ask. Even among the economists who have made careers out of analyzing and predicting the economy, there is a fair amount of disagreement. Some figures suggest a healthy economy while others tell a different story.

As one example, the job report has looked pretty good for the last four years. But because it tracks both part-time and full-time jobs, it may not capture the full impact of lost income and benefits in the current job market. 

Similarly, consumer spending is looking a little shaky, with credit challenges in the auto industry and credit card delinquencies. A lack of consumer confidence and liquidity could add up to a weaker economy in the year ahead.

Interestingly, tracking the production of corrugated boxes is another way to determine the health of the economy. When consumer spending is up and retail goods are selling, corrugated box production tends to increase. During a recession, production tends to decrease. It’s such a good predictor, in fact, that it has come to be known as the Cardboard Box Index, and as of the most recent report in September 2024, production of corrugated boxes was 4.3% lower than it was during the last recession in June 2020, which could indicate a dip in consumer spending.

Then again, a new administration tends to bring new energy to the markets, which could have a positive effect on the economy as a whole. 

Ultimately, the economy could head in either direction, business owners should have a contingency plan in place for a recession and for an expansion. 

4 ways to prepare

With uncertainty ahead, small business owners can take these steps to increase financial resilience and position themselves advantageously regardless of what the next few months bring.

Know your customers. Be careful who you extend credit to and know exactly how much credit it’s reasonable to extend. We wrote about the importance of vetting your customers and managing their access to credit back in 2023, and the issue will become even more important if your customers start to experience greater financial stress from interest-rate fluctuations, new government mandates, or an economic downturn. For more tips, you can read this article on customer credit management. 

Know your vendors. Stay on top of your vendor relationships, too. While a bad customer can jeopardize your earned revenue, a bad vendor can jeopardize your supply chain, reputation, and future revenue. Just recently, an insurance company that specialized in the staffing industry shut its doors unexpectedly, affecting many of our clients. When the economy is uncertain, you need to step up the due diligence to make sure your partners are trustworthy and financially stable. 

Improve your credit score. Your business credit score is a valuable asset that can improve your access to cash and reduce your cost of borrowing. Yet many businesses don’t have a plan in place to manage and improve this score. At a time when the economy is in flux, it’s even more important to actively manage this business asset. Here are five ways to improve your credit score. 

Build financial flexibility. After an eventful few years, the state of the economy is very hard to analyze right now. That creates a lot of uncertainty. As a business owner, you should be proactively exploring all the financial tools at your disposal, including invoice factoring and other alternative financing options, so that you are ready to mobilize with additional financing right away if the economy puts you in a tight spot,or, conversely, if it brings a big opportunity your way. 

Build business resilience in 2025

Not even the economists can agree on what the year ahead will bring for the business community, which can leave business owners feeling confused and unsettled. But one thing you can do right now is ensure that your business is built on strong foundations, with reliable customers and vendors, good credit management, and a plan to access as much working capital as possible. You may not need it, but knowing that it’s there if you do will help you face the year ahead with confidence and optimism.

If you’d like to learn more about the role invoice factoring can play in strengthening your business resilience, don’t hesitate to reach out to us.