How to Help Your Small Business Navigate Uncertain Economic Times

Late in 2024, economic forecasts for this year were mostly positive. However, the first part of 2025 has held more surprises than many business owners would prefer. While economic uncertainty presents challenges, for a well-prepared small business, it can also present opportunities.

Here’s how to help ensure your business succeeds, no matter the circumstances.

1. Deepen Your Banking Relationships

Uncertain times can demand a more flexible approach, so it’s vital to have strong relationships and a variety of funding options in place. Reach out to your financial advisors and business banking partners proactively and discuss your access to capital.

Work alongside these partners, as well as industry groups and trade associations to understand how policy changes will affect supply chains, labor markets, and pricing strategies.

2. Preserve and Strengthen Cash Flow

Make sure you have access to credit options that can provide that flexibility, diverse financing options, and sources of revenue. Look beyond traditional loans to asset-based lending or revenue-sharing models to create an optimal financial outlook, and consider diversifying your revenue streams in order to reduce your business’s dependency on a single market or customer segment. In addition, prioritize operational efficiency: Delay capital expenditures unless they’re immediately necessary, and conserve cash flow to better manage fluctuations.

You should also speak with vendors and examine your contracts. Adjusting your payment terms or the contracts themselves can help you optimize the cycle of your cash flow. Similarly, diversifying your supply chain strategy can help you mitigate risks associated with shifting tariffs.

3. Test the Waters and Shore Up

Talk to your advisors about running a financial “stress test.” This kind of evaluation can help you determine how a downturn would potentially impact your cash flow and profitability, and—crucially—allow you to make educated adjustments as needed.

Additionally, take a look at areas where you may need to secure financing in the future—credit markets tend to tighten during economic downturns, so securing a line of credit or working capital early on ensures you’re prepared for growth when market conditions improve.

4. Take a Long-Term Look at Hiring and Retention

It may be easy to consider reducing your workforce when economic headwinds present themselves, but think twice before doing so. Instead, focus on retaining your key employees, even if you are forced to implement a cost-cutting phase. This will help avoid labor shortages when circumstances improve, and also ensure you have employees with institutional knowledge already onboard.

Related to retention, ensure your existing staff have the tools they need to help your business. Provide opportunities for them to improve their knowledge of data analytics, financial planning, and automation as appropriate in order to create an adaptable, nimble workforce.

5. Don’t Forget, the Economy is Cyclical

Prepare your business for the next economic cycle in advance by creating a long-term expansion strategy—identifying new markets, potential acquisitions, and product developments you’d like to make in the future.

You can also prepare by timing your investments wisely. Work with your banking partner to ensure you’re taking advantage of lower costs for expenditures when inflation and demand are also low. This also means taking a proactive approach to awareness. Alongside your financial advisors, keep an eye on interest rates, job growth, consumer sentiment, and other factors that might indicate or influence the beginning of an economic rebound.

Businesses that proactively manage risk, strengthen their finances, and position themselves for strategic growth will emerge stronger when conditions improve. Stay connected to your professional advisor partners like you banker, CPA, investment advisors to help your business navigate uncertainty, seize opportunities, stay nimble, and succeed on the road ahead.